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 MDU Resources Group, Inc. (NYSE:MDU) 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).
Workers in hard hats installing a transformer in a power plant.
MDU Resources Group, Inc. (NYSE:MDU)
Number of Hedge Fund Holders: 27
MDU Resources Group, Inc. (NYSE:MDU) is engaged in the regulated energy delivery, and construction materials and services businesses in the US.
The company’s pipeline business, which is expected to fuel growth momentum, focuses on the transportation and storage of natural gas. As per Wall Street analysts, this business is expected to continue to be aided by higher transportation volumes and service rates. The rise in transportation volumes is driven by organic growth projects. Furthermore, new transportation and storage rates, together with higher storage-related revenues, should continue to fuel the income growth of the business. Furthermore, MDU Resources Group, Inc. (NYSE:MDU)’s investments in the pipeline business are expected to aid customer growth and the completion of ongoing projects driven by increasing customer demand.
The company has also announced a capital investment plan of $3.1 billion for the period from 2025 through 2029, demonstrating a 15% increase over the previous five-year plan (2024-2028). This investment focuses on enhancing and expanding MDU Resources Group, Inc. (NYSE:MDU)’s electric, natural gas, and pipeline services. By focusing on strategic upgrades and expansions, the company’s pipeline operations are well-positioned to optimize service delivery and support long-term profitability.
Approximately $473 million of this plan has been earmarked specifically for the pipeline