We recently published a list of 15 Best Beaten Down Stocks to Invest In. In this article, we are going to take a look at where XP Inc. (NASDAQ:XP) stands against other best beaten down stocks to invest in.
As per Charles Schwab, 2025 might bring hurdles for stocks in the form of uncertain trade policy, tougher fiscal policy, and subdued average growth in the global economy and corporate earnings. Collectively, these factors might result in significant volatility. On the positive side, improving growth and higher stock valuations might support strong returns overall for international stocks in 2025.
Challenges Faced by US Equities in 2024
As per Henry Allen, macro strategist at Deutsche Bank, the biggest sell-off of 2024 was seen at the beginning of August 2024. Between 1st August 2024 and 5th August, the S&P 500 index saw a decline of more than 4%. This was due to weak nonfarm payrolls report amidst worries that the US Fed might decide to keep monetary policy too tight. Furthermore, investors’ sentiments were further impacted by the poor earnings reports from the renowned tech companies. However, the strategist believes that, for equity investors, the U.S. economic data soon demonstrated some improvement and the markets rebounded.
Next, mounting geopolitical tensions have somehow weighed over the broader equity indices in 2024. Henry Allen highlighted that a market sell-off in April was primarily because of escalating tensions in the Middle East, with Brent crude oil seeing an intraday peak for the year of ~$92 a barrel. Between 1st April and 19th April, the S&P 500 index saw a significant decline of more than ~5%. However, Wall Street experts believe that tides are now expected to turn, and 2025 might be a promising year for global equities.
Structural Trends to Support Growth, Says Firetrail Investments
Firetrail Investments believes that several key structural trends are expected to aid global equity markets in 2025. Technological advancement might act as one of the most significant drivers, with businesses continuing to integrate automation, Al, and cybersecurity into their activities. Companies having innovative solutions in digital transformation will potentially benefit from significant digital adoption across sectors, spanning from finance to healthcare to manufacturing.
As per Firetrail Investments, the outlook for defensive and growth-oriented stocks in 2025 remains positive. This is because investors continue to balance the appeal of continuous income-generating businesses with the potential of high-growth entities. Companies operating in sectors such as technology, communications, and advanced manufacturing are expected to benefit due to favorable valuations and the normalization of interest rates. With capital becoming more accessible, such sectors will be well-placed to invest in further innovation, driving earnings growth.
As per the investment firm, in 2025, lower inflation, favorable labour market, and supportive monetary policy conditions are expected to provide a strong foundation for growth.
Our Methodology
To list the 15 Best Beaten Down Stocks to Invest In, we used a screener and sifted through several online rankings. After getting the list of initial 30-35 stocks, we filtered out the ones that have seen a significant decline on a YTD basis and are trading close to their respective 52-week lows. We also mentioned the hedge fund holdings around each stock. Finally, the stocks were ranked in ascending order of their hedge fund sentiment, as of Q3 2024.
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).
Why XP Inc. (XP) is the Best Beaten Down Stock to Invest In?
A financial professional examining price changes on a stock broker's trading floor.
XP Inc. (NASDAQ:XP) offers financial products and services in Brazil. XP Inc. (NASDAQ:XP)’s stock has had a tough environment as a result of underperformance in its Q3 2024 revenues primarily because of slower growth in key business segments including retail investments and wealth management. The company has been witnessing a tougher economic environment in Brazil because of increased interest rates and inflationary pressures. These factors have weighed over consumer and investor sentiment.
Moving forward, XP Inc. (NASDAQ:XP)’s stock is expected to be aided by favorable demographic and economic trends. Brazil’s growing middle class and increased awareness about investment opportunities among retail investors should create long-term opportunities. Despite the modest growth outlook, Brazil is expected to add more than 6 million new households to its middle class by 2029, as per the Brazilian Chamber of Commerce. The company remains focused on becoming a leader in retail investments with the help of net new money consistency and by enhancing product offerings.
XP Inc. (NASDAQ:XP) indicated that it plans to maintain a BIS (Bank for International Settlements) ratio between 16% and 19% by 2026 and distribute more than 50% of profits in the form of dividends during the same period. Furthermore, the acquisition of Banco Modal S.A. should help XP Inc. (NASDAQ:XP) expand its client base, and enhance the ability to offer comprehensive financial solutions. Therefore, XP Inc. (NASDAQ:XP)’s strong brand recognition, customer trust, and commitment to cost management are expected to act as principal growth enablers.
Overall, XP ranks 3rd on our list of best beaten down stocks to invest in. While we acknowledge the potential of XP as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for a deeply undervalued AI stock that is more promising than XP but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
