In this article, we’re going to talk about the 8 best electronic stocks to buy according to hedge funds.
The Electronics Industry’s Growth Trajectory
The electronics sector is experiencing robust growth driven by several key factors. Technological advancements, particularly in consumer electronics, are a major catalyst, with innovations in smartphones, the emergence of 3G and 4G technologies, smart wearables, and smart home devices significantly boosting demand. According to Grand View Research, the global consumer electronics market is projected to experience significant growth, expanding from $1,068.22 billion in 2022 to $1,619.04 billion by 2030, with a compound annual growth rate of 6.6%.
Additionally, rising income levels, especially in emerging markets, are fueling demand, as more households can afford electronic devices. The expansion of the IoT ecosystem presents new opportunities within the sector, enhancing automation and efficiency across various applications. Advancements in semiconductor technology are crucial for this growth, powering everything from smartphones to electric vehicles. Furthermore, sustainability initiatives are becoming increasingly important, with companies exploring eco-friendly manufacturing practices and materials to meet consumer demand for greener products.
The semiconductor industry is at a pivotal moment, driven by rapid advancements in AI and the evolving dynamics of the market. With significant players recently reporting disappointing earnings and a slower-than-expected recovery in chip demand, the sentiment surrounding semiconductor stocks is one of cautious optimism. As the market grapples with these challenges, investors are keenly focused on identifying the best electronic stocks poised to thrive amid this transformative landscape.
On October 16, Dan Niles, Niles Investment Management founder & portfolio manager, joined ‘Fast Money’ on CNBC to discuss how semiconductors are a canary in the coal mine for the tech sector. In a recent discussion about the semiconductor sector and mega-cap technology, Dan Niles provided insights into ASML’s recent performance and its implications for the broader chip industry. He highlighted that the Dutch company experienced a significant miss in orders, reporting over a 50% decline compared to expectations. This drop indicates that while demand for certain products remains strong, the overall outlook for the semiconductor market is weaker than anticipated. Niles explained that if companies are ordering its equipment today, it typically means they are preparing to produce chips about a year from now. This lag suggests a slowdown in demand that could impact future revenues.
The relationship between electronic stocks and the semiconductor industry is vital and mutually reinforcing, as semiconductors serve as the backbone of modern electronic devices. The performance of semiconductor stocks directly impacts the broader electronics sector. Supply chain fluctuations can significantly affect both industries; shortages may lead to production delays and reduced revenues for electronic manufacturers, while stabilization can foster growth for both sectors.
With that being acknowledged, we’re here with a list of the 8 best electronic stocks to buy according to hedge funds.
Methodology
We sifted through ETFs, online rankings, and internet lists to compile a list of 15 electronic stocks with high market caps. We then selected the 8 stocks that were the most popular among elite hedge funds and that analysts were bullish on. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q2 2024. The hedge fund data was sourced from Insider Monkey’s database which tracks the moves of over 900 elite money managers.
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).
8 Best Electronic Stocks To Buy According to Hedge Funds
8. Littelfuse Inc. (NASDAQ:LFUS)
Market Cap as of October 22: $6.28 billion
Number of Hedge Fund Holders: 30
Littelfuse Inc. (NASDAQ:LFUS) is an American electronics manufacturer that primarily produces circuit protection products (fuses) and a variety of switches and automotive sensors. These components are crucial in safeguarding electrical circuits and devices from damage caused by overloads or short circuits, serving industries such as automotive, consumer electronics, and industrial applications.
It has secured significant new business in both transportation and industrial markets. In transportation, the company has won contracts for high-voltage fuses, low-voltage fuses, battery management systems, and switch technology. In industrial markets, it has secured design wins in HVAC, industrial safety, renewables, and EV charging.
The Q2 financial results for the electronics market were mixed. Demand for consumer products, appliances, and building technologies remains soft, but customers are optimistic about AI-driven growth. Datacenter applications, especially AI-driven ones, saw strong demand.
The company’s second-quarter 2024 revenue dropped 8.74% year-over-year, still recording an amount of $558.49 million. This decline was primarily driven by product line pruning actions and unfavorable foreign exchange movements. The Electronics Products segment experienced the most significant drop, with sales falling 13%. The Transportation Products segment saw a more modest decline of 2%, while the Industrial Products segment decreased by 7%. Despite the headwinds, it continued to generate strong cash flow.
