We recently compiled a list of the 10 Best Fundamental Stocks to Invest In. In this article, we are going to take a look at where Applied Materials, Inc. (NASDAQ:AMAT) stands against other best fundamental stocks.

As per Ameriprise Financial, the broader stock market continued to climb in Q3 2024, despite surprises that occurred on the way. Particularly, the stocks were resilient during September. In July, weaker-than-anticipated jobs data raised concerns that the US labor trends have been slowing faster than expected. As a result, there were worries that the US Fed left the rates too high for too long. Furthermore, in August, an unexpected increase in the rate from the Bank of Japan weighed over the global stocks for a brief period.

Moving forward, the results of the US Presidential election are likely to decide the course of the broader market in 2025. As per Fidelity Investments, the November election outcomes should shape the economic policy debate in 2025. Some of the examples of proposals from the Republican party consist of corporate tax cuts and lower regulatory pressures on some industries, but elevated tariffs and tighter immigration restrictions can be inflationary. Democratic party proposals consist of a focus on increasing taxes to finance public spending.

Fidelity Investments added that the fiscal deficit is expected to remain large over the upcoming several years (6%–7% of GDP), with interest payments grabbing an even larger share of the overall federal budget.

Q4 2024: What Lies Ahead?

Ameriprise Financial believes that, economically, the US consumer and business activity has demonstrated signs of healthy moderation in Q3, with inflation ebbing lower and labor/spending/savings trends slowing but staying firm throughout the quarter. The corporate profits saw a healthy growth in H1 2024 and this trend is likely to continue in H2 2024. The labor conditions are expected to remain healthy. Overall, the investment firm believes that the macroeconomic backdrop might remain strong and supportive for asset prices in Q4, outside of periods of brief volatility.

Another factor that should help companies and broader equities is an expectation that inflation and interest rates are on the path to move lower. After reducing the policy rate by a strong 50 bps in September, the US Fed might cut its policy rate by at least another 50 bps before 2024 ends. The September cut was the first since 2020 and likely concludes an aggressive rate-hiking cycle. As per the Fed projections, the policymakers might continue to cut rates through 2024-end and into 2025, supporting growth and labor moving forward.

While some sort of weak seasonality factors might be visible in Q4, Ameriprise Financial highlighted that S&P 500 managed to deliver an average return of ~4.2% in the fourth quarter since 2000 and an average of ~9.8% over the last 5 years.

READ ALSO: 7 Best Stocks to Buy For Long-Term and 8 Cheap Jim Cramer Stocks to Invest In.

The Case For a Soft Landing

The IMF’s chief economist hinted that the US remains close to achieving a “soft landing” by navigating challenges, such as inflation, without prompting a prolonged recession. While global growth is slowing, the US is still a positive exception. The inflation in the US appears to be easing towards the US Fed’s target, and the labor market, despite some cooling, remains resilient. As per State Street Global Advisors, despite the US election uncertainty and Middle East geopolitical tensions, the US Fed’s dovish pivot and still-solid US economy continue to make the case for a soft landing.

IMF’s chief economist stated that, globally, an inflation picture seems to be coming very close to central bank targets in the course of the next year. Also, several supply-side factors are aiding the US economy, including good US productivity data, and a significant increase in the number of foreign-born workers, which supported spurring growth without driving inflation.

Our Methodology

To list the 10 Best Fundamental Stocks to Invest In, we conducted extensive research using Finviz screener and online rankings. To select the stocks, we chose companies with stable and reliable 10-year revenue and net income growth rates. We also mentioned the hedge fund sentiment around each stock, as of Q2 2024. Finally, the list has been arranged in the ascending order of their hedge fund holdings.

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).

Applied Materials, Inc. (NASDAQ:AMAT)

10-Year Revenue Growth Rate: ~11.8%

10-Year Net Income Growth Rate: ~22.2%

Number of Hedge Fund Holdings: 77

Applied Materials, Inc. (NASDAQ:AMAT) is engaged in the provision of manufacturing equipment, services, and software to the semiconductor, display, and related industries.

Applied Materials, Inc. (NASDAQ:AMAT)’s growth trajectory should further strengthen as a result of its competitive advantages. These include intangible assets regarding wafer fabrication equipment design expertise and R&D, and cost advantages. The semiconductor capital equipment (SCE) sector continues to transition to a period of high single-digit growth and industry fundamentals are looking positive. The growth should stem from primary secular trends such as larger chips and increased demand for trailing node technology. Wall Street believes that Applied Materials, Inc. (NASDAQ:AMAT) should benefit from such trends, mainly in areas like advanced packaging and Gate-All-Around (GAA) technology.

Experts believe that the company should be able to outperform the WFE industry in 2024 as a result of its exposure to leading-edge foundry/logic and DRAM technologies. Applied Materials, Inc. (NASDAQ:AMAT)’s focus on areas with incremental spending, like GAA, HBM, backside power, and advanced packaging, should drive market share gains in 2024 and 2025.

The company’s robust product lineup, mainly in areas like GAA technology and advanced packaging, aligns with the broader industry’s move towards more sophisticated chip designs. As demand for high-performance computing and AI grows, Applied Materials, Inc. (NASDAQ:AMAT)’s expertise in these advanced technologies should drive revenue growth.

Wall Street analysts believe that the shares of the company have an average price target of $242.95. Parnassus Investments, an investment management company, released the second quarter 2024 investor letter. Here is what the fund said:

“Applied Materials, Inc. (NASDAQ:AMAT) is the world’s largest supplier of wafer fabrication technologies used in semiconductor manufacturing. The company reported solid earnings for the quarter, and investors believe Applied Materials should continue to benefit from accelerated industry spend due to AI and share gains.”

Overall, AMAT ranks 7th on our list of 10 Best Fundamental Stocks to Invest In. While we acknowledge the potential of AMAT 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 timeframe. If you are looking for a deeply undervalued AI stock that is more promising than AMAT but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

READ NEXT: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.

Disclosure: None. This article is originally published at Insider Monkey.