We recently published a list of 10 Most Undervalued Stocks to Buy for Under $10. In this article, we are going to take a look at where Kinross Gold (NYSE:KGC) stands against the other most undervalued stocks to buy for under $10.
Market Outlook: Will October Bring a Pullback or a Rally?
In an interview on CNBC on October 8, Jose Rasco, CIO at HSBC Global Private Banking & Wealth Management discussed the current state of the stock market and the potential for a pullback. Rasco suggests that when the Fed starts to cut rates, fixed income tends to do well, particularly high-yield and investment-grade bonds. He recommends extending the duration and looking for quality credits. He also notes that historically, when the Fed eases, the US market tends to do well, especially during mid-cycle slowdowns. As a result, Rasco is looking for credit opportunities in Asia, particularly in India.
Rasco also mentioned that health care is a sector that tends to do well when the Fed eases. He notes that historically, health care has done very well in such environments, and it’s worth keeping an eye on. He also mentions that the growth-to-value ratio is currently at 2:1, which could lead to a mean reversion, making value stocks more attractive.
Paul Hickey, co-founder at Bespoke Investment suggests that a 1% decline in the market, which has already risen over 20% this year, is not necessarily something to get excited about. However, he does acknowledge that increased volatility is a concern, particularly with the geopolitical situation being the hottest it’s been in years, an upcoming election in November, and the impact of a hurricane in the southern United States. Hickey believes that the election and the hurricane are short-term events, but the geopolitical situation is a worry that could have a more significant impact on the market.
Despite these concerns, Hickey’s team has identified plenty of positives about the market, they believe that if a 5% pullback in the market were to occur, it would be a buying opportunity. In fact, Hickey notes that 5% pullbacks are more common in October than in any other month. Historically, when the market has been up 20% through the first three quarters of the year, October has been negative 7 out of 10 times, but the fourth quarter tends to be positive.
Hickey notes that the yield curve is flattening out, with the two-year yield flirting at 4% and the ten-year yield at 4%. This has implications for fixed-income investments, particularly with financials kicking off earnings later in the week. Hickey expects the yield curve to continue to flatten, which could impact the stock market.
Hickey notes that analysts have been lowering their earnings forecasts, which could set the bar low for companies to surpass. He expects the S&P 500 to see gains during the reporting period, particularly in sectors where the revision spreads are negative, such as technology, energy, and industrials.
While there are concerns about volatility and the geopolitical situation, there are also reasons to be optimistic about the market’s prospects, particularly with the Fed’s easing cycle and the potential for earnings growth.
Our Methodology
To compile our list of the 10 most undervalued stocks to buy for under $10, we used the Finviz and Yahoo stock screeners to find the 40 largest companies with stock prices under $10. From that list, we screened for companies that are trading at a forward P/E ratio of under 15 as of October 8. We then narrowed our choices to 10 stocks according to their hedge fund sentiment, which was taken from our database of 912 elite hedge funds as of Q2 of 2024. The list is sorted in ascending order of their hedge fund sentiment, as of the second quarter.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Aerial shot of a mine entrance, the bedrock of the company’s gold and silver extraction.
Kinross Gold (NYSE:KGC)
Number of Hedge Fund Investors: 37
Forward P/E Ratio as of October 8: 14.90
Stock Price as of October 8: $9.40
Kinross Gold (NYSE:KGC) is a Canadian-based gold mining company with operations across the Americas, West Africa, and Russia. The company focuses on high-quality, low-cost gold development projects, with a promising pipeline that includes the Great Bear project in Ontario, the Manh Choh project in Alaska, and the Lobo-Marte project in Chile, all driving its future growth and expansion.
In Q2, Kinross Gold (NYSE:KGC) reported a 4% decline in gold production to 535,300 ounces, largely due to reduced output at the Tasiast, Paracatu, and La Coipa mines. However, production at its U.S. operations, including Fort Knox and Round Mountain, increased. Despite the production drop, Kinross Gold’s revenue rose 10% year-over-year to $1.43 billion, benefiting from higher gold prices. Although all-in-sustaining costs (AISC) climbed 7% to $1,387 per ounce, the elevated gold price boosted AISC margins by 40% to $955 per ounce.
Kinross Gold’s (NYSE:KGC) focus on cost-effective and high-quality gold production allows the company to generate strong cash flows. With a realized gold price of $2,342 per ounce, the company’s annual operating cash flow potential exceeds $2 billion. Moreover, with gold prices hovering above $2,500 per ounce, its free cash flow projection is between $1.5 billion to $2 billion annually. This cash flow will support growth initiatives and potentially lead to higher dividend payouts.
Overall KGC ranks 1st on our list of most undervalued stocks to buy for under $10. While we acknowledge the potential of KGC as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than KGC but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.