We recently published a list of 10 Best Falling Stocks To Buy According to Hedge Funds. In this article, we are going to take a look at where Halliburton Company (NYSE:HAL) stands against other best falling stocks to buy according to hedge funds.
Are The S&P 500 Gains Coming Towards An End?
Analysts at Goldman Sachs on October 21st released a note forecasting that the S&P 500 average annual return of 13% for the past 10 years might come down to just 3% for the next decade. The estimates by Goldman Sachs are far below Wall Street’s estimates as analysts on Wall Street expect the index performance to range from 4.4% to 7.4%, with an average of 6%.
Analysts at Goldman Sachs based their forecast on the concern that market concentration within the S&P 500 has been at a record high in its 100-year history. They mentioned that the top 10 largest stocks of the index currently account for more than 36% of the overall index. These top 10 constituents of the index have increased in size due to exceptional earnings growth over the past 2 years. The Magnificent Seven alone have at least doubled their earnings year-over-year during the first quarter of fiscal 2024.
However, analysts at the firm believe that historical evidence shows it is extremely challenging for companies to sustain high levels of sales growth and profit margins for more than a decade. They also noted that the sales growth of the Magnificent Seven has already started to fall from the accelerated pace of their growth during the past 2 years.
On the bright side, analysts pointed out that growth is expected to pick up for the remaining stocks on the index. They expect double-digit earnings growth for these remaining 493 stocks over the next 5 quarters.
Sylvia Jablonski, Defiance ETFs CEO and CIO joined CNBC on October 22 for an interview to talk about the earnings season progress and also shared her point of view regarding the recent note from Goldman Sachs. She noted that we have seen around 14% of the S&P 500 that have reported their earnings and, out of those, 79% beat expectations. She thinks this is a solid start to the earnings season. Jablonski also mentioned that the bar for some of the companies has also come down, for instance in July analysts were talking about 6% to 7% year-over-year growth, and now we are looking at around 5% growth and companies have been achieving it for the most part.
While talking about Goldman Sachs’s recent note, she mentioned that the shrink in annual return by the index depends on a few factors. While the valuations are high, the earnings are strong and profits are also growing, thereby the high valuations have started to feel justified. However, it only remains justified until the valuations become lofty again. Jablonski pointed out that while the Magnificent Seven stocks have been the top performers of the last decade, we are going to see a broadening of the market where the performance would come from the remaining stocks in the index. She thinks that this transition of growth from the top constituents of the index to smaller stocks might affect the annual returns. However, AI is going to drive the index for the next 5 to 10 years. Jablonski mentioned utility facilities and energy sector companies having grown in triple digits due to artificial intelligence.
Lastly, Jablonski clarified that she is not bearing on tech or semiconductors but the leaders in the S&P 500 are expected to change with Magnificent Seven slowing down in terms of the stellar growth they have posted in the past.
Our Methodology
To curate the list of the 10 best falling stocks to buy according to hedge funds, we used the Finviz stock screener and Yahoo Finance. We defined falling stocks as those trading within 0% to 3% of their 52-week lows. Using the Finviz stock screener, we got an aggregated list of stocks that fit our criteria. Next, we ranked these stocks based on the number of hedge funds holding each stock during Q2 2024, as per Insider Monkey’s database. All indicators were recorded on October 21st, 2024. Please note that the list is ranked in ascending order of the number of hedge funds.
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).
Halliburton Company (NYSE:HAL) is one of the major players in the energy sector with operations running in around 70 countries. They provide various products and services to help energy companies maximize their production throughout the lifecycle of the reservoir. The company operates through two major segments including the Completion and Production Segment and the Drilling and Evaluation Segment.
The Completion and Production segment provides key services including cementing, and stimulation services, which include techniques like hydraulic fracturing (fracking) to increase the flow of oil and gas from the reservoir, artificial lift, and production enhancement. On the other hand, the Drilling and Evaluation deals with drilling fluids, wellbore placement, and reservoir evaluation.
Halliburton Company (NYSE:HAL) differentiates itself from its counterparts due to its focus on technology and data-driven platforms. Its portfolio of advanced technologies includes iCruise, iStar, and LOGIX, which are designed to enhance drilling operations and efficiency in the energy sector. Management noted that demand for advanced technology solutions is rising in the international market. The international revenue for the company contributed $3.4 billion during the second quarter of fiscal 2024, indicating an 8% increase year-over-year, with 10% growth in Latin America.
Overall, the second quarter of fiscal 2024, indicated robust financial performance. Revenue for the quarter ending June 30, 2024, was $5.8 billion representing a 0.6% increase year-over-year. Management was not only able to maintain strong operating margins of 18% during the quarter but also grew its net income by 16.23% year-over-year to $709 million in the second quarter of fiscal 2024.
Although the stock has been trading close to its 52-week low, however, 41 hedge funds held stakes in the company during Q2 2024, up from 38 hedge funds during the first quarter as per Insider Monkey’s database. Halliburton Company (NYSE:HAL) is the 4th best-falling stock to buy according to hedge funds.
Carillon Eagle Mid Cap Growth Fund stated the following regarding Halliburton Company (NYSE:HAL) in its fourth quarter 2023 investor letter:
“Halliburton Company (NYSE:HAL) provides equipment and services to the global energy industry. The company’s shares underperformed during the quarter, largely due to downward pressure on crude oil and natural gas prices. Despite this recent move, ongoing discipline among North American shale producers could continue supporting relatively healthy activity growth at current commodity price levels, which should provide stability to service providers such as Haliburton. The company is also poised to benefit from the ongoing, multi-year international and offshore upstream investment cycle that is less dependent on short-term swings in commodity prices.”
Overall, HAL ranks 4th on our list of best falling stocks to buy according to hedge funds. While we acknowledge the potential of HAL to grow, 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 a promising AI stock that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
