We recently compiled a list of the 10 Best Conglomerate Stocks to Buy According to Hedge Funds. In this article, we are going to take a look at where Valmont Industries, Inc. (NYSE:VMI) stands against the other conglomerate stocks.
As per Lloyd Capital, the new year starts on the back of economic resilience. Global conditions remain benign, courtesy of a healthy US economy, moderating inflation, and a gradual easing of global monetary policy. However, investors are required to remain cognizant of the several risks looming. Notably, governments worldwide have fueled economic activity in a way that has deteriorated fiscal positions. Also, inflation is yet to fully return to the respective targeted levels and the geopolitical situation remains uncertain.
As per the investment management firm, investors are required to remain focused on analyzing the quality of the businesses they purchase and ensuring that these are done at prices offering an adequate margin of safety relative to intrinsic value.
S&P 500 to Reach 6,666 in 2025, Says Bank of America
As per BofA’s equity strategy team, led by Savita Subramanian, the S&P 500 index should reach 6,666 by 2025 end. Part of this growth is expected to stem from healthy economic growth. The investment firm’s economics team expects that the US economy should grow at an annualized rate of 2.4% in 2025, higher than Bloomberg consensus forecasts of 2% growth. As a result, the firm has favored companies that are GDP-sensitive and is now going overweight on Financials, Consumer Discretionary, and Real Estate, among others.
Bank of America went on to add that, in 2025, there will be a broadening out of the stock market rally from the “Mag 7” tech stocks to other 493 stocks of the S&P 500 Index. J.P. Morgan also has somewhat similar expectations. Let’s look at that in detail.
READ ALSO: 7 Best Stocks to Buy For Long-Term and 8 Cheap Jim Cramer Stocks to Invest In.
How Can Investing in Conglomerates Provide Support in 2025?
J.P. Morgan believes that equity earnings should broaden moving forward. Equity returns were dominated by “Mag 7” since the beginning of 2023. Over that period, the broader market (S&P 500 index) managed to return 62%, more than half of which was made by Magnificent 7 (delivering 242% over the same period). The strong returns have a solid backing as the Mag 7 were able to grow their earnings at 40%, and the remaining 493 stocks in the index were able to post 2%.
However, J.P. Morgan expects that performance is expected to broaden in 2025 as the remaining “493 stocks” should be able to more than 5 times their earnings growth to 13% in 2025. Therefore, Wall Street analysts believe that investing in companies having a diversified presence should deliver healthy returns in contrast to pure-play (sector-specific) investments. The wealth management firm believes that reduced interest rates, renormalization of inventories and production, and easier comparables are expected to act as potential tailwinds for the cohort over the next year.
Analysts are bullish on businesses with multiple revenue streams and one group that gives investors a diversification advantage is conglomerates. With this in mind, let us now have a look at the 10 Best Conglomerate Stocks to Buy According to Hedge Funds.
Our Methodology
To list the 10 Best Conglomerate Stocks to Buy According to Hedge Funds, we used a screener and online rankings. After getting an initial list of 20-25 stocks, we selected the ones having high hedge fund holdings. Finally, the stocks were ranked in ascending order of their hedge fund sentiments, as of Q3 2024.
At Insider Monkey we are obsessed with 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).
Aerial view of highly-engineered steel towers, with their intricate frameworks shining in the sun.
Valmont Industries, Inc. (NYSE:VMI)
Number of Hedge Fund Holders: 33
Valmont Industries, Inc. (NYSE:VMI) operates as a manufacturer of products and services for infrastructure and agriculture markets in the US, Australia, Brazil, and internationally.
With strategic leadership appointments, investments in infrastructure, and positive demand drivers in utility and telecom sectors, Valmont Industries, Inc. (NYSE:VMI) appears to be well-placed to capitalize on long-term demand trends, despite headwinds in the agricultural sector. The company announced the appointment of Deborah Caplan to its Board of Directors.
Caplan’s strong experience in utility markets and talent development should contribute to Valmont Industries, Inc. (NYSE:VMI)’s strategic initiatives focused on market expansion, operational excellence, and organizational development. The telecom business is expected to drive the next leg of growth. Wireless carriers have returned to more normalized spending levels, which should remain above previous cycles. This hints at steady demand for Valmont Industries, Inc. (NYSE:VMI).
Valmont Industries, Inc. (NYSE:VMI)’s telecom business should be supported by the global expansion of 5G networks. This needs significant investment in infrastructure such as small cells, monopoles, and cell towers, areas where Valmont Industries, Inc. (NYSE:VMI) has strong capabilities. Furthermore, rural broadband initiatives in developed markets, aided by government funding, are expected to contribute to the demand for telecom infrastructure.
Artisan Partners, an investment management company, released its Q4 2023 investor letter. Here is what the fund said:
“Along with Argenx, our top detractors in Q4 were Lattice Semiconductor and Valmont Industries, Inc. (NYSE:VMI). Valmont is a leading designer and manufacturer of engineered metal products. There remains a lot to like about the company. It has exposure to several secular tailwinds (accelerating spending for renewables, grid hardening and renewed irrigation investments to ensure more efficient water usage), a solid balance sheet, strong free cash flow generation and an attractive valuation. However, the company abruptly changed CEOs in July and reported a goodwill impairment in its most recent earnings release. The goodwill impairment was on Prospera, an AI company focused on agriculture that Valmont acquired in 2021, due to significantly slower growth than originally projected. Given the operational missteps and new management team, we have started to harvest the position after giving back most of the strong gains generated in 2021 and 2022.”
Overall VMI ranks 3rd on our list of the best conglomerate stocks to buy according to hedge funds. While we acknowledge the potential of VMI 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 VMI 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.