Looking ahead, the company expects continued challenges in the semiconductor market and some persistent commodity headwinds. However, Littelfuse Inc. (NASDAQ:LFUS) remains confident in its positioning and ability to drive value creation for its stakeholders.
Aristotle Small Cap Equity Strategy stated the following regarding Littelfuse, Inc. (NASDAQ:LFUS) in its Q2 2024 investor letter:
“Littelfuse, Inc. (NASDAQ:LFUS), a designer and manufacturer of circuit protection, power control, and sensing products for the automotive, industrial, medical, and consumer end markets, was added to the portfolio. We believe the company’s dominant position in circuit protection and growing presence in automotive sensors and power semiconductors/components should benefit from ongoing efforts to solve power control and connection problems between the digital and physical worlds.”
7. Fabrinet (NYSE:FN)
Market Cap as of October 22: $8.96 billion
Number of Hedge Fund Holders: 31
Fabrinet (NYSE:FN) specializes in advanced optical packaging and precision optical, electro-mechanical, and electronic manufacturing services. It designs, engineers, and produces optical components and assemblies for various industries, including communications, industrial applications, and medical devices. The company uses state-of-the-art manufacturing facilities and an experienced workforce to deliver high-quality products that meet the demanding requirements of its customers.
FQ4 2024 results exceeded expectations, with revenue up 14.85% and earnings per share at $2.41. This marked 4 consecutive quarters of record revenue and EPS figures. Datacom revenue grew over 120%, offsetting a telecom revenue decline of over 20% due to industry inventory issues. Optical communications revenue accounted for 79% of total revenue in FQ4.
The company’s revenue growth is driven by new AI products in datacom. Products rated at 800 gig and faster dominated growth, contributing 54% to optical communications revenue. Non-optical communications revenue grew 2%, primarily driven by automotive recovery.
Fabrinet (NYSE:FN) anticipates continued revenue growth in the first quarter of FY2025. It’s investing in expanding its manufacturing capacity with Building 10 in Chonburi, with construction expected to take approximately a year and a half. Capital expenditures for the project are estimated to be $110 million. The company remains optimistic about its future and is well-positioned for continued success.
FPA Queens Road Small Cap Value Fund stated the following regarding Fabrinet (NYSE:FN) in its Q2 2024 investor letter:
“Fabrinet (NYSE:FN) is a contract manufacturer of optical communications components and modules. The company has a dominant position in hard-to-replicate precision-manufacturing technologies and an enviable track record of execution. The majority of Fabrinet’s sales are to networking equipment manufacturers, but it has been successfully diversifying into the data center, industrial, auto, and medical end-markets. FN’s stock jumped after reporting June 2023 earnings – datacenter sales increased 50% sequentially and more than 100% over the previous year, driven by their 800-gigabyte transceivers for Artificial Intelligence applications. The company also announced that Nvidia is a 10%+ customer.
Fabrinet was a top-five holding in the Fund before its June 2023 earnings announcement. Since then, the stock has appreciated considerably and we have trimmed in keeping with our risk management policies. Given the growth in its forward earnings estimates, Fabrinet trades in line with its historical earnings multiples and remains a top five position for us.”
6. Corning Inc. (NYSE:GLW)
Market Cap as of October 22: $40.43 billion
Number of Hedge Fund Holders: 35
Corning Inc. (NYSE:GLW) is an American multinational technology company that specializes in specialty glass, ceramics, and related materials and technologies, including advanced optics primarily for industrial and scientific applications. It operates in various segments, including display technologies, optical communications, life sciences, and environmental technologies, with products used in smartphone screens, fiber-optic cables, laboratory equipment, and emission control systems.
Its optical products have seen a surge in demand due to increased investments in AI data centers. The company also supplies glass for popular smartphone brands, which are becoming AI powerhouses. This has driven over 40% growth in the optical business in Q2 compared to the previous year, despite a soft smartphone market. Corning Inc.’s (NYSE:GLW) Optical glass fiber and related products make up 34% of the total company sales, accounting for over 50% of its targeted sales growth through 2027.
