We recently published a list of the 13 Most Undervalued Blue Chip Stocks To Buy According To Analysts. In this article, we are going to take a look at where NXP Semiconductors N.V. (NASDAQ:NXPI) stands against other most undervalued blue chip stocks to buy according to analysts.
“Now is the Time to Revisit Portfolios”
The Fed went through with a 50 basis point cut and as things have started to get clear, investors must give their portfolio another look. On September 20, Matt Stucky, Northwestern Mutual Wealth Management’s chief equities portfolio manager, appeared in an interview on Yahoo Finance to discuss why and how investors must revisit their portfolios.
He suggested that now is the perfect time for investors to sit down and reassess their investments with the help of advisors. Stucky highlights that there is currently $6.3 trillion sitting in money market funds in the asset class, which may not be as attractive after the 50 basis point cut went through. He urged investors to consider a rather diversified portfolio and suggested that sitting on cash alone is risky.
He reiterated that while investors do not need to alter their long-term strategic goals, the ones with idle cash must try to allocate or deploy that money in other investment classes. According to Stucky, garnering a solid yield or return on investment does not come without risk and investors must understand that with the current Fed decision on board, it is impossible to get that kind of yield from cash alone.
What Does the Cut Signal?
On September 19, Dennis Lockhart, Former president of the Federal Reserve Bank of Atlanta, appeared in an interview on Yahoo Finance to discuss the aftermath of the rate cut. According to Lockhart, the rate cut was perfectly balanced and rather optimistic in nature.
He believes that the Fed’s decision was not reactionary to anything going on in the market or the economy. The Fed is particularly confident about the inflation rate, the labor market, and the soft landing of the economy.
Lockhart suggested that the Fed will reroute and remain flexible based on how the economy is performing from meeting to meeting. According to him, the Fed will aim to maintain flexibility and the 50 basis point cut was more like a compensation to what should have happened in July.
Our Methodology
To come up with the 13 most undervalued blue chip stocks to buy according to analysts we examined multiple similar rankings, our own rankings, and ETFs to come up with the best blue chip stocks. We then chose stocks with a forward P/E ratio that was less than the S&P 500’s (22.68, as of September 22). Finally, we ranked the shortlisted stocks in ascending order of the analyst upside potential, as of September 22, 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 close-up of a semiconductor component, highlighting its complex design.
NXP Semiconductors N.V. (NASDAQ:NXPI)
Forward P/E, as of September 22: 17.1
Analyst Upside Potential, as of September 22: 24%
Number of Hedge Fund Holders: 52
NXP Semiconductors N.V. (NASDAQ:NXPI) is a Dutch semiconductor manufacturing and design company. Some of its products include processors, microcontrollers, and sensors to name a few. NXP sells to some of the biggest companies in the world including Apple, Dell, Ericsson, and Samsung.
In the second quarter of 2024, NXP Semiconductors N.V. (NASDAQ:NXPI) logged $3.13 billion in revenue. During the same quarter, the company returned $260 billion in cash dividends and initiated the repurchase of $310 million of its common shares.
NXP Semiconductors (NASDAQ:NXPI) is one of the most undervalued blue chip stocks and we say that because of its strategic position in the industry. During the second quarter, the company announced a joint venture with VisionPower Semiconductor Manufacturing Company Pte Ltd to create a semiconductor wafer manufacturing facility in Singapore.
Towards the end of August, the European Commission approved aid worth EUR 5 billion for the construction of a microchip manufacturing plant in Dresden, Germany. The project will be led by European Semiconductor Manufacturing Company (ESMC), a joint venture between Taiwan Semiconductor Manufacturing Company, Bosch, Infineon, and NXP. By 2029, the plant will be able to produce 480,000 silicon wafers per annum.
Overall, NXP Semiconductors’ (NASDAQ:NXPI) position in the industry is remarkable. Its partnerships and projects add to its value, making it a crucial stakeholder. Moreover, as the demand for tech grows, so will the demand for NXPI.
Aristotle Large Cap Growth Strategy made the following comment about NXP Semiconductors N.V. (NASDAQ:NXPI) in its Q3 2023 investor letter:
“We sold NXP Semiconductors N.V. (NASDAQ:NXPI) to reduce our exposure to the automotive sector in semiconductors following the strong returns over the past 3 years. We are seeing early data of slowing global auto sales due to macroeconomic conditions and higher interest rates. While we think this may be a shorter-term slowdown, the risk is increasing of elevated inventory levels and pricing headwinds.”
Overall, NXPI ranks 2nd on our list of most undervalued blue chip stocks to buy according to analysts. While we acknowledge the potential of NXPI 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 NXPI but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
