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 Amphenol Corporation (NYSE:APH) 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 consumer electronics manufacturer inspecting a newly manufactured device.
Amphenol Corporation (NYSE:APH)
Market Cap as of October 22: $80.69 billion
Number of Hedge Fund Holders: 72
Amphenol Corporation (NYSE:APH) is a leader in broadband communication products for cable, satellite, and telecommunications networks, as well as a provider of high-performance interconnect systems and components for the aerospace market. It offers a wide range of products, including connectors, cables, and cable assemblies, used in industries such as automotive, aerospace, industrial applications, and communications. These products are essential for connecting and protecting electrical signals, power, and data, enabling critical applications to operate safely and reliably.
The second quarter of 2024 saw strong revenue growth of 26.24% compared to the previous year, generating a record amount of $4.04 billion. Sequentially, sales grew 12% and orders reached a record $4.412 billion, increasing 39% year-over-year and 9% sequentially. Sales in the Harsh Environment Solutions segment increased by 35%. Communications Solutions sales grew 32%, while Interconnect and Sensor Systems sales increased 12%.
It completed the acquisitions of Lutze Europe and CIT, and the acquisition of the Andrew businesses from CommScope is expected to close in the first quarter of 2025. Its end market exposure remains highly diversified, providing resilience in various economic conditions. The company experienced strong growth in defense, commercial air, mobile devices, and IT datacom markets, while the industrial and automotive markets faced some challenges with slower demand in certain regions.
The company’s strong financial performance is evident in its healthy balance sheet and robust liquidity position. Its effective management of inventory accounts receivable, and accounts payable has contributed to its overall financial health. Amphenol Corporation’s (NYSE:APH) commitment to returning capital to shareholders through share repurchases and dividends demonstrates its dedication to creating value for investors.
TimesSquare Capital Management U.S. Focus Growth Strategy stated the following regarding Amphenol Corporation (NYSE:APH) in its Q2 2024 investor letter:
“Adding to that trend, Amphenol Corporation (NYSE:APH) reported better-than-expected results. The producer of electrical, electronic and fiber optic cables, and connectors showed steady organic revenue growth and enhanced its margins—especially in areas such as data communications, military applications, and commercial aerospace. Guidance for the next fiscal quarter was higher than expected, and Amphenol’s shares responded with a 17% gain.”
Overall, APH ranks 1st on our list of the 8 best electronic stocks to buy according to hedge funds. While we acknowledge the growth potential of APH, 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 APH 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.