We recently compiled a list of the 10 Best Robinhood Stocks Under $20. In this article, we are going to take a look at where Permian Resources Corporation (NYSE:PR) stands against the other Robinhood stocks.
The market reacted favorably after the Federal Reserve’s June 11-12 meeting. The broader market marked record closes. At the June 12 press conference, Fed Chairman Jerome Powell emphasized the Fed’s focus on its dual mandate of achieving maximum employment and stable prices. While the labor market remains strong with continued job gains and low unemployment, inflation has decreased significantly from its peak but remains above the 2% target, currently at 2.7% and the Federal Open Market Committee (FOMC) believes it’s still high.
Key Developments
The Fed Chairman reported that GDP growth slowed from 3.4% in Q4 of 2023 to 1.3% in Q1 of 2024. However, underlying demand indicated by private domestic final purchases grew at 2.8%. Consumer spending has moderated but remains solid, and investment in equipment and intangibles has improved. Moreover, the labor market is balanced, with job gains averaging 218,000 per month in April and May, and the unemployment rate was at 4%. Inflation, as measured by PCE prices, rose 2.7% over the past year, while core PCE rose 2.8% and the CPI rose 3.3% in May, with the core CPI at 3.4%. Finally, the FOMC decided to keep the federal funds rate unchanged at 5.25% to 5.5% and to continue reducing securities holdings to manage inflation.
Powell emphasized a cautious approach to policy adjustments. The Chairman said that while some progress has been made toward the inflation target, more data is needed to ensure inflation is sustainably moving toward 2%. The Fed will continue to assess economic data and adjust policies as needed to support their dual mandate. He reiterated the commitment to restoring price stability to ensure long-term economic health. The Fed chair noted that the median projection for the federal funds rate by FOMC participants is 5.1% by the end of 2024 if the “economy evolves as expected.” Nevertheless, Jerome Powell highlighted that the projections are not a guarantee and will depend upon the data in the coming months.
The CME’s FedWatch tool reveals that 35.8% of the market expects the interest rates to remain the same in September, 59.2% expect a 25 basis points (bps) reduction, and 5% believe in a 50 bps rate cut. These numbers have risen significantly in favor of rate cuts since we reported them on May 31 in our article about the best up-and-coming stocks.
After a long wait, the Fed has finally hinted at potential rate cuts in September, which brings tons of opportunities in the market. Let’s take a look at some now.
Our Methodology
For this article, we used the app to identify over 100 stocks with a $2 billion market cap that were trading under $20, as of June 12. We narrowed down our list to the stocks with positive hedge fund sentiment, analyst ratings, and optimistic prospects and chose the 10 stocks with the highest number of institutional investors.
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 close-up of a wellhead, showing off the company’s production of oil and natural gas.
Permian Resources Corporation (NYSE:PR)
Number of Hedge Fund Holders: 41
Share Price as of June 12: $15.58
Permian Resources Corporation (NYSE:PR) is a Texas-based independent oil and natural gas company that develops crude oil and related liquids-rich natural gas reserves. The company has assets in the Delaware Basin.
The bullish case for Permian Resources Corporation (NYSE:PR) is four-pronged. Starting with its strong balance with liquidity of over $2 billion and leverage of approximately 1x, meaning that the company’s total debt is roughly equal to its EBITDA as of the first quarter of the current year. In addition, the company’s credit facility saw aggregate lender commitments rise from $2 billion to $2.5 billion while maintaining a borrowing base of $4 billion. This financial strength enables the company to sustain its operations and fund future growth initiatives. Moreover, In Q1 2024, the company generated an adjusted operating cash flow of $844 million and an adjusted free cash flow of $324 million.
Permian Resources Corporation’s (NYSE:PR) second prong is its early integration of Earthstone Energy, Inc., which took place on November 1, 2023, and drove significant synergies. Permian Resources has already achieved $175 million per year in synergies and has an increased target of $225 million annually. The Earthstone acquisition was also responsible for efficiency gains, including an 18% reduction in Earthstone drilling days per well and a 50% reduction in completion days per well. In addition, analysts predict significant top and bottom-line growth for Permian Resources Corporation (NYSE:PR) in the near future. Based on consensus estimates of 16 analysts, the company is forecasted to post a non-GAAP EPS of $1.64 in 2024, up 32% year over year. The company is offering an attractive entry point as its trading at just 9 times its forward earnings, lower than the sector median of 11x.
Another factor that makes Permian Resources one of the best Robinhood stocks under $20 is its focus on shareholder returns. On May 7, the company announced a 20% increase in its quarterly dividend and the board also declared a quarterly variable cash dividend of $0.14 per share. Both dividends were paid out on May 29. In the first quarter, Permian Resources rewarded its shareholders by buying back 2.0 million shares of common stock for $31 million. Including the base dividend, variable dividend, and share repurchases, the total return on capital for the quarter amounted to $0.24 per share. As of June 12, the company has a dividend yield of 1.6% and a low payout ratio of 12.8%, which means that its free cash flows can easily sustain its dividends.
Finally, over the last three months, 13 Wall Street analysts have covered Permian Resources Corporation (NYSE:PR), and 11 keep a buy rating on the stock. The average price target of $20.77 represents an upside of 33.31% to the stock’s current price, as of June 12.
In the first quarter, 41 hedge funds held positions in Permian Resources Corporation (NYSE:PR) and their stakes amounted to $1.07 billion. This is compared to 35 funds’ positions in the previous quarter worth $945.008 million.
Overall PR ranks 8th on our list of the best Robinhood stocks to buy. You can visit 10 Best Robinhood Stocks Under $20 to see the other Robinhood stocks that are on hedge funds’ radar. While we acknowledge the potential of PR 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 PR but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
Read Next: Analyst Sees a New $25 Billion “Opportunity” for NVIDIA and Jim Cramer is Recommending These 10 Stocks in June.
Disclosure: None. This article is originally published at Insider Monkey.
