We recently published a list of 10 Stocks That Could 10X Over the Next 5 Years. In this article, we are going to take a look at where Visteon Corporation (NASDAQ:VC) stands against other stocks that could 10x over the next 5 years.
Despite ongoing concerns related to the durability of growth and interest rate policy, Deloitte believes that the broader US economy is fundamentally strong. While real GDP growth witnessed some slowness in Q1 2024, growth rebounded to 3.0% in Q2 2024. All the available evidence demonstrates that policymakers have managed to bring inflation under control without a recession.
Market experts opine that the boom in factory construction is expected to boost the economy’s potential over the upcoming years. Deloitte expects that, in the short term, a faster pace of interest rate cuts by the US Fed is expected to allow households to take on more debt and support continued consumer spending growth. This, together with the elevated government consumption, will help the US economy to grow by 2.7% this year.
Pathway for Rate Cuts
S&P Global expects that the global policy rate easing cycle remains in full swing after the 50-bps cut by the US Fed in mid-September. The US has been outperforming as growth remains above potential, amidst relatively higher policy and market rates. This above-trend growth stems from services and private investment, new business formation, and productivity.
The firm believes that the US Fed is on a path to a steady series of interest-rate cuts, and the company is expecting policy rates to reach the terminal rate of 3.00%-3.25% by 2025 end, with risks in both directions. It has kept its probability of a recession starting in the upcoming 12 months unchanged at 25%. With healthy consumption, the company expects that fears of a recession in the near term are overblown.
Amidst Noise, What Are Investment Implications?
EY believes that the US economy is expected to slow into 2025, with restrictive monetary policy and elevated costs curbing the private sector activity. On the positive side, it expects that the recession risks are contained. Households are expected to spend more cautiously, with labor market conditions and income growth softening further. Also, still-elevated financing costs will continue to prompt the businesses to hire and deploy capital with discretion. Investors should know that lower inflation and interest rates, together with a balanced labor market, should result in cooler but more sustainable economic growth in 2025. EY expects real GDP growth to average ~2.7% in 2024.
Regarding consumer spending, Vanguard believes that healthy balance sheets, together with a steady labor market, should support consumer spending over the coming quarters, though at a more modest pace as compared to recent quarters.
As per Merrill (A Bank of America Company), for long-term investors, events such as worker strikes do not often warrant action. Concerning military conflict events, the company has continued to be constructive on Defense stocks for years considering the trend in geopolitical risk. It was highlighted that the pure-play S&P 500 Defense stocks were able to outperform S&P 500 Energy stocks on October 1. This was because of elevated tensions in Israel/Iran and spike in oil prices. Also, defense stocks outperformed when equity volatility increased in July.
Therefore, Merrill believes that defense stocks provide some non-cyclical diversification benefits that cannot be offered by energy. For interest rates, the risks of supply-side inflation warrant the Fed’s attention considering the potential for disinflation to slow or stop. Also, the geopolitical conflict can mean longer-term rates and borrowing rates for the private sector remaining higher for longer.
To put things in perspective, Wall Street analysts opine that, amidst uncertainties, long-term investors should be inclined towards diversification and fundamentally strong companies that offer strong potential for the next 3-5 years.
Our Methodology
To list the 10 Stocks That Could 10X Over the Next 5 Years, we conducted extensive research and sifted through several online rankings. After extracting the list of 20-25 stocks, we narrowed the list to the following 10 stocks, and ranked them in the 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 technician connecting an automotive display in a modern car.
Visteon Corporation (NASDAQ:VC)
Number of Hedge Fund Holders: 33
Visteon Corporation (NASDAQ:VC) is an automotive technology company, which is engaged in designing, manufacturing, and selling automotive electronics and connected car solutions for vehicle manufacturers.
Visteon Corporation (NASDAQ:VC) continues to position itself as a critical player in the evolving automotive technology landscape, with a strong emphasis on digital products and advanced electronic systems. The company is focusing on offsetting near-term Light Vehicle Production (LVP) headwinds by diversifying into underpenetrated customer segments and non-LVP business lines. This approach will reduce Visteon Corporation (NASDAQ:VC)’s reliance on traditional automotive production cycles and open new growth avenues.
The company’s cost structure is expected to act as a critical tailwind over the near term. Its ability to maintain efficient operations remains critical in sustaining profitability amidst industry-wide challenges. Visteon Corporation (NASDAQ:VC)’s capital allocation strategy focuses on bolt-on M&As, with a focus on vertical integration and revenue enhancement opportunities. Its ability to execute its diversification strategy, exploit new business opportunities, and achieve the margin targets are expected to be critical factors in determining future success.
Through its focus on underpenetrated customer segments and non-LVP business lines, Visteon Corporation (NASDAQ:VC) continues to position itself to capture new revenue streams. As per Wall Street, the shares of the company have an average price target of $136.55.
TimesSquare Capital Management, an equity investment management company, released its fourth-quarter investor letter. Here is what the fund said:
“Offsetting that was the -10% pullback from Visteon Corporation (NASDAQ:VC), which designs and manufactures automotive electronics, primarily for driver information and display clusters. Its revenues were shy of expectations, though earnings were better than expected and management lifted its guidance. While the UAW strike settlement was a positive development for automotive production in the short term, concerns grew for EV component providers as EV supply exceeded demand. Even though Visteon’s digital cockpit solutions are used across all types of vehicles, notable future growth is expected from its wireless battery management systems for EVs. Because EV sales rates might take several quarters to reaccelerate, we trimmed our position in Visteon.”
Overall, VC ranks 6th on our list of stocks that could 10x over the next 5 years. While we acknowledge the potential of VC 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 VC 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.
