We recently compiled a list of the Best Future Stocks For The Long-Term. In this article, we will look at where NextEra Energy, Inc. (NYSE:NEE) ranks among the best future stocks for the long term.
A Soft Landing is More than Likely
The Fed plans to initiate rate cuts for the first time in over four years and investors do not know what to expect of the financial markets moving forward. On September 17, Stephen Juneau, Bank of America US economist, appeared in an interview on Yahoo Finance to discuss the impact of an unexpected growth in consumer spending on the economy.
Juneau reiterated that economic data is highly volatile and that the retail data released this morning will not impact the Fed’s rate cut decision tomorrow, and he expects the Fed to stick to a 25-basis point cut. As for consumer behavior, the economy is finally moving toward normalization and the consumer’s basket of goods reflects that. These indications, the increasing labor demand, and a stable investment outlook hint that a hard landing is highly unlikely.
The Outlook of Investing Amid Rate Cuts
On September 17, Eric Freedman, US Bank Asset Management Group CIO, appeared in an interview on Yahoo Finance to discuss the rate cut and how investors view investing. Freedman said that the rate cut depends on the Fed’s path, therefore an accurate prediction may not be possible at the moment.
Freedman talks about investment from an individual perspective, suggesting investors must move out of the front end of the yield curve. He then pointed to sectors that are currently providing value to investors, including the consumer discretionary sector, some parts of the energy sector, and tech, especially because investments in the sector are predicted to grow rapidly, well into 2025.
He then discussed what companies need to do to attract investors. Freedman emphasized the need for strong financials and suggested that companies should engage in buybacks or consider increasing dividends. The perfect combination of stocks, according to Freedman, includes companies that are returning cash and seeing strong organic growth.
The future of the economy and the financial market is quite unpredictable. However, some stocks can influence the market not just now, but also in the future. With that, let’s take a look at the best future stocks for the long term.
Our Methodology
To come up with the 10 best future stocks for the long term we looked up growth stocks in the AI, Cloud, Cybersecurity, Biotechnology, Electric Vehicle, and Renewable Energy industries. We then ranked the stocks with the highest number of hedge funds 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).
NextEra Energy, Inc. (NYSE:NEE)
Number of Hedge Fund Holders: 73
NextEra Energy, Inc. (NYSE:NEE) is a prominent renewable energy company and we say that because at the end of Q2 2024, 73 hedge funds were bullish on the stock with total stakes amounting to $2.1 billion. The company generates, transmits, distributes, and sells electric power, generated through wind, solar, nuclear, and natural gas, across North America.
NextEra Energy, Inc. (NYSE:NEE) provides its services across two major segments including Florida Power & Light (FPL), an electric utility business, and NextEra Energy Resources (NEER), a clean energy producer. FPL accounts for the majority of its revenue. It delivers reliability 66% better than the national average and has residential bills 40% below the national average.
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 second quarter of 2024, the company added more than 3,000 megawatts of new renewables and storage. Of this, 860 megawatts came from its agreements with Google to meet its data center power demand. To capitalize on its strategic investments, NextEra Energy (NYSE:NEE) plans to invest somewhere between $8 billion and $8.8 billion in capital expenditures for the fiscal full year 2024.
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 the best future stock for the long-term. While we acknowledge the potential of NEE as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. 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 was originally published on Insider Monkey.