We recently compiled a list of the 10 Most Promising Mid-Cap Stocks According to Hedge Funds.In this article, we are going to take a look at where Chord Energy Corporation (NASDAQ:CHRD) stands against the other promising mid-cap stocks.
The S&P 500 May Hit 6,000 in 2024
September closed on a high note, opening a wealth of opportunities for investors. On October 1, Jay Woods, Freedom Capital Markets Chief Global Strategist, appeared in an interview on Yahoo Finance to discuss his predictions for the market.
Woods shares his anticipation for the elections and that the market will take its due course once the elections are over. He believes the technology sector is poised to strengthen as the market rotates from sector to sector. Nvidia, Apple, and Microsoft are currently 15%, 5%, and 8% off their highs and a strong tailwind may be in store for us.
September was stronger than expected and 19 out of 21 times the market hit a high during the month in the past, the market has gone way higher in the following months, or the fourth quarter. Woods reiterated that the setup for a strong comeback is there, especially with elections, and that rotational trade will continue.
Speaking of employment data, Woods suggests that the market has particularly been overreacting to data points and that anything jittery will adversely impact investor confidence. He predicts the unemployment rate to sit at 4.2% and hints that a percentage higher than this will lead to more discussions on bigger rate cuts. He advises that investors need to start blocking out some of these headlines and focus on how stocks have performed in the third quarter of 2024.
The Job Market is Extremely Crucial
On September 30, Matt Stucky, Northwestern Mutual Wealth Management's chief portfolio manager for equities, appeared in an interview on Yahoo Finance to discuss his market thesis.
According to Stucky, the job market is extremely crucial and investors must focus on that. Since the beginning of 2024, employment data has been consistently declining to the point it may hint at a weakening economy.
On the flip side, the third quarter stood out. The third quarter of 2024 saw the market broaden to sectors other than tech. Five out of seven sectors on the S&P 500 experienced tremendous earnings growth, compared to only two in the second quarter of the same year.
As the market broadens, he expects the market to post earnings growth between 9% to 10% this year and 14% to 15% for the next year. Stucky's expectations are rather optimistic and believes the economy will head to a soft landing. He also expects the average investor to be more inclined to stocks that have consistent high margin growth in 2025 and ahead. For this year, however, Stucky believes that the defensive sector, especially utilities, remained the strongest.
While the financial markets may remain uncertain, investors may look for cheaper and less-risky investments. That said, let's look at some of the most promising mid-cap stocks according to hedge funds.
Our Methodology
To find the most promising mid-cap stocks according to hedge funds, we used the Finviz stock screener. We set the market capitalization filter to range between $2 billion and $10 billion. We then examined the hedge fund sentiment of these stocks as of Q2 2024 and picked the most popular ones. The stocks are sorted in ascending order of the number of hedge fund holders as of Q2 2024.
Why are we interested in 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 technician in a lab coat examining a sample of crude oil.
Market Capitalization as of October 10, 2024: $8.25 Billion
Chord Energy Corporation (NASDAQ:CHRD) ranks sixth on our list of the most promising mid-cap stocks according to hedge funds. The hydrocarbon exploration and hydraulic fracturing company is headquartered in Texas, United States. The company has an immense focus on acquiring and developing oil and natural gas properties.
In the second quarter of 2024, the company generated revenue worth $1.26 billion, up by 38.22% year-over-year. Strong financial results were primarily driven by solid well performance and declining downtime. According to the company's CEO, efficient production levels and strategic cost control improved free cash flow levels, exceeding overall expectations. In addition to that, the company closed its deal with Enerplus, promising greater scale, low-cost inventories, financial strength, and better shareholder returns. The deal will add more than $200 million in annual synergies, up from the original target of $150 million.
Following the combination with Enerplus, Chord Energy Corporation (NASDAQ:CHRD) revised its guidance for the complete fiscal year 2024. Now, the company expects to generate $1.2 billion of adjusted free cash flow, with a re-investment rate of 55%. In addition to that, adjusted EBITDA is expected to reach $2.9 billion.
Overall, Chord Energy Corporation (NASDAQ:CHRD) has strong fundamentals and an attractive position in the industry. The company has a history of dominating the market by engaging in strategic acquisitions. Lastly, CHRD expects to continue investing in capital investments and increase production, positioning the company for long-term sustainable growth.
Madison Investments' Madison Small Cap Fund stated the following regarding Chord Energy Corporation (NASDAQ:CHRD) in its first quarter 2024 investor letter:
"Our Energy underweight was also a slight drag, although we are optimistic about our singular investment in this sector with Chord Energy Corporation (NASDAQ:CHRD). During Q1 the company announced a strategic combination with Canadian-based Enerplus Corporation (TSX: ERF). Enerplus is one of, if not the best remaining assets in the Bakken and we are very constructive on the financial and strategic merits of this transformational deal. CHRD will become the largest operator in the Bakken, representing about 12% of the basin’s production. With a solid balance sheet post deal, CHRD will now be in the enviable position of either the basin’s main consolidator or most strategic asset as a target for larger E&P companies."
Overall CHRD ranks 6th among the most promising mid-cap stocks according to hedge funds. While we acknowledge the potential of CHRD 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 time frame. If you are looking for an AI stock that is more promising than CHRD but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
