We recently compiled a list of the 8 Best Electronic Stocks To Buy According to Hedge Funds. In this article, we are going to take a look at where Flex Ltd. (NASDAQ:FLEX) stands against the other electronic stocks.
The Electronics Industry’s Growth Trajectory
The electronics sector is experiencing robust growth driven by several key factors. Technological advancements, particularly in consumer electronics, are a major catalyst, with innovations in smartphones, the emergence of 3G and 4G technologies, smart wearables, and smart home devices significantly boosting demand. According to Grand View Research, the global consumer electronics market is projected to experience significant growth, expanding from $1,068.22 billion in 2022 to $1,619.04 billion by 2030, with a compound annual growth rate of 6.6%.
Additionally, rising income levels, especially in emerging markets, are fueling demand, as more households can afford electronic devices. The expansion of the IoT ecosystem presents new opportunities within the sector, enhancing automation and efficiency across various applications. Advancements in semiconductor technology are crucial for this growth, powering everything from smartphones to electric vehicles. Furthermore, sustainability initiatives are becoming increasingly important, with companies exploring eco-friendly manufacturing practices and materials to meet consumer demand for greener products.
The semiconductor industry is at a pivotal moment, driven by rapid advancements in AI and the evolving dynamics of the market. With significant players recently reporting disappointing earnings and a slower-than-expected recovery in chip demand, the sentiment surrounding semiconductor stocks is one of cautious optimism. As the market grapples with these challenges, investors are keenly focused on identifying the best electronic stocks poised to thrive amid this transformative landscape.
On October 16, Dan Niles, Niles Investment Management founder & portfolio manager, joined ‘Fast Money’ on CNBC to discuss how semiconductors are a canary in the coal mine for the tech sector. In a recent discussion about the semiconductor sector and mega-cap technology, Dan Niles provided insights into ASML’s recent performance and its implications for the broader chip industry. He highlighted that the Dutch company experienced a significant miss in orders, reporting over a 50% decline compared to expectations. This drop indicates that while demand for certain products remains strong, the overall outlook for the semiconductor market is weaker than anticipated. Niles explained that if companies are ordering its equipment today, it typically means they are preparing to produce chips about a year from now. This lag suggests a slowdown in demand that could impact future revenues.
The relationship between electronic stocks and the semiconductor industry is vital and mutually reinforcing, as semiconductors serve as the backbone of modern electronic devices. The performance of semiconductor stocks directly impacts the broader electronics sector. Supply chain fluctuations can significantly affect both industries; shortages may lead to production delays and reduced revenues for electronic manufacturers, while stabilization can foster growth for both sectors.
Our Methodology
We sifted through ETFs, online rankings, and internet lists to compile a list of 15 electronic stocks with high market caps. We then selected the 8 stocks that were the most popular among elite hedge funds and that analysts were bullish on. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q2 2024. The hedge fund data was sourced from Insider Monkey’s database which tracks the moves of over 900 elite money managers.
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 close-up of a young professional analyzing data on an electronic device.
Flex Ltd. (NASDAQ:FLEX)
Market Cap as of October 22: $13.65 billion
Number of Hedge Fund Holders: 46
Flex Ltd. (NASDAQ:FLEX) is an American multinational manufacturing company and one of the largest global electronics manufacturing services providers by revenue. It offers a comprehensive range of services, including product development, engineering, manufacturing, and logistics. The company serves a diverse customer base across various industries, including healthcare, consumer electronics, automotive, and industrial applications.
The company’s competitive edge lies in its power pods for data centers, offering lower costs and faster delivery times. In FQ1 2025, significant progress was made in cloud, power, and automotive projects. Revenue increased 2% sequentially despite a 13.93% year-over-year decline in this quarter. Datacenter and power revenues contribute over 25% to the total revenue. Inventory reduction of 6% sequentially and 21% year-over-year also contributed to the sequential improvement.
Its innovative power solutions are driving growth and positioning it for success in the AI-dominated tech landscape. Despite EV adoption concerns, it’s poised to outperform the automotive market due to its advanced compute solutions and power products. In digital health, Flex Ltd. (NASDAQ:FLEX) anticipates a balanced supply-demand situation, with strong medical device demand offsetting a softer medical equipment market.
As a key player in the AI sector, serving 80% of large and hyper-scale data centers, the company stands out with its global reach and automotive exposure. Its power pods for data centers offer a competitive edge with lower costs and faster delivery times. In FQ1 2025, significant advancements were made in various projects across cloud, power, and automotive. The ongoing AI transition in data centers is driving demand for its cloud and power solutions, positioning Flex Ltd. (NASDAQ:FLEX) well for continued growth.
Artisan Small Cap Fund stated the following regarding Flex Ltd. (NASDAQ:FLEX) in its first quarter 2024 investor letter:
“We initiated new GardenSM positions in Flex Ltd. (NASDAQ:FLEX), On Holding and Onto Innovation during the quarter. Flex provides outsourced electronic manufacturing services to a diverse set of end markets. The company hired a new CEO in 2020, who has been driving a strategic pivot toward manufacturing high-value products in areas such as health care, industrial, automotive and cloud infrastructure. Today, these higher value items account for ~60% of revenues, and we believe they will continue to tick higher. We also believe an improving business mix, along with the reshoring of supply chains, will lead to faster growth and higher margins.”
Overall, FLEX ranks 4th on our list of the 8 best electronic stocks to buy according to hedge funds. While we acknowledge the growth potential of FLEX, our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than FLEX 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.