The company recently partnered with Lumen to reserve 10% of Corning Inc.’s (NYSE:GLW) global fiber capacity for AI data center interconnections. Its new GenAI fiber and cable system will allow Lumen to significantly increase fiber capacity in their existing infrastructure. As of Q2 2024, it generated $3.60 billion in revenue, up 3.50% from a year-ago period.
In Optical Communications, sales surged 20% sequentially in the second quarter, marking a return to growth. Enterprise network sales soared 42%, driven by AI-related solutions. Although carrier sales declined 10%, they showed sequential growth as customers adjusted their inventory. For display technologies, sales rose 16% due to increased panel maker utilization.
It’s well-positioned for growth due to its diverse product portfolio and strong market presence. It is a promising investment with a strong foundation for future success.
O’keefe Stevens Advisory stated the following regarding Corning Incorporated (NYSE:GLW) in its Q2 2024 investor letter:
“Corning Incorporated (NYSE:GLW), another long-time holding, announced Q2 results would come in better than anticipated due to outperformance in their optical connectivity products used for Generative AI. Corning has long been a disappointing investment; with leading-edge technology, it consistently underperforms expectations. Their “springboard” plan, which revolves around $3 billion of excess capacity, seems to be the first sign in a long time that they are ready for a surge in growth. Management has frequently discussed the potential for operating leverage in nearly every conference call, anticipating a return to normal business conditions. Margins should expand over the coming quarters, driving EPS growth. The $3B in incremental sales could be worth in excess of $900m in EBITDA.”
5. Celestica Inc. (NYSE:CLS)
Market Cap as of October 22: $6.68 billion
Number of Hedge Fund Holders: 38
Celestica Inc. (NYSE:CLS) is an American-Canadian multinational electronics manufacturing services company that operates in multiple sites across various countries. It provides design, engineering, manufacturing, and supply chain management services to a diverse customer base across different industries. Its expertise lies in the production of complex electronic assemblies and systems, particularly in communications, computing, industrial, and medical technologies.
The company’s connectivity products for AI data centers have been in high demand, especially its 400G and 800G switches and storage solutions. Hyperscalers investing in AI infrastructure have been driving this surge, leading to a 50% year-over-year increase in connectivity revenues in Q2.
It recently unveiled its new SC6100, a high-performance 2U rackmount all-flash storage controller designed for enterprise applications. Leveraging its expertise in storage, compute, and networking solutions, the company has developed a controller powered by two AMD EPYC Embedded 9004 processors and capable of supporting up to 24 dual-port U.2 PCIe Gen 5 SSDs. This cutting-edge technology is a testament to its growth in the AI-driven market.
Revenue was up 23.33% year-over-year in Q2 2024, driven by the large-scale investments in data center infrastructure from hyper-scale customers. The Cloud and Connectivity Solutions revenue saw a 51% year-to-year increase. High-Performance Solutions revenue made up 29% of total company revenue and was up 94%. Some of the growth was offset by the decline in Advanced Technology Solutions due to continued softness in the industrial business, still accounting for 32% of total revenues in Q2.
Celestica Inc. (NYSE:CLS) appears to be well-positioned for continued growth, driven by its diverse range of high-reliability hardware platform solutions and strong focus on emerging technologies like AI. The company’s strong financial performance suggests a promising outlook for investors.
4. Flex Ltd. (NASDAQ:FLEX)
Market Cap as of October 22: $13.65 billion
Number of Hedge Fund Holders: 46
Flex Ltd. (NASDAQ:FLEX) is an American multinational manufacturing company and one of the largest global electronics manufacturing services providers by revenue. It offers a comprehensive range of services, including product development, engineering, manufacturing, and logistics. The company serves a diverse customer base across various industries, including healthcare, consumer electronics, automotive, and industrial applications.
The company’s competitive edge lies in its power pods for data centers, offering lower costs and faster delivery times. In FQ1 2025, significant progress was made in cloud, power, and automotive projects. Revenue increased 2% sequentially despite a 13.93% year-over-year decline in this quarter. Datacenter and power revenues contribute over 25% to the total revenue. Inventory reduction of 6% sequentially and 21% year-over-year also contributed to the sequential improvement.
