Is Alliance Entertainment Holding Corp (AENT) Among Best Performing Cheap Stocks in 2024?

We recently published a list of 12 Best Performing Cheap Stocks in 2024. In this article, we are going to take a look at where Alliance Entertainment Holding Corporation (NASDAQ:AENT) stands against other best performing cheap stocks in 2024.

As we step into the final quarter of 2024, the financial markets continue to navigate a complex terrain shaped by a mix of optimism and uncertainty. The latest jobs report for September came in stronger than expected, signaling resilience in the U.S. labor market and leading many investors to reassess their expectations regarding the Federal Reserve’s monetary policy. This report has led traders to largely eliminate the possibility of a more significant rate cut, now forecasting an 87% chance of a quarter-point reduction in the near future. Despite these concerns, analysts are generally optimistic about the broader market’s prospects as we head towards year-end, thanks to promising earnings growth and stabilizing economic indicators.

Goldman Sachs, one of the leading voices on Wall Street, recently revised its target for a major stock market index upward, projecting that the index will reach 6,000 by the end of 2024. This forecast implies a 4.3% upside from current levels and reflects the bank’s confidence in sustained earnings growth throughout the remainder of the year. The bank also sees a longer-term target of 6,300 for the index, which would represent a 9.5% gain over the next 12 months. Chief U.S. equity strategist David Kostin noted that despite near-term volatility, factors like a recovery in the semiconductor cycle and easing cost pressures are likely to boost margins across multiple sectors. Such bullish sentiment suggests that investors looking for value opportunities might find them in underperforming but fundamentally sound sectors.

One area that stands out in terms of valuations and future potential is the biopharmaceutical industry. Experts like Karen Firestone, a seasoned investor and regular contributor to CNBC, highlight that despite the sector’s recent struggles, it presents an attractive entry point for long-term investors. Large pharmaceutical companies are trading at lower price-to-earnings ratios compared to the broader market, offering robust profit margins and potential for AI-driven breakthroughs in drug development. While some big names have rallied on the back of their blockbuster obesity drugs, the broader biopharma sector remains relatively undervalued.

This favorable setup is not confined to biopharma alone. The technology and consumer discretionary sectors, which were hit hard earlier this year, are also starting to show signs of life. According to FactSet, analysts expect the major stock index to post its fifth consecutive quarter of earnings growth in the third quarter, projecting a 4.2% expansion year-over-year. This suggests that sectors with solid growth fundamentals could outperform as economic conditions stabilize. At the same time, energy stocks, particularly those within the communication services sector, have received a higher percentage of “buy” ratings, reflecting optimism around their capacity to deliver gains in the coming months.

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While there’s a lot of chatter around high-growth sectors, value investors are eyeing cheap stocks that have managed to deliver impressive returns. The biopharmaceutical sector is a case in point, where low valuations, high margins, and the potential integration of AI into drug discovery make it a compelling area for investment. Analysts suggest that companies with robust balance sheets and pricing power are best positioned to withstand potential economic headwinds and capitalize on emerging growth opportunities.

In addition, some strategists believe that broader market gains could extend beyond 2024, particularly if the Federal Reserve manages to engineer a “soft landing” by controlling inflation without triggering a recession. With the presidential election looming in 2025, historical data shows that major stock indices tend to perform well during election years, further supporting a cautiously optimistic outlook for equities.

Given these dynamics, it’s evident that while the market landscape is marked by volatility and economic uncertainties, there are still promising opportunities to be found. In the following sections, we delve into 12 of the best-performing cheap stocks of 2024, which have outpaced broader market indices and offer attractive entry points for investors looking to navigate these uncertain times with a focus on long-term gains.

Our Methodology

For this article, we used Finviz stock screener to look for companies having forward Price to Earnings (P/E) ratio of less than 15. We then selected the top 12 stocks with the best year-to-date performance. Additionally, we reviewed data from approximately 912 elite hedge funds tracked by Insider Monkey during the second quarter of 2024 to determine hedge fund ownership for each company. The stocks are ranked in ascending order of their year-to-date performance.

At Insider Monkey we are obsessed with the stocks that hedge funds pile into. 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 retail store employee demonstrating the features of a video game console.

Alliance Entertainment Holding Corporation (NASDAQ:AENT)

Number of Hedge Fund Holders: 2

Year to date Share Price Gain: 179.03%

Forward Price to Earnings (P/E) Ratio: 7.40

Alliance Entertainment Holding Corporation (NASDAQ:AENT) operates as a global wholesaler, retailer, distributor, and e-commerce provider for the entertainment industry. Its diversified product offerings include vinyl records, video games, DVDs, Blu-rays, toys, and consumer electronics. As a leading direct-to-consumer and business-to-business supplier, Alliance Entertainment Holding Corporation (NASDAQ:AENT) has built strong relationships with major retailers like Walmart, Amazon, and Target.

The company reported a robust financial performance in its fiscal year ending June 30, 2024, achieving annual revenue of over $1.1 billion, with more than $250 million generated from exclusive distribution deals. This revenue was largely driven by its strategic partnerships with prominent brands such as Walt Disney, Sony Pictures, Microsoft, and Universal Music. Additionally, the company has successfully expanded its market reach, serving over 35,000 storefronts across 72 countries. This extensive global footprint, combined with exclusive licensing agreements, creates a competitive advantage that safeguards its leadership position in the entertainment distribution market.

Alliance Entertainment Holding Corporation (NASDAQ:AENT) efficient cost management initiatives have also contributed to its success. The implementation of the AutoStore automated storage and retrieval system in its Kentucky warehouse has significantly lowered fulfillment costs by streamlining operations. The company reduced its labor costs and increased storage capacity, resulting in an annual cost reduction of approximately $0.9 million. Additionally, the introduction of the Sure Sort X system from OPEX in fiscal Q3 2024 led to immediate savings of $0.5 million and is projected to generate an additional $400,000 in annual savings moving forward.

The company’s adjusted EBITDA for fiscal 2024 reached a strong level, reflecting its ability to optimize operations and generate consistent profitability. With a proven history of strategic acquisitions, Alliance Entertainment Holding Corporation (NASDAQ:AENT) has further solidified its market position by expanding its product offerings and entering new segments like retro gaming and collectibles. These factors position the company as a strong performer among cheap stocks in 2024, providing value and growth potential for long-term investors.

Overall, AENT ranks 4th on our list of best performing cheap stocks in 2024. While we acknowledge the potential of AENT to grow, our conviction lies in the belief that some 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 AENT 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.