We recently compiled a list of the 10 Best UK Stocks to Invest in Now. In this article, we are going to take a look at where Linde plc (NASDAQ:LIN) stands against the other best UK stocks.
The OBR (Office for Budget Responsibility) anticipates economic output in Britain to expand by 1.8% in 2026 and by 1.5% in 2027. In September 2024, KPMG reported that The Bank of England might take a more cautious approach when it comes to easing monetary policy as compared to the Fed and the ECB, with gradual cuts resulting in the UK base rate to 3.5% by 2025 end.
Furthermore, the labour market will continue to loosen, with fewer vacancies, and subdued pay growth but a relatively modest rise in the unemployment rate. KPMG went on to add that business investment might see some recovery next year if geopolitical uncertainties ease and the impact of reduced rates and the improving growth outlook offer businesses the confidence to commit to their investment plans.
What to expect from the UK Economy?
As per the new EY ITEM Club Autumn Forecast, the UK economy should grow 0.9% in 2024, down from the 1.1% growth expected in July’s Summer Forecast. The downgrade exhibits that household savings are now lower than expectations, providing less scope for consumers to increase their spending. Furthermore, lower-than-anticipated increases in consumer spending, together with cautious rate cuts to the Bank Rate, demonstrate that UK growth is expected to be steady rather than rapid over the upcoming 2 years.
EY added that business investment is expected to accelerate moderately in the coming years, with rate cuts providing a boost to the private sector. Therefore, the UK business investment should grow to 1.3% in 2024, an increase from the 1% expected earlier. Private sector investment is anticipated to accelerate to 3% in 2025, demonstrating a small downgrade from projections of 3.2% growth in its Summer Forecast.
Inflation Outlook for the UK Economy
EY expects that inflation is expected to average 2.6% in 2024 before falling marginally to 2.5% in 2025 and 2.1% in the following year. The firm believes that this ‘stickiness’ is because of several factors, such as tightness in the broader labour market, and the gradual slowing of pay growth. With spending growth anticipated to be lower than the earlier expectations because of reduced household saving rates, it projects consumer spending to rise by 0.8% in 2024.
EY expects that gradual cuts to the Bank Rate might provide some benefits to the UK’s housing market. It projects house price growth of 1.7% in 2024, and 2.1% in 2025, with declining borrowing costs anticipated to help offset other affordability challenges. Notably, the looser monetary policy is expected to have a modest impact on growth over the short term. Several borrowers on fixed rates will not experience the decline in their mortgage payments and a significant minority might refinance a fixed mortgage to a higher rate, despite a decline in Bank Rate.
Our Methodology
To list the 10 Best UK Stocks to Invest in Now, we used a screener to extract UK stocks. Next, we narrowed our list by selecting the ones having high hedge fund holdings. Finally, the stocks were ranked in an ascending order of their hedge fund sentiments, 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).
A professional focused on the markets, monitoring investments in a busy trading floor.
Linde plc (NASDAQ:LIN)
Number of Hedge Fund Holders: 63
Based in Woking, the United Kingdom, Linde plc (NASDAQ:LIN) carries out operations as an industrial gas company in the Americas, Europe, the Middle East, Africa, Asia, and the South Pacific.
Linde plc (NASDAQ:LIN)’s growth trajectory is expected to be aided by its competitive advantages, such as switching costs and intangible assets. A critical driver of the company’s future growth prospects is its ambitious clean hydrogen strategy. Linde plc (NASDAQ:LIN) agreed to supply clean hydrogen to Dow Inc’s ‘Path2Zero’ project in Alberta, Canada. This investment has placed Linde plc (NASDAQ:LIN) as a front-runner in the clean hydrogen market and was aligned with broader trends supporting higher demand for Canadian natural gas.
The use of ATR technology, which needs natural gas as feedstock, should contribute positively to the long-term demand for natural gas in the region. Wall Street analysts opine that the clean hydrogen market has an optimistic outlook, which stems from the industries and governments seeking to reduce carbon emissions and transition to more sustainable energy sources.
Linde plc (NASDAQ:LIN)’s large-scale projects, like the clean hydrogen production site in Canada, exhibit its focus on becoming a leader in this emerging market. With the expansion of the hydrogen economy, the company is expected to benefit from elevated demand for its production technologies, distribution infrastructure, and end-use applications throughout industries, such as transportation, power generation, and industrial processes.
Analysts at Bank of America upped their price target on the shares of Linde plc (NASDAQ:LIN) from $495.00 to $516.00, giving a “Buy” rating on 5th August. Aristotle Atlantic Partners, LLC, an investment advisor, released its third quarter 2024 investor letter. Here is what the fund said:
“Linde plc (NASDAQ:LIN) is the largest industrial gas company worldwide and a major technological innovator in the industry. The company produces atmospheric gases like oxygen, nitrogen, argon, and rare gases through air separation processes, with cryogenic air separation being the most prevalent. They also have technologies to produce blue and green hydrogen, which are considered clean energy. Linde uses three basic distribution methods for industrial gases: on-site or tonnage, merchant or bulk liquid, and packaged or cylinder gases. These methods are often integrated, with products from all three supply modes coming from the same plant. The method of supply is determined by the lowest cost means of meeting the customer’s needs.
Linde holds a leading market share in a consolidated industry, with expected revenues of approximately $34 billion in 2024. The company has consistently grown its earnings throughout economic cycles due to its exposure to both cyclical end markets and is secured by long-term supply agreements of at least three years, providing defensive characteristics to its operating model. We see a robust backlog and pipeline driven by attractive growth end markets and significant decarbonization opportunities with operational discipline from management.”
Overall, LIN ranks 1st on our list of the 10 Best UK Stocks to Invest in Now. While we acknowledge the potential of LIN 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 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.