9. Flex Ltd. (NASDAQ:FLEX)
Short % of Shares Outstanding: 1.68%
Number of Hedge Fund Holders: 46
Forward Price to Earnings Ratio as of August 28: 13.27
Flex Ltd. (NASDAQ:FLEX) is an international manufacturing company that provides end-to-end solutions for various industries. The two main business segments of the company include Agility Solutions and Reliability Solutions.
The portfolio of manufacturing solutions provided by the company ranges from communication, cloud, and consumer devices to complex solutions for the automotive, health, and industrial sectors. It also provides data solutions and caters to high-growth industries including next-generation mobility, AI, and autonomous vehicles.
The company hired a new CEO back in 2020, since then it has entered an era of strategic pivot towards high-value products such as health care, industrial, automotive, and cloud infrastructure. These sectors account for more than 60% of the company’s revenue and are expected to grow higher.
Flex Ltd. (NASDAQ:FLEX) grew its gross margins and operating profits despite a slight decline in year-over-year revenue. Revenue of $6.3 billion was up 2% subsequently and down 8% year-over-year. However, Gross profits and operating profits of the company improved by 50 base points during the same time indicating its ability to remain profitable during headwinds.
What’s noteworthy about Flex Ltd. (NASDAQ:FLEX) is that both its segments performed above expectations. The reliability segment was led by strong demand for power and medical devices, whereas Agility benefited from effective cost management.
Management focus on high-growth sectors such as automotive and next-generation autonomous vehicles is poised for significant growth as the overall industry improves. It has also positioned itself to benefit from the growing EV sales as it directly provides solutions for the powertrain sector.
FLEX is undervalued at current levels. Its earnings are expected to grow 13.00% during the year to reach $2.43. Moreover, it is only trading at 13 times its forward earnings, which is a 44% discount to its sector. The stock was held by 46 hedge funds during Q2 2024, with stakes totaling $923.82 million. Lyrical Asset Management is the top share holder of the company with a position worth $273.3 billion.
Artisan Small Cap Fund stated the following regarding Flex Ltd. (NASDAQ:FLEX) in its first quarter 2024 investor letter:
“We initiated new GardenSM positions in Flex Ltd. (NASDAQ:FLEX), On Holding and Onto Innovation during the quarter. Flex provides outsourced electronic manufacturing services to a diverse set of end markets. The company hired a new CEO in 2020, who has been driving a strategic pivot toward manufacturing high-value products in areas such as health care, industrial, automotive and cloud infrastructure. Today, these higher value items account for ~60% of revenues, and we believe they will continue to tick higher. We also believe an improving business mix, along with the reshoring of supply chains, will lead to faster growth and higher margins.”
