“Uncertainty is BGC Group’s (BGC) Best Friend”: O’Keefe Stevens
O’keefe Stevens Advisory, an investment advisory firm, released its third-quarter 2024 investor letter. A copy of the letter can be downloaded here. In the Q3 letter, O'Keefe Stevens discussed its investment in Graftech (EAF). The firm admits that its investment thesis for the company was wrong and that the near-term viability of the business is in question. Even though this kind of loss is difficult, the firm hopes that the lessons learned will help avoid similar ventures in the future. For more information on the fund’s top picks in 2024, please check its top five holdings.
O’keefe Stevens Advisory highlighted stocks like BGC Group, Inc. (NASDAQ:BGC), in the third quarter 2024 investor letter. BGC Group, Inc. (NASDAQ:BGC) is a financial brokerage and technology company. The one-month return of BGC Group, Inc. (NASDAQ:BGC) was -5.06%, and its shares gained 57.12% of their value over the last 52 weeks. On October 14, 2024, BGC Group, Inc. (NASDAQ:BGC) stock closed at $9.38 per share with a market capitalization of $4.631 billion.
O’keefe Stevens Advisory stated the following regarding BGC Group, Inc. (NASDAQ:BGC) in its Q3 2024 investor letter:
"BGC Group, Inc. (NASDAQ:BGC) – After a long-awaited arrival, the FMX Futures Exchange launched on September 24th. Years of expenses flowing through BGC’s financials without offsetting revenue are reversing. While we are keenly aware of the ramp-up period from 0 volume to market share gains provided by the CME, FMX’s compelling offerings are anticipated to gain market share slowly. In addition, per BGC’s standard practice, announced revenue and pre-tax income will come in at the high end of management’s guidance.
Uncertainty is BGC’s best friend. Entering 2024, rate cut expectations of 150bps reflected optimism around the aggressive and dramatic decline of rates. In September, a 50bps cut marked the first rate cut since 2020 and the reversal after 2.5 years of interest rate hikes. Officials target a range of 4.25-4.50% by the end of this year, which signals two quarter-point rate cuts or one half-point cut. For 2025, they expect to cut four more times, bringing their Fed Funds rate to 3.25-3.5%. We are unconvinced the higher inflation experienced in recent years is over, putting these rate-cut expectations at risk. For BGC, whether we experience 50 bps cuts or 150 bps, conflicting economic data points will continue driving record volumes. With one sell-side analyst covering the name, this stock continues to trade under the radar and remains a core holding."
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BGC Group, Inc. (NASDAQ:BGC) is not on our list of 31 Most Popular Stocks Among Hedge Funds. As per our database, 33 hedge fund portfolios held BGC Group, Inc. (NASDAQ:BGC) at the end of the second quarter which was 28 in the previous quarter. While we acknowledge the potential of BGC Group, Inc. (NASDAQ:BGC) 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 as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
In another article we discussed BGC Group, Inc. (NASDAQ:BGC) and shared the list of most undervalued stocks to buy for under $10. O’keefe Stevens Advisory shared its positive outlook for BGC Group, Inc. (NASDAQ:BGC) in its Q1 2024 investor letter. In addition, please check out our hedge fund investor letters Q3 2024 page for more investor letters from hedge funds and other leading investors.
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Disclosure: None. This article is originally published at Insider Monkey.