We recently published a list of 10 Best Stocks to Buy and Hold For 5 Years. In this article, we are going to take a look at where NextEra Energy, Inc. (NYSE:NEE) stands against other best stocks to buy and hold for 5 years.
Is Corporate America Celebrating the New Administration?
On November 7, Reuters reported that stocks in the United States were higher than usual after the Fed announced a 25 basis point rate cut, extending the rally fueled by the election results. The Fed decision came promptly after the job market showed signs of easing and inflation moved towards the Central Bank’s target of 2%. Most investors expect the new administration to ease taxes and regulations, all of which sparked all three of the major indexes. The S&P 500 and Dow, each logged their largest one-day percentage jumps in two years.
Now that the elections are over, investors are keen to know how will markets perform amid election results. On November 8, Bethany McLean, contributing editor at Vanity Fair, joined Catalysts on Yahoo Finance to discuss why businesses may be optimistic as the new president takes over the White House.
McLean emphasizes that investors foresee a myriad of benefits such as tax cut extensions, fewer regulations, and less aggressive antitrust oversight, all of which have sparked a surge in markets. Despite the possible benefits, she emphasizes it is difficult to predict what the administration is going to do at the moment.
McLean expects the new administration to be friendlier with companies in the technology sector, however, she remains fixated on waiting to see how the policies play out. She further adds that if any future policies made by the new administration negatively impact the stock market, she expects them to “switch course.”
On the flip side, some analysts maintain that the easing cycle has a greater bearing on the stock market than the elections, hinting that value names may be more important as of now. On November 7, Arup Datta, senior vice president at Mackenzie Global Quantitative, joined Wealth! on Yahoo Finance to share his market thesis as the 2024 elections come to a close.
Datta shares that he is extremely positive about the market but emphasizes that the win will have little impact on financial markets in the long term. Speaking of the magnificent seven, he adds focusing on quality names with positive growth and value for his investment portfolio helps him navigate the market in such conditions.
He suggests that while the magnificent seven have been the talk of the town for the past 18 to 21 months, he would like to “pivot away” from that by a little. Historically, value stocks have performed better amid an easing cycle, adds Datta.
As the new administration settles in and the Fed initiates its second cut of the cycle, the near-term market will most likely remain volatile. Speaking of the future, some names happen to promise long-term growth due to their proprietary revolutionary technologies and crucial investments. That said, let’s take a look at the 10 best stocks to buy and hold for 5 years.
Our Methodology
To come up with the 10 best stocks to buy and hold for 5 years, we sifted through multiple similar rankings and compiled an initial list of 20 stocks. We then ranked the top 10 based on their hedge fund sentiment at the end 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).
An aerial view of a power plant, symbolizing the company’s investments in energy infrastructure sector.
NextEra Energy, Inc. (NYSE:NEE)
Number of Hedge Fund Holders: 73
NextEra Energy, Inc. (NYSE:NEE) is a prominent renewable energy company. The company generates, transmits, distributes, and sells electric power, generated through wind, solar, nuclear, and natural gas, across North America.
The company is on our list because of the value it provides to customers. Since 2001, NextEra Energy’s (NYSE:NEE) modernizations have saved customers more than $16 billion in fuel costs. During the third quarter of 2024, the company generated revenue worth $7.57 billion. Of this, its Florida Power & Light Company, which supplies reliable and clean electricity to nearly 12 million people across Florida, made up $4.94 billion of the total revenue.
Through 2027, the company expects its earnings per share to increase at an annual growth rate of 6% to 8%. During the third quarter, NextEra Energy Resources added nearly 3 gigawatts of new renewables and storage projects. By 2027, NextEra Energy, Inc. (NYSE:NEE) expects its renewables and storage portfolio to reach a capacity of 81 gigawatts, more than double its capacity today. The company also revised its wind repowering target to 1.9 gigawatts through 2026, from 1.3 GW at the moment.
Overall, NextEra Energy’s (NYSE:NEE) growth strategies position it as an emerging leader in renewable energy in the coming years, contributing to its ranking on our list. Analysts are also bullish on the stock and their median price target represents an upside of 23% from current levels, as of November 7.
ClearBridge Investments’ ClearBridge Large Cap Growth Strategy stated the following regarding NextEra Energy, Inc. (NYSE:NEE) in its Q2 2024 investor letter:
“AI-related momentum was a key driver of performance in the second quarter, lifting the enablers in technology as well as holdings like renewable power producer NextEra Energy, Inc. (NYSE:NEE) that supply the increasing energy needs of data centers. Parts of the market lacking an AI connection, like our medical device holdings, underperformed despite no change to fundamentals. We have managed through several similar momentum periods over our tenure and have delivered long-term results for shareholders by staying true to an approach that emphasizes diversification across three buckets of growth companies (select, stable and cyclical) and seeks to take advantage of attractive entry points into quality growth businesses.”
Overall, NEE ranks 9th on our list of best stocks to buy and hold for 5 years. While we acknowledge the potential of NEE to grow, our conviction lies in the belief that certain 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 NEE 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.
