Is Linde plc (LIN) the Best ADR Stock to Buy According to Hedge Funds?

We recently compiled a list of the 12 Best ADR Stocks to Buy According to Hedge Funds. In this article, we are going to take a look at where Linde plc (NASDAQ:LIN) stands against the other best ADR stocks.

American Depositary Receipts (ADR) are US-listed securities that represent shares in foreign companies, allowing American investors to gain exposure to international equities without dealing with foreign exchanges or currencies. Unlike regular shares of domestic companies, ADRs are issued by US banks and trade on American exchanges, typically in US dollars. While they provide easier access to foreign markets, ADRs can carry additional risks such as currency fluctuations, geopolitical factors, and differences in accounting standards or regulatory environments. Investors should also note that ADRs come in two forms: sponsored and unsponsored. Sponsored ADRs are issued in partnership with the foreign company and typically offer more reliable financial reporting and investor communication. Unsponsored ADRs, on the other hand, are created without the company’s direct involvement and may have limited information available, making due diligence more challenging.

READ ALSO: 10 Worst ADR Stocks To Buy According to Short Sellers

ADRs were not particularly popular in the last 15 years, as the US stock market has been the best-performing developed market since the 2008 financial crisis, significantly and consistently outperforming all major European markets as well as the Chinese stock market. The US stock market has massively benefited from the US’s technological leadership and the emergence of tech giants with multi-trillion-dollar capitalizations, a more favorable business environment with lower tax rates, more aggressive financial stimulus, and, more importantly, significantly higher productivity growth vs. other regions. As a result, the US stock markets not only delivered higher earnings growth but also experienced the largest increase in valuations compared to Europe and China. The latter is partially attributed to foreign capital flowing into the US market as investors recognized the superior growth opportunities of US companies.

The recent political developments initiated by the Trump 2.0 regime have set the stage for a potential reversal of the aforementioned trends, which may drive relative outperformance of foreign markets and make ADRs attractive again. First, the Trump 2.0 tariff turmoil and massive cuts in federal spending are likely to cause an economic slowdown and thus cut the earnings growth potential of domestic companies. Second, the threat of tariffs imposed on the USA’s allies is already causing retaliatory measures, including the potential substitution of American products for European or Canadian alternatives (again, this endangers the earnings growth potential of US domestic companies while boosting the potential of European and Canadian companies). Third, Europe has recognized that the US has become a less reliable partner, as evidenced by the major shift in policies of the new administration, and is already taking steps to ensure its independence and minimize dependence on the US. This is illustrated by the recent decision of Germany to create a €500 billion infrastructure fund to boost its defense capabilities (funds which are planned to be spent primarily on European contractors). Last but not least, the increasing tensions between the Western allies could potentially drive a return of European capital to the European continent, which may cause a relative valuation repricing in favor of the European stock market.

With that being said, the key takeaway for readers is that the current developments in the US and Europe suggest a potential break of the trend in which the US strongly outperformed Europe and China for the last 15 years. In this context, gaining more international exposure through ADRs could be a great way to not only hedge domestic risk but also gain exposure to new emerging tailwinds such as the accelerating European spending on defense. Both the European and Chinese stock markets have outperformed the US since election day, meaning that there is already strong confirmation for the developments discussed above.

Is Linde plc (LIN) the Best ADR Stock to Buy According to Hedge Funds?

A scientist in a lab coat inspecting a cylinder filled with industrial gas.

Our Methodology

For this article, we used a Finviz screener to filter all the available ADR stocks. Then we compare the list with our Q4 2024 proprietary database of hedge funds’ ownership and include in the article the top 12 stocks with the largest number of hedge funds that own the stock.

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 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).

Linde plc (NASDAQ:LIN)

Number of Hedge Fund Holders: 70

Linde plc (NASDAQ:LIN) is an Ireland-based global industrial gases and engineering company. It produces and supplies atmospheric and process gases such as oxygen, nitrogen, argon, hydrogen, and carbon dioxide to a wide range of industries, including healthcare, chemicals, energy, manufacturing, and electronics. LIN also offers gas processing solutions and operates one of the world’s largest engineering businesses for gas production plants. It plays a key role in energy transition efforts through its investments in clean hydrogen and carbon capture technologies. LIN ranked fifth on our recent list of 7 Best Natural Resources Stocks to Invest in According to Hedge Funds.

Linde plc (NASDAQ:LIN) delivered another successful year in 2024, with EPS increasing 10% and EBIT margins expanding 190 basis points to 29.5%, along with a strong ROC of 25.9%. The company achieved a record sale of gas backlog of $7 billion within its total backlog of $10 billion, demonstrating strong future growth potential. In terms of operational achievements, LIN set a record for small on-site wins with 59 long-term agreements for 64 plants while also completing 18 packaged gas acquisitions with annualized revenues of approximately $200 million. The company’s 2025 guidance projects EPS growth of 4% to 7%, or 8% to 11% when excluding an estimated 4% currency headwind, maintaining its long-term double-digit EPS growth trajectory through a combination of capital allocation and management actions.

Linde plc (NASDAQ:LIN) continues to make progress on sustainability initiatives, with over 40% of total power consumption now being low carbon based, and increased its active low carbon and renewable energy consumption by 19% YoY. The company’s management remains focused on network density improvement, pricing power, and cost management while maintaining disciplined contract terms to ensure profitable growth regardless of macroeconomic conditions. Despite facing challenges from currency headwinds and flat industrial production growth expectations for 2025, management anticipates continued margin expansion of 20 to 50 basis points. With 70 hedge funds owning the stock and strong guidance in place, LIN is one of the best ADR stocks to buy.

Overall LIN ranks 5th on our list of the 12 best ADR stocks to buy according to hedge funds. While we acknowledge the potential of LIN 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 time frame. If you are looking for an AI stock that is more promising than LIN 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.