Its innovative power solutions are driving growth and positioning it for success in the AI-dominated tech landscape. Despite EV adoption concerns, it’s poised to outperform the automotive market due to its advanced compute solutions and power products. In digital health, Flex Ltd. (NASDAQ:FLEX) anticipates a balanced supply-demand situation, with strong medical device demand offsetting a softer medical equipment market.
As a key player in the AI sector, serving 80% of large and hyper-scale data centers, the company stands out with its global reach and automotive exposure. Its power pods for data centers offer a competitive edge with lower costs and faster delivery times. In FQ1 2025, significant advancements were made in various projects across cloud, power, and automotive. The ongoing AI transition in data centers is driving demand for its cloud and power solutions, positioning Flex Ltd. (NASDAQ:FLEX) well for continued growth.
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.”
3. TE Connectivity (NYSE:TEL)
Market Cap as of October 22: $44.64 billion
Number of Hedge Fund Holders: 46
TE Connectivity (NYSE:TEL) designs and manufactures a broad portfolio of electronic components and electrical parts, including various types of connectors, heat shrink tubing, automotive relays, and a wide range of sensors. These products are used in industries such as transportation, industrial applications, communications, medical devices, and energy, as they are essential for connecting and protecting electrical signals, power, and data, enabling critical applications to operate safely and reliably.
In the third quarter of FY2024, the company’s revenues declined 0.48% as compared to the prior year’s third quarter, generating an amount of $3.98 billion. Overall, orders increased 4% year-over-year and 3% sequentially. The Communications segment led this growth, surging over 50% sequentially driven by AI applications. Transportation orders declined slightly due to commercial transportation weakness.
In the Transportation segment, auto sales grew 4%, outpacing the global auto production decline of 1%. Content growth had strong double-digit sales in China offsetting declines in Europe and North America. Commercial Transportation declined 8%, primarily due to European weakness, and is expected to remain down in the fourth quarter. Sensors sales declined due to market weakness and portfolio optimization.
In the Industrial Solutions segment, sales were down 2%, with strength in aerospace, defense, marine, medical, and energy offsetting weakness in industrial equipment. The Communications segment saw a 32% growth in data and devices. Appliances grew 12%, driven by both the Americas and China.
Despite challenging market conditions, the company has demonstrated strong resilience and operational excellence. Its strategic focus on secular growth trends, coupled with its ability to drive margin expansion and generate strong cash flow, positions it well for continued success.
The London Company Large Cap Strategy stated the following regarding TE Connectivity Ltd. (NYSE:TEL) in its Q2 2024 investor letter:
“Initiated: TE Connectivity Ltd. (NYSE:TEL) – TEL designs and manufactures connectors and sensors, supplying solutions to the transportation, industrial, and communications industries. The critical components that TEL sells have long life cycles and they make up a small percent of the overall cost of materials for a complex electronic systems (i.e. low cost but high-cost failure products), creating high switching costs and barriers to entry. TEL has leading share in the global connector market (including 30-35% share in automotive) with leverage to secular growth from the ‘electrification’ of multiple end markets. TEL’s management team has enacted successful cost- realignment strategies, driving significant margin improvement and leading to mid-teens returns on invested capital. TEL fits our process well. It has a low level of net debt, generates healthy cash flows, returns a significant amount of capital back to shareholders through its dividend and buyback program, and it currently trades at a discount to our estimate of intrinsic value and a discount to its peers. Given its strong competitive position, capital allocation philosophy, and favorable industry tailwinds, we believe TEL presents an opportunity to own a high quality compounder.”
2. Jabil Inc. (NYSE:JBL)
Market Cap as of October 22: $14.10 billion
Number of Hedge Fund Holders: 51
Jabil Inc. (NYSE:JBL) is a global manufacturing solutions provider that offers a range of services, including design, engineering, manufacturing, and supply chain management. It serves a diverse customer base across various industries, including healthcare, consumer electronics, automotive, and industrial applications. Its expertise lies in providing end-to-end solutions for complex electronic products, from initial concept development to final assembly and distribution.
