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 Jabil Inc. (NYSE:JBL) 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 team of engineers analyzing electronic components in a modern laboratory.
Jabil Inc. (NYSE:JBL)
Market Cap as of October 22: $14.10 billion
Number of Hedge Fund Holders: 51
Jabil Inc. (NYSE:JBL) is a global manufacturing solutions provider that offers a range of services, including design, engineering, manufacturing, and supply chain management. It serves a diverse customer base across various industries, including healthcare, consumer electronics, automotive, and industrial applications. Its expertise lies in providing end-to-end solutions for complex electronic products, from initial concept development to final assembly and distribution.
It generated a revenue of $6.96 billion in FQ4 2024, which was down 17.66% as compared to the year-ago period. However, this revenue still exceeded expectations by $364 million, driven by stronger performance in connected devices, networking, and storage markets. DMS segment revenue grew 22%, driven by connected devices, but was slightly offset by automotive weakness. EMS segment revenue increased by 13% due to stronger demand in advanced networking markets, despite overall softness in end markets like 5G, renewable energy, and digital print.
It’s expanding its footprint in AI, making it a solid investment. On October 3, Jabil Inc. (NYSE:JBL) announced the acquisition of Mikros Technologies, a manufacturer of liquid cooling solutions in AI data centers. On October 14, the company launched new high-performance AMD and Intel servers functional for AI, FinTech, and Cloud workflows.
Despite a challenging year, the company demonstrated remarkable resilience in 2024. Strong margins, consistent earnings, and robust cash flow were achieved even with reduced revenue. With a strong global network and a clear vision for the future, Jabil Inc. (NYSE:JBL) is well-positioned to capitalize on upcoming opportunities.
Artisan Mid Cap Fund stated the following regarding Jabil Inc. (NYSE:JBL) in its Q3 2024 investor letter:
“We ended our investment campaigns in Edwards Lifesciences, Jabil Inc. (NYSE:JBL) and Trex during the quarter. Jabil provides outsourced manufacturing services to diverse end markets and customers. Our thesis was that the company was moving away from the more cyclical consumer electronics markets toward secular growth areas, such as electric vehicles and medical devices, which would lead to faster growth and higher margins. Unfortunately, while it is a diversified contract manufacturer, several of its meaningful markets have come under pressure this year, including residential solar, semiconductor capital equipment and health care devices. While these headwinds will likely prove temporary, we have also been disappointed by a high level of management turnover in recent quarters. Given these issues, we decided to exit the position in favor of higher conviction investments in technology.”
Overall, JBL ranks 2nd on our list of the 8 best electronic stocks to buy according to hedge funds. While we acknowledge the growth potential of JBL, 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 JBL 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.