We recently published a list of 8 Stocks Under $20 To Invest In Now. In this article, we are going to take a look at where Viatris Inc. (NASDAQ:VTRS) stands against other under $20 stocks to invest in now.
Will We Have a Soft Landing?
There has been a lot of discussion happening lately regarding the economy and the markets. While the economy was doing great with the Federal Reserve cutting interest rates and analysts expecting the markets to continue the bullish outlook, the recent geopolitical circumstances have again created doubt among investors.
We recently covered an article about 10 Stocks Under $10 With High Potential, where we talked about how the market is expected to perform if the geopolitical situation escalates. Tom Lee, managing partner and head of research at Fundstrat Global Advisors, mentioned that he would be buying the dip if the market goes there and also presented his bullish thesis regarding how the market tends to perform well after such tensions. Here’s an excerpt from the article:
“Tom Lee, managing partner and head of research at Fundstrat Global Advisors, appeared on CNBC to discuss what the stock market looks like in the current geopolitically tense environment. Lee has been bullish on small caps for a long time however, he has also remained cautious regarding some bumps in the start before the market for small caps starts to rise. He maintained a bullish stance, projecting a year-end target of 6,000 for the S&P 500, despite acknowledging potential short-term volatility due to upcoming events like the election and geopolitical tensions in the Middle East.
He emphasized that current market conditions are tricky, with headline risks stemming from a potential port strike that could impact the economy. Lee suggested that if a significant dip occurs, it would be a good opportunity to buy, as he believes the long-term outlook remains positive despite temporary setbacks.
Talking about how the market has performed during wars in the past. Lee noted that historically, market reactions to geopolitical conflicts have often been more positive than anticipated. He cited past conflicts where buying during initial downturns proved beneficial, except for the recent Russia-Ukraine war which went otherwise due to concurrent Federal Reserve tightening.”
Building upon how the market is progressing, Larry Adam, chief investment officer at Raymond James, says that the current market is exactly what a soft landing looks like. Adam recently appeared in an interview on CNBC to talk about how the lower interest rates will benefit the small caps in particular the Russell 2000. He believes that the bull market will continue while the economy inches towards a soft landing.
When it comes to small-cap stocks they get around 56% of their financing from the short end of the curve. The short end of the curve refers to the short-term interest rate on the yield curve, which typically represents the yields on bonds with shorter maturities, such as 2-year or 5-year Treasury notes. Whereas the large-cap companies get only 26% financing from these short ends of the curve. Therefore, Adam believes that as the Fed continue to lower interest rates it will help small caps meet financing needs.
He further pointed out that it is expected that the Fed will cut twice this year and another four times the next year. Another reason why he likes small caps is because the economy going towards a soft landing. Adam emphasized that we have already seen that the rate cuts helped small caps outperform the large caps. Historically speaking whenever the economy has a soft landing it typically helps the small caps greater than the rest of the market.
Moreover, while mentioning his favorite sectors, Adam likes technology, healthcare, and industrials in both the small caps and large caps categories. While reasoning his interests in these sectors, he mentioned earnings in these sectors to be one of the prominent likable factors. Technology has been the only sector in the large caps category that has seen upward revisions. Moreover, the cash flow that these sectors are generating is being utilized in buybacks, paying dividends, and future growth expansions.
Our Methodology
To curate the list of 8 stocks under $20 to invest in now, we used the Finviz stock screener and Insider Monkey’s database for Institutional Investors. Using the screener we shortlisted stocks trading under the price tag of $20 (recorded on October 4th). Once we had the list of stocks under $20, we ranked them according to the number of hedge fund holders as of Q2 2024. The list is ranked in ascending order based on 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).
A healthcare worker in a lab coat, holding a microscope and reflecting on the diagnosis of a patient.
Viatris Inc. (NASDAQ:VTRS)
Share Price: $11.43
Number of Hedge Fund Holders: 45
Viatris Inc. (NASDAQ:VTRS) is an international healthcare company that was formed through the merger of Mylan and Upjohn, a former division of Pfizer. The company specializes in producing and selling generic and branded medicines. It is known for popular branded medicines such as Viagra and Lipitor. The company also produces cost-effective alternatives to branded drugs and deals in over-the-counter (OTC) medicines that are available without prescriptions.
A lot was going on with Viatris Inc. (NASDAQ:VTRS) during the second quarter of 2024, which clearly showed in its financial results for the quarter. The company was engaged in several divestitures as a part of its broader strategy to focus on core and high-growth therapeutics business. During the quarter, it completed the sale of its OTC business, its Active Pharmaceutical Ingredients business, and the Women’s Healthcare business.
As a result of this divestiture, there were prominent shifts in its financial results. The revenue of $3.8 billion was down 3% year-over-year and the net income of $264 million in Q2 2023 turned to a net loss of $326 million during the current quarter.
However, there is a bright side to the company’s future. While the revenue and net income took a hit during the quarter largely owing to the strategic measures, the new product revenue reached $210 million. The new product revenue was driven by the successful launches of Breyna and Lisdexamfetamine. The growth in new product revenue gave management the confidence to improve its new product revenue guidance for the year.
Moreover, if we look at the company’s remaining business after its divestiture, we see that the operational revenue increased by 2%, indicating that the core business is progressing even in tough quarters.
Viatris Inc. (NASDAQ:VTRS) is one of the best stocks to buy under $20. It was held by 45 institutional holders during the second quarter of 2024.
Greenlight Capital stated the following regarding Viatris Inc. (NASDAQ:VTRS) in its fourth quarter 2023 investor letter:
We established medium-sized positions in Alight (ALIT) and Viatris Inc. (NASDAQ:VTRS), and a small position in Syensqo (Belgium: SYENS). VTRS is a manufacturer of generic and off-patent branded drugs. The company was created in 2020 after a merger between Mylan and a division of Pfizer. We previously invested in Mylan, but sold five years ago due to concerns around management’s ability to deliver on promises, as well as deterioration in the generic industry. Those concerns were well-founded, as the shares proceeded to decline by more than 60% after we exited. After a recent management change, we decided to take another look and found that after years of sharp declines, generic drug pricing has stabilized and competition has been diminished. The company’s revenue and cash flow are now growing, and we expect this improvement to accelerate. VTRS’ new management team has simplified its drug portfolio via various divestitures and has committed to returning 50% of free cash flow to shareholders through “aggressive” share buybacks, implying a double-digit capital return based on our estimates. We acquired our shares at an average price of $10.63, or just 4.0x 2024 consensus earnings. VTRS shares ended the quarter at $10.83.”
Overall, VTRS ranks 8th on our list of 8 Stocks Under $20 To Invest In Now. While we acknowledge the potential of VTRS 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.
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Disclosure: None. This article is originally published at Insider Monkey.