We recently published a list of the 10 Best Stocks to Buy and Hold For 3 Years. In this article, we are going to take a look at where Vertiv Holdings Co (NYSE:VRT) stands against the other best stocks to buy and hold for 3 years.
What to Expect From the Stock Market in 2025?
On December 12, Tom Lee, Fundstrat Global Advisors managing partner and head of research, joined CNBC’s ‘Closing Bell’ to discuss his playbook for 2025. Following two years of significant gains, his playbook suggests an optimistic yet cautious outlook for the stock market next year. Lee anticipates that the S&P 500 will rise to approximately 7,000 by mid-2025, before retreating to around 6,600 by the end of the year. This reflects an overall expected increase of about 8% for the year, which is consistent with historical averages for stock market returns. In terms of Earnings Per Share (EPS) estimates Lee projects EPS for the S&P 500 at $260 in 2025 while estimating $300 for 2026. This is slightly below the consensus estimates from Wall Street, which average around $268 for 2025.
READ ALSO: 11 Best Aerospace and Defense Stocks to Buy Right Now and 11 Best Computer Hardware Stocks to Invest in Right Now.
Explaining his investment thesis, Lee pointed towards several themes that could drive the market in 2025. He predicts a “tale of two halves,” where the first half of the year will see stronger market performance due to factors like Federal Reserve policies and business-friendly initiatives under President Trump. Conversely, he expects a pullback in the second half, reflecting historical trends after strong consecutive years. He sees potential in small-cap stocks, which have underperformed relative to large-cap stocks historically. Lee also talked about the mega caps that are leading. He mentioned that investors reach for these companies when there is even slight risk in the market. Secondly, mega-cap stocks are highly sensitive to falling interest rates. With the December cut in effect, the market is bullish for tech, thereby further solidifying the investment case for megacaps.
Despite his generally positive outlook, Lee acknowledges several risks that could impact market performance. For instance, he thinks the newly formed Department of Government Efficiency (DOGE) could potentially lead to reduced government spending and slower economic growth if it is too effective in cutting costs. Moreover, the implementation of tariffs could adversely affect economic conditions and corporate profits. Lee pointed out that historical patterns suggest that after two years of substantial gains, markets often experience declines in the latter half of the third year.
A close-up of a group of technicians working on complex data center systems.
Our Methodology
To compile the list of 10 best stocks to buy and hold for 3 years, we applied a consensus approach. We sifted through recent articles to get an aggregated list of the best stocks to buy and hold for 3 years. Next, we ranked these stocks based on the number of hedge fund holders as of Q3 2024, sourced from Insider Monkey’s database.
Why do we care about what hedge funds do? 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).
Vertiv Holdings Co (NYSE:VRT)
Number of Hedge Funds: 91
Vertiv Holdings Co (NYSE:VRT) specializes in providing essential technologies and services for digital infrastructure. Its products are critical for the high-growth AI and data center industry as they power, cool, and secure data centers. The company also provides integrated rack systems and management systems that allow businesses to monitor and control their digital infrastructure.
As data centers evolve, liquid cooling systems are becoming increasingly important. Vertiv Holdings Co (NYSE:VRT) is gaining market share in this area by focusing on high intellectual property components like cooling distribution units (CDUs) and complete systems. On November 19, the company announced a significant expansion of its liquid cooling product portfolio with the introduction of two new high-capacity (CDUs). The new CDUs are designed to accommodate the high-density computing demands associated with AI applications, allowing data centers to efficiently manage both traditional air-cooled racks and advanced liquid-cooled systems.
As a result of its robust portfolio, the company is experiencing a significant increase in its order backlog. Its backlog at the end of the second quarter of 2024 stood at $7.0 billion, indicating a 47% increase in comparison to the previous year. The backlog only continued to increase during the third quarter to reach $7.4 billion, indicating a 5% increase from the previous quarter. In addition, Vertiv Holdings Co’s (NYSE:VRT) organic sales were also up 19.2% year-over-year driven by double-digit growth in all three regions. Management has taken confidence from its growing order backlog to raise its full-year guidance for all metrics. It now expects organic sales of $7.8 billion up $140 million from the previous expectation. It is one of the best stocks to buy and hold for 3 years.
Baron Small Cap Fund stated the following regarding Vertiv Holdings Co (NYSE:VRT) in its Q3 2024 investor letter:
“Vertiv Holdings Co (NYSE:VRT) is a leader in data center equipment, with significant share in both power and cooling applications. The stock rebounded off recent weakness, as investors gained confidence that a massive build out of AI data centers globally was on the horizon. Vertiv’s strong relationship with chip manufacturers and involvement in the necessary technology roadmap for solutions as the energy density of server racks increases were catalysts. Vertiv’s orders were up 57% year-over-year in the second quarter, backlog was $7 billion, a record, and 2024 operating profit margin and EPS guidance was raised.”
Overall, VRT ranks 7th on our list of best stocks to buy and hold for 3 years. While we acknowledge the potential of VRT to grow, 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 VRT 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.