We recently compiled a list of the 12 Best Large Cap Stocks To Buy Now. In this article, we will look at where GE Vernova Inc. (NYSE:GEV) ranks among the best large cap stocks to buy now.
Is the Next Bull Cycle Picking Up?
Analysts’ anticipation about the Fed initiating three rate cuts of 25 basis points each, starting in September, has become a hot topic in the current market. While some economic indicators show resilience, recent market fluctuations have raised concerns about deeper rate cuts being overestimated. Yet, a recession appears unlikely, and the steady economic growth suggests a cautious but positive outlook for the markets.
But the question is: why is a recession even being talked about? We discussed this earlier in another one of our articles, 12 Best Small Cap Tech Stocks to Buy, here’s an excerpt from it:
“Inflation in the US may have reached a 3-year low of 2.6% in August, the lowest rate since March 2021, according to a survey of economists by FactSet. Core inflation, excluding food and energy prices, is believed to have remained at 3.2%.
Inflation peaked at a 4-decade high of 9.1% in June 2022 as the economy rebounded rapidly from the pandemic recession. The Fed responded with 11 rate hikes in 2022 and 2023, raising its key rate to a 23-year high and significantly increasing borrowing costs across the economy. The easing of inflation may pave the way for the Fed to start cutting interest rates next week.”
Binky Chadha, Deutsche Bank’s chief global strategist, joined CNBC last week to discuss what’s next for stocks, given the US elections — particularly the typical pullback seen in the month leading up to closely contested races, where markets often decline by 4% to 5%.
Chadha thinks that this trend, driven by uncertainty, prompts investors to seek protection against volatility, leading to a dip in stock prices. This decline usually hits its lowest point on election day, followed by a substantial rally if the election outcome is clear and resolves uncertainty. Historical instances, such as the Bush/Gore election, show that unresolved outcomes can exacerbate volatility, as seen with further market declines during that period.
Understanding market trends about elections is crucial, as delays can significantly impact investor confidence and overall market behavior. The current market is led by a significant rally in the S&P 500, reaching record highs despite challenges like high interest rates and geopolitical tensions. While election years typically see market weakness, the incumbency of both major party nominees may reduce uncertainty this cycle. However, potential volatility remains as the election approaches and corporate earnings are closely examined against high expectations, according to Chadha.
Chadha further talked about the Bush/Gore election and when a Supreme Court resolution seemed imminent, the market rallied. However, this was followed by a continued market decline. While relying on a single instance for broader conclusions is not ideal, this case reflects general market behavior. It’s important to recognize the prevailing positive trend, despite experiencing two pullbacks.
Chadha said that while the S&P 500 has shown unusual recovery dynamics, peaking with 26% year-on-year sales growth, this growth has slowed unsustainably over the past 2 years. As sales growth decelerates, concerns about potential downturns rise, leading to increased inquiries about negative sales growth in the S&P 500.
While Chadha acknowledges that S&P 500 sales growth has returned to pre-pandemic levels, implying stability, there’s also a decline in the labor market, particularly in private payrolls over the past 7 months. Such a mixed sentiment should be given into and used as a buying opportunity. With that, we’re bringing you a list of the 12 best large-cap stocks to buy now.
Methodology
For this article, we have defined large cap stocks as those trading between $20 billion and $200 billion. We sorted our screen by market cap and looked through the top 25 stocks that matched our criteria. We then selected 12 stocks that were the most popular among elite hedge funds and that analysts were bullish on. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q2 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).
Solar panels in an agricultural field, highlighting the company’s commitment to renewable energy.
GE Vernova Inc. (NYSE:GEV)
Market Capitalization as of September 13: $62.33 billion
Number of Hedge Fund Holders: 92
GE Vernova Inc. (NYSE:GEV) is an energy equipment manufacturing and services company that helps customers meet their energy needs and specializes in renewable energy technologies, power generation, and grid solutions.
The company has a legacy of over 130 years in the manufacturing of electrical equipment, natural gas turbines, wind turbines, hydropower turbines, and high-voltage electrical transmission products. It plays a significant role in the green energy sector, with its technology being utilized in ~55,000 wind turbines and ~7,000 gas turbines across ~100 countries, collectively generating ~25% of the world’s electricity.
In Q2 2024, GE Vernova Inc. (NYSE:GEV) generated a revenue of $8.20 billion, which was less than Street estimates by $55.00 million. Revenue grew 2% with continued strength in electrification and power, partially offset by Wind. Services revenue increased 9% with growth across all segments.
The company is set to capitalize on the growing energy demand from the electrification of transportation and AI-driven electricity demand. The IEA forecasts a 4% rise in global electricity demand for 2024 and 2025, up from 2.5% in 2023.
All this growth potential positions the company for success, and makes it one of the top large-cap stocks that investors should consider. As of the second quarter, 92 hedge funds hold long positions in the company.
The company is expanding its portfolio of onshore and offshore wind projects (in the clean energy sector). It’s not limited to wind energy and participates in the broader transition towards lower carbon energy solutions. Its innovative application of AI for efficient power management and autonomous inspections further strengthens its competitive advantage in the market.
Carillon Eagle Mid Cap Growth Fund stated the following regarding GE Vernova Inc. (NYSE:GEV) in its Q2 2024 investor letter:
“GE Vernova Inc. (NYSE:GEV) is a global electric power company that was recently spun out of a much larger industrial conglomerate. The company’s shares performed well in their first quarter as a standalone company, primarily as a result of the increasing outlook for power demand growth, both domestically and abroad. We believe GE Vernova is well positioned to capitalize on this growing trend across its various products and services, but most notably within its large-scale gas turbine equipment and related services, as well as in its high-voltage electrical transmission products.”
Overall GEV ranks 9th on our list of the best large cap stocks to buy. While we acknowledge the potential of GEV as an investment, our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than GEV 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 was originally published on Insider Monkey.
