We recently compiled a list of the 10 Best UK Stocks to Invest in Now. In this article, we are going to take a look at where CNH Industrial N.V. (NYSE:CNH) stands against the other best UK stocks.
The OBR (Office for Budget Responsibility) anticipates economic output in Britain to expand by 1.8% in 2026 and by 1.5% in 2027. In September 2024, KPMG reported that The Bank of England might take a more cautious approach when it comes to easing monetary policy as compared to the Fed and the ECB, with gradual cuts resulting in the UK base rate to 3.5% by 2025 end.
Furthermore, the labour market will continue to loosen, with fewer vacancies, and subdued pay growth but a relatively modest rise in the unemployment rate. KPMG went on to add that business investment might see some recovery next year if geopolitical uncertainties ease and the impact of reduced rates and the improving growth outlook offer businesses the confidence to commit to their investment plans.
What to expect from the UK Economy?
As per the new EY ITEM Club Autumn Forecast, the UK economy should grow 0.9% in 2024, down from the 1.1% growth expected in July’s Summer Forecast. The downgrade exhibits that household savings are now lower than expectations, providing less scope for consumers to increase their spending. Furthermore, lower-than-anticipated increases in consumer spending, together with cautious rate cuts to the Bank Rate, demonstrate that UK growth is expected to be steady rather than rapid over the upcoming 2 years.
EY added that business investment is expected to accelerate moderately in the coming years, with rate cuts providing a boost to the private sector. Therefore, the UK business investment should grow to 1.3% in 2024, an increase from the 1% expected earlier. Private sector investment is anticipated to accelerate to 3% in 2025, demonstrating a small downgrade from projections of 3.2% growth in its Summer Forecast.
Inflation Outlook for the UK Economy
EY expects that inflation is expected to average 2.6% in 2024 before falling marginally to 2.5% in 2025 and 2.1% in the following year. The firm believes that this ‘stickiness’ is because of several factors, such as tightness in the broader labour market, and the gradual slowing of pay growth. With spending growth anticipated to be lower than the earlier expectations because of reduced household saving rates, it projects consumer spending to rise by 0.8% in 2024.
EY expects that gradual cuts to the Bank Rate might provide some benefits to the UK’s housing market. It projects house price growth of 1.7% in 2024, and 2.1% in 2025, with declining borrowing costs anticipated to help offset other affordability challenges. Notably, the looser monetary policy is expected to have a modest impact on growth over the short term. Several borrowers on fixed rates will not experience the decline in their mortgage payments and a significant minority might refinance a fixed mortgage to a higher rate, despite a decline in Bank Rate.
Our Methodology
To list the 10 Best UK Stocks to Invest in Now, we used a screener to extract UK stocks. Next, we narrowed our list by selecting the ones having high hedge fund holdings. Finally, the stocks were ranked in an ascending order of their hedge fund sentiments, 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).
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CNH Industrial N.V. (NYSE:CNH)
Number of Hedge Fund Holders: 30
CNH Industrial N.V. (NYSE:CNH) is an equipment and services company, which is engaged in the design, production, marketing, sale, and financing of agricultural and construction equipment. The company has its headquarters in Basildon, the United Kingdom.
CNH Industrial N.V. (NYSE:CNH)’s growth outlook is supported by its intangible assets and switching costs. The company is critical in mechanizing crop production and boosting farmers’ productivity. This is expected to further strengthen its brand loyalty among farmers, stretching back generations. CNH Industrial N.V. (NYSE:CNH) has consistently offered customers reliable, high-quality products while, at the same time, working to reduce the total cost of ownership. Moving forward, the company is expected to benefit from solid replacement demand even though agriculture commodity demand moderates, prompting farmers to refresh their machinery fleet.
CNH Industrial N.V. (NYSE:CNH) has opportunities to improve its construction business by optimizing its product portfolio and dealer network. Furthermore, higher infrastructure spending in the US and emerging markets results in more construction equipment purchases. The U.S. Machinery & Construction industry possesses a positive outlook, offering a favorable environment for CNH Industrial N.V. (NYSE:CNH)’s operations. Wall Street believes that its strong position in the agricultural sector should form a base of solid foundation for growth.
The company’s cost-out initiatives should act as a key differentiator in the current economic cycle. CNH Industrial N.V. (NYSE:CNH)’s ability to effectively manage cost structure, primarily during challenging times, is expected to act as a tailwind. The strategic focus on operational efficiency should result in lower Cost of Goods Sold (COGS), offsetting increased Selling, General & Administrative expenses.
As per Wall Street analysts, the shares of CNH Industrial N.V. (NYSE:CNH) have an average price target of $14.25. Parnassus Investments, an investment management company, released the second quarter 2024 investor letter. Here is what the fund said:
“Within industrials, we exited CNH Industrial N.V. (NYSE:CNH) following the CEO’s surprise resignation. We think the recent unexpected departure of CEO Scott Wine creates significant risk to our thesis that CNH Industrial will be able to execute on its operational improvement plan.”
Overall, CNH ranks 8th on our list of the 10 Best UK Stocks to Invest in Now. While we acknowledge the potential of CNH as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued AI stock that is more promising than CNH 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.