We recently compiled a list of the 12 Best Long-term Stocks to Invest in for High Returns. In this article, we are going to take a look at where Analog Devices, Inc. (NASDAQ:ADI) stands against the other stocks.
The global economy seems to be at a point where fiscal ambition intersects with market skepticism, says Oakglen Wealth. Donald Trump’s presidential election and the Republican takeover of the US Senate and retention of the House of Representatives resulted in a complicated mix of policy goals. Notably, the broader market’s initial reaction hints at positivity given Trump’s plans for growth, hinting at the continued outperformance of US assets in the year ahead.
Sectors To Focus on in 2025
Fidelity has an optimistic view of the financial sector, primarily because of steady economic growth for the broader US economy. Since the financial sector is cyclical, the sector’s performance is mainly a function of the strength of the broader economy. The US economy has been showing momentum and a path towards the desired “soft landing,” says Fidelity. Therefore, worries about a mild recession (which could have impacted the financial stocks) are alleviated. One significant difference in market dynamics entering 2025, in comparison to recent years, is the outlook on interest rates.
The H2 2024 began a new rate cycle, with the US Fed cutting rates for the first time since the initial days of the pandemic. Banks might benefit from higher interest rates due to higher NIMs. On the other hand, lower rates can help boost confidence and decrease the pressure on economic growth, which is expected to be beneficial for virtually all industries in this sector, opines Fidelity. Within equities, Franklin Templeton has an optimistic outlook on IT, health care, energy, consumer staples, and industrial sectors.
READ ALSO: 7 Best Stocks to Buy For Long-Term and 8 Cheap Jim Cramer Stocks to Invest In.
Growth Drivers Amidst Policy Shifts
As per Russell Investments, the US economy is resilient as it enters 2025, but the road ahead is expected to be affected by shifting policy dynamics. On the positive side, tax cuts and deregulation can offer a meaningful growth boost, mainly to domestic and cyclical sectors. The investment firm believes that companies leveraging AI technologies to enhance productivity—mainly in industrials and healthcare— are expected to see material improvements to operating fundamentals.
Even though the mega-cap AI stocks have fueled the market returns over recent years, leadership has been shifting to companies leveraging AI to develop real-world efficiencies. Russell Investments believes that the Trump administration’s policies offer a delicate balancing act. It assumes that the new administration will not aggressively pursue policies that can create inflation risk.
Our Methodology
To list the 12 Best Long-term Stocks to Invest in for High Returns, we sifted through several financial media reports related to the best long-term stocks to buy. After getting an initial list of 20 stocks, we chose the ones which analysts saw the most upside to. Finally, the stocks were ranked in ascending order of their average upside potential, as of February 6. We also mentioned the hedge fund sentiments around each stock, as of Q3 2024.
At Insider Monkey we are obsessed with 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 working on power management in a semiconductor factory.
Analog Devices, Inc. (NASDAQ:ADI)
Average Upside Potential: 24.2%
Number of Hedge Fund Holders: 63
Analog Devices, Inc. (NASDAQ:ADI) is engaged in designing, manufacturing, testing, and marketing integrated circuits (ICs), software, and subsystems products. CFRA analyst Angelo Zino upgraded the company’s stock from ‘Buy’ to ‘Strong Buy,’ while maintaining a price objective of $250.00. As per the analyst, the new capacity additions are expected to drive long-term growth, together with industrial advancements in instrumentation, testing, and factory automation.
Notably, the automotive sector is expected to act as Analog Devices, Inc. (NASDAQ:ADI)’s most significant growth opportunity, with its products in battery management systems, audio systems, and connectivity acting as potential drivers. The analyst also opines that stable pricing for Analog Devices, Inc. (NASDAQ:ADI)’s products and a rebound can enable it to increase returns to investors. The company continues to make strategic, long-term investments throughout engineering, manufacturing, and the end-to-end customer experience.
For Q1 2025, Analog Devices, Inc. (NASDAQ:ADI) projects revenue of $2.35 billion (+/- $100 million). At the midpoint of this revenue outlook, the company anticipates a reported operating margin of ~22.0% (+/- 130 bps), and an adjusted operating margin of ~40.0% (+/- 100 bps). Carillon Tower Advisers, an investment management company, released its Q2 2024 investor letter. Here is what the fund said:
“Analog Devices, Inc. (NASDAQ:ADI) rebounded as management teams at several semiconductor companies in the analog space called the bottom, seeing improved conditions ahead. The analog semiconductor industry is a very cyclical business that has underperformed the broader semiconductor industry for several years.”
Overall ADI ranks 9th on our list of the best long-term stocks to invest in for high returns. While we acknowledge the potential of ADI 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 ADI but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap.
Disclosure: None. This article is originally published at Insider Monkey.