It generated a revenue of $6.96 billion in FQ4 2024, which was down 17.66% as compared to the year-ago period. However, this revenue still exceeded expectations by $364 million, driven by stronger performance in connected devices, networking, and storage markets. DMS segment revenue grew 22%, driven by connected devices, but was slightly offset by automotive weakness. EMS segment revenue increased by 13% due to stronger demand in advanced networking markets, despite overall softness in end markets like 5G, renewable energy, and digital print.
It’s expanding its footprint in AI, making it a solid investment. On October 3, Jabil Inc. (NYSE:JBL) announced the acquisition of Mikros Technologies, a manufacturer of liquid cooling solutions in AI data centers. On October 14, the company launched new high-performance AMD and Intel servers functional for AI, FinTech, and Cloud workflows.
Despite a challenging year, the company demonstrated remarkable resilience in 2024. Strong margins, consistent earnings, and robust cash flow were achieved even with reduced revenue. With a strong global network and a clear vision for the future, Jabil Inc. (NYSE:JBL) is well-positioned to capitalize on upcoming opportunities.
Artisan Mid Cap Fund stated the following regarding Jabil Inc. (NYSE:JBL) in its Q3 2024 investor letter:
“We ended our investment campaigns in Edwards Lifesciences, Jabil Inc. (NYSE:JBL) and Trex during the quarter. Jabil provides outsourced manufacturing services to diverse end markets and customers. Our thesis was that the company was moving away from the more cyclical consumer electronics markets toward secular growth areas, such as electric vehicles and medical devices, which would lead to faster growth and higher margins. Unfortunately, while it is a diversified contract manufacturer, several of its meaningful markets have come under pressure this year, including residential solar, semiconductor capital equipment and health care devices. While these headwinds will likely prove temporary, we have also been disappointed by a high level of management turnover in recent quarters. Given these issues, we decided to exit the position in favor of higher conviction investments in technology.”
1. Amphenol Corporation (NYSE:APH)
Market Cap as of October 22: $80.69 billion
Number of Hedge Fund Holders: 72
Amphenol Corporation (NYSE:APH) is a leader in broadband communication products for cable, satellite, and telecommunications networks, as well as a provider of high-performance interconnect systems and components for the aerospace market. It offers a wide range of products, including connectors, cables, and cable assemblies, used in industries such as automotive, aerospace, industrial applications, and communications. These products are essential for connecting and protecting electrical signals, power, and data, enabling critical applications to operate safely and reliably.
The second quarter of 2024 saw strong revenue growth of 26.24% compared to the previous year, generating a record amount of $4.04 billion. Sequentially, sales grew 12% and orders reached a record $4.412 billion, increasing 39% year-over-year and 9% sequentially. Sales in the Harsh Environment Solutions segment increased by 35%. Communications Solutions sales grew 32%, while Interconnect and Sensor Systems sales increased 12%.
It completed the acquisitions of Lutze Europe and CIT, and the acquisition of the Andrew businesses from CommScope is expected to close in the first quarter of 2025. Its end market exposure remains highly diversified, providing resilience in various economic conditions. The company experienced strong growth in defense, commercial air, mobile devices, and IT datacom markets, while the industrial and automotive markets faced some challenges with slower demand in certain regions.
The company’s strong financial performance is evident in its healthy balance sheet and robust liquidity position. Its effective management of inventory accounts receivable, and accounts payable has contributed to its overall financial health. Amphenol Corporation’s (NYSE:APH) commitment to returning capital to shareholders through share repurchases and dividends demonstrates its dedication to creating value for investors.
TimesSquare Capital Management U.S. Focus Growth Strategy stated the following regarding Amphenol Corporation (NYSE:APH) in its Q2 2024 investor letter:
“Adding to that trend, Amphenol Corporation (NYSE:APH) reported better-than-expected results. The producer of electrical, electronic and fiber optic cables, and connectors showed steady organic revenue growth and enhanced its margins—especially in areas such as data communications, military applications, and commercial aerospace. Guidance for the next fiscal quarter was higher than expected, and Amphenol’s shares responded with a 17% gain.”
While we acknowledge the growth potential of Amphenol Corporation (NYSE:APH), our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than APH but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
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