We recently compiled a list of the 13 Best American Tech Stocks To Buy According to Short Sellers. In this article, we are going to take a look at where Fiserv, Inc. (NYSE:FI) stands against the other American tech stocks.
Tech stocks have outperformed the stock market for several years and account for over 30% of the market’s overall holdings. With market values estimated at trillions of dollars, the majority of the lauded Magnificent Seven stocks are American tech companies that are still expanding. Technology is constantly evolving, and investors have a lot of opportunities because of this ongoing advancement.
This dynamic progress was reflected in the US stock market when it rose more than 3% in the second quarter of 2024. In terms of the trade in artificial intelligence, technology companies remained at the top, and this trend did not appear to be slowing down throughout the quarter. The largest companies have outperformed the market this year, which has been a remarkable trend. The 500 largest companies’ large-cap market saw gains of 4.4% in Q2 YoY, increasing its 2024 return to above 15%. In contrast, the small-cap market saw a 3.3% drop, translating into a 1.6% 2024 return.
Even though technology companies outperformed in Q2 FY2024, Main Street Research’s James Demmert cautions investors not to treat all of them the same. Instead, they should prioritize those tech firms that can deliver consistent earnings, especially in an uncertain economy.
Investors should also stay informed about the 2024 tech industry statistics. According to the Information Technology and Innovation Foundation, almost one-third of the growth in the US economy is attributed to the IT sector, which is the main driver of the country’s economy. Similarly, the United States accounts for one-third of the world’s information technology market, according to the International Trade Administration, making it the largest tech market in the world. Computer and IT jobs reported a median annual wage of $104,420 in May 2023, while 108,503 college graduates with bachelor’s degrees in computer and information sciences graduated in 2022, a 3.5% increase YoY. The average yearly salary for tech majors is $90,000.
According to a report, tech trends in 2023 were dominated by electrification/renewables and generative AI. Internet searches for generative AI increased by 700%, and the area received significant funding as huge language models processed more data and expanded modalities. Even while global IT investment declined, electrification and renewables continued to draw large amounts of capital. These industries continue to have a high volume of job postings, signifying potential for long-term growth.
Looking forward, according to the Deloitte 2024 technology industry outlook, in the wake of current macroeconomic headwinds such as high inflation and supply chain disruptions, the technology industry confronts a cautious 2024 recovery. As per Deloitte’s Q4 2023 study, 62% of tech executives believe the industry is “healthy,” with growth anticipated in the areas of cybersecurity, cloud computing, and artificial intelligence. By late 2024, generative AI is expected to have a major impact on enterprise software and elevate operational efficiency. Tech companies and startups are investing more in AI, but enterprise adoption is still sluggish. However, this is predicted to change in the second half of 2024. Market expansion is anticipated to be propelled by enterprise expenditure on AI and IT services. Nonetheless, regulations in the EU and the US focusing on data privacy, sustainability, and AI ethics continue to provide challenges, forcing companies to follow regulations while leveraging these for competitive advantage. To reduce geopolitical risks and guarantee uninterrupted growth, supply networks will need to strategically change, and effective operations will need to be prioritized.
Methodology:
We sifted through holdings of tech ETFs and online rankings to form an initial list of 25 American tech stocks. Then we selected the 13 stocks that had the lowest percentage of their shares shorted. The stocks are ranked in ascending order of the lowest percentage of their shares shorted.
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)
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Fiserv, Inc. (NYSE:FI)
% of shares shorted: 1.35%
Based in Milwaukee, Wisconsin, Fiserv, Inc. (NYSE:FI) is a major provider of core processing and supplementary services to US banks and credit unions. It focuses on small and midsize banks. International sales account for about 10% of the company’s total revenue.
It offers technological services domestically in the US, as well as in Latin America, the Asia-Pacific region, Europe, the Middle East, and Africa.
The American tech company also offers merchants payment processing services following Fiserv’s 2019 merger with First Data. Three other mergers of a similar nature were quickly completed. However, Fiserv’s decision did not significantly improve the company’s competitive position as an outcome. Nonetheless, these purchases had a sound strategic basis. The tech company has to maintain numerous core processing facilities because it was formed through acquisitions, which could reduce profits and lower the quality of its products.
However, its bank technology business is highly stable, with large volumes of recurring revenue and long-term agreements.
Here is what Madison Investments analyzed about Fiserv, Inc. (NYSE:FI) in its Q1 2024 investor letter:
“At payment processor Fiserv, Inc. (NYSE:FI), revenue and profits continue to steadily compound. In fact, 2023 marked the 38th consecutive year of double-digit earnings growth for the company, a remarkable accomplishment considering the wide range of economic environments experienced during that long period. It goes without saying that success over such a prolonged timeframe requires a combination of strong competitive advantages, dependable stewardship, and continuous investment in new products and services. In more recent years, Fiserv has rolled out the Clover payment platform for small-and-medium sized businesses. Clover has been very successful in large part, not only due to its superior functionality relative to legacy point-of-sale payment platforms, but also Fiserv’s distribution scale across financial institutions and independent sales organizations, an advantage that is difficult to replicate by upstart fintech competitors. Investments like Clover give us confidence that Fiserv will continue to build upon its impressive long-term track record.”
Fiserv was given a Buy rating by Robert W. Baird analyst David Koning, who cited the company’s track record of being among the fastest-growing EPS climbers with low volatility in EPS growth, which puts it in a favorable position in the market.
Overall FI ranks 11th on our list of the best American tech stocks to buy according to short sellers. While we acknowledge the potential of FI as an investment, our conviction lies in the belief that some 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 FI 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.
