We recently compiled a list of the 10 Best Conglomerate Stocks to Buy According to Hedge Funds. In this article, we are going to take a look at where FTAI Infrastructure Inc. (NASDAQ:FIP) stands against the other conglomerate stocks.
As per Lloyd Capital, the new year starts on the back of economic resilience. Global conditions remain benign, courtesy of a healthy US economy, moderating inflation, and a gradual easing of global monetary policy. However, investors are required to remain cognizant of the several risks looming. Notably, governments worldwide have fueled economic activity in a way that has deteriorated fiscal positions. Also, inflation is yet to fully return to the respective targeted levels and the geopolitical situation remains uncertain.
As per the investment management firm, investors are required to remain focused on analyzing the quality of the businesses they purchase and ensuring that these are done at prices offering an adequate margin of safety relative to intrinsic value.
S&P 500 to Reach 6,666 in 2025, Says Bank of America
As per BofA’s equity strategy team, led by Savita Subramanian, the S&P 500 index should reach 6,666 by 2025 end. Part of this growth is expected to stem from healthy economic growth. The investment firm’s economics team expects that the US economy should grow at an annualized rate of 2.4% in 2025, higher than Bloomberg consensus forecasts of 2% growth. As a result, the firm has favored companies that are GDP-sensitive and is now going overweight on Financials, Consumer Discretionary, and Real Estate, among others.
Bank of America went on to add that, in 2025, there will be a broadening out of the stock market rally from the “Mag 7” tech stocks to other 493 stocks of the S&P 500 Index. J.P. Morgan also has somewhat similar expectations. Let’s look at that in detail.
READ ALSO: 7 Best Stocks to Buy For Long-Term and 8 Cheap Jim Cramer Stocks to Invest In.
How Can Investing in Conglomerates Provide Support in 2025?
J.P. Morgan believes that equity earnings should broaden moving forward. Equity returns were dominated by “Mag 7” since the beginning of 2023. Over that period, the broader market (S&P 500 index) managed to return 62%, more than half of which was made by Magnificent 7 (delivering 242% over the same period). The strong returns have a solid backing as the Mag 7 were able to grow their earnings at 40%, and the remaining 493 stocks in the index were able to post 2%.
However, J.P. Morgan expects that performance is expected to broaden in 2025 as the remaining “493 stocks” should be able to more than 5 times their earnings growth to 13% in 2025. Therefore, Wall Street analysts believe that investing in companies having a diversified presence should deliver healthy returns in contrast to pure-play (sector-specific) investments. The wealth management firm believes that reduced interest rates, renormalization of inventories and production, and easier comparables are expected to act as potential tailwinds for the cohort over the next year.
Analysts are bullish on businesses with multiple revenue streams and one group that gives investors a diversification advantage is conglomerates. With this in mind, let us now have a look at the 10 Best Conglomerate Stocks to Buy According to Hedge Funds.
Our Methodology
To list the 10 Best Conglomerate Stocks to Buy According to Hedge Funds, we used a screener and online rankings. After getting an initial list of 20-25 stocks, we selected the ones having high hedge fund holdings. Finally, the stocks were ranked in ascending order of their hedge fund sentiments, as of Q3 2024.
At Insider Monkey we are obsessed with 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).
Aerial view of a deep-water port, with cargo ships coming and going.
FTAI Infrastructure Inc. (NASDAQ:FIP)
Number of Hedge Fund Holders: 21
FTAI Infrastructure Inc. (NASDAQ:FIP) focuses on acquiring, developing, and operating assets and businesses representing infrastructure for customers in the transportation, energy, and industrial products industries in North America.
As per Wall Street, FTAI Infrastructure Inc. (NASDAQ:FIP)’s portfolio of diverse, high-quality infrastructure assets offers significant opportunities for value creation with the help of strategic monetization. Its Long Ridge power plant, the company’s power generation asset, will be an extremely valuable asset because of its access to low-cost energy and increasing electricity demand.
Long Ridge should benefit from capacity auction results which indicate a significant increase in revenue potential because of higher power demand. This business should see an increase in annual adjusted EBITDA by $16 million in 2025/2026 as a result of new capacity pricing for the 2025-26 season. Analysts remain optimistic about the value of the Long Ridge power plant, considering its potential for monetization via partnerships or sales.
Long Ridge is pioneering in blending hydrogen with natural gas, targeting to become one of the first power plants in the US capable of operating on 100% green hydrogen. This places FTAI Infrastructure Inc. (NASDAQ:FIP) as a leader in clean energy innovation. Therefore, this transition to green hydrogen should fuel overall growth.
Tourlite Capital Management, an investment management firm, released its Q4 2023 investor letter. Here is what the fund said:
“FTAI Infrastructure Inc. (NASDAQ:FIP) remains an attractive and overlooked opportunity. The priority this year will be to redeem the preferred stock, followed by the refinancing of the 10.5% holding company debt. With Jefferson Terminal steadily increasing throughput volumes from signed contracts, we anticipate the potential sale of Jefferson Terminal this year. The tax-free proceeds from this sale would go towards redeeming the preferred, marking the initial step in unlocking the value embedded in the Transtar asset, which we believe exceeds the current market cap of FIP.”
Overall FIP ranks 6th on our list of the best conglomerate stocks to buy according to hedge funds. While we acknowledge the potential of FIP 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 FIP 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.