We recently compiled a list of the 10 Stocks That Will Bounce Back According To Hedge Funds. In this article, we are going to take a look at where Intel Corporation (NASDAQ:INTC) stands against the other stocks.
With 2024 coming to a close, investors have left several unknown variables behind them. They started out the year wondering when and if the Federal Reserve would start cutting interest rates. Then, as the year progressed, uncertainty about the outcome of the 2024 US Presidential Election came to the forefront due to the significantly different policy objectives of the two candidates.
Now, with President-elect Donald Trump waiting to be sworn in and the Fed’s interest rate cut cycle having kicked off in September, Wall Street is now focused on the impact of tariffs on global trade and the speed and depth of the interest rate cutting cycle. After the results of the election were clear, several sectors fluctuated in response.
Since this post is about stocks that can bounce back based on hedge fund holdings, it’s relevant to see which stocks tumbled in November. One of the hardest hit sectors was clean energy. The S&P’s clean energy stock index lost 10.4% in the days following the election as investors were worried about the rollback of clean energy subsidies rolled out during the Biden Administration and the incoming Trump Administration’s focus on traditional energy stocks and oil drilling.
While clean energy as a sector took the hardest hit, other stocks linked to China and the German automotive industry did not do well either. Shares of the Chinese stock that is known to have been a part of Warren Buffett’s investment portfolio fell by 4.8%, while shares of German car companies fell by as much as 6.6%. The drops were natural as investors were worried about tariffs against China impacting the car company’s business and tariffs against all countries that export to the US hampering the German car industry.
Along with the outcomes of a change in government, investors have also spent 2024 positioning themselves for the Fed’s monetary easing. The central bank started its rate cut cycle in September through a jumbo 50 basis point rate cut. In December, investors were greeted by the first set of economic data free of election worries in the form of the consumer price index. The CPI data was a mixed bag of results since while inflation grew at the fastest pace since April, two key inflationary components that have long held up strong against interest rates finally fell.
In numerical terms, US inflation sat at 0.3% in November and 2.7% in the twelve months ending in November. Additionally, core CPI, which removes the impact of volatile food and energy prices from the data, jumped by 0.3% in November to stay at the same level since August. Within this data, rents jumped by 0.2% and decelerated to levels last seen in July 2021. This marked a deceleration over the 0.3% reading for October, and the overall core CPI for the twelve months through November sat at 3.3%. This was lower than the three-month annualized average of 3.7%. This inflation data is crucial as it helps investors determine whether the Federal Reserve will cut interest rates thrice in 2025 or increase the number of cuts to four.
Shifting gears, while artificial intelligence has caught the market and public’s attention throughout 2024 and allowed investors to push the broader economic weakness to the background, not all stocks have performed well. Sectors such as oil shipping, biotechnology, industrials, and non-AI information technology have all struggled to impress in 2024. Some stocks, such as this oil tanker firm, are close to 52-week lows as 2024 ends after having lost 26% year-to-date. Sectors like biotechnology, as evidenced by the NASDAQ’s index of biotechnology stocks have gained a modest 2.6% year-to-date. Others, such as this Brazilian oil and fuel distribution stock have bled 60% of their value so far in 2024.
It’s safe to say that not all sectors of the market have performed well. However, as any prudent investor knows, not all stocks at the bottom of the barrel have to be shunned. Therefore, in this piece, we will look at those stocks that are trading at low levels but attract hefty hedge fund interest during the third quarter.
Our Methodology
To make our list of stocks that can bounce back according to hedge funds, we ranked the 40 most valuable stocks with a market cap greater than $300 million that are down 50% or more year-to-date by the number of hedge funds that had bought the shares in Q3 2024. Out of these, we picked the top ten stocks with the highest number of hedge fund investors.
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 technician soldering components for a semiconductor board.
Intel Corporation (NASDAQ:INTC)
Year-To-Date Loss: 57.45%
Number of Hedge Fund Investors In Q3 2024: 68
Intel Corporation (NASDAQ:INTC) is 2024’s horror story in the semiconductor industry. The close of the year is seeing a dramatic shift in the firm’s fortunes with its CEO Patrick Gelsinger having left and executives wondering whether the firm’s status as an integrated chip manufacturer is key to its future. Intel Corporation (NASDAQ:INTC) is among the few integrated chip manufacturers in the world, a model that allows it to design and manufacture its chips. However, a slowdown in the consumer PC market and a loss of technology leadership to the Taiwanese TSMC has placed the firm on the back foot and raised doubts about its future. These factors mean that Intel Corporation (NASDAQ:INTC)’s hypothesis is dependent on its 18A manufacturing process entering production in 2025 and a potential split up of its manufacturing and chip design businesses to cut costs and inject cash.
ClearBridge Investments mentioned Intel Corporation (NASDAQ:INTC) in its Q3 2024 investor letter. Here is what the fund said:
“While the market environment clearly was a headwind in the third quarter, several of our large positions also faced challenging conditions, which negatively impacted results. In the information technology (IT) sector, Intel Corporation (NASDAQ:INTC) has come under additional pressure due to continued softness in the company’s core PC and server markets as well as concerns on the company’s longer-term competitive position. While Intel’s turnaround is not happening overnight, we are constructive on the outlook into 2025: the company’s product positioning should be much improved and it should be positioned to gain market share in a cyclical upswing in which it has strong earnings power. A somewhat adverse spending environment due to AI myopia has weighed on shares, but we still think the market is undershipping PCs and general servers following a COVID normalization period that saw demand get pulled ahead and then languish as companies froze IT budgets. The installed base is now getting older, and we expect a strong refresh cycle into next year. The delay is actually beneficial to Intel, whose product positioning will be all the more improved. While our investment case is not predicated on an M&A transaction, and we believe one is unlikely, the expression of interest in the company speaks to the value of the assets, which we think still trade at a meaningful discount to fair value.”
Overall INTC ranks 1st on our list of the stocks that will bounce back according to hedge funds. While we acknowledge the potential of INTC 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 timeframe. If you are looking for an AI stock that is more promising than INTC 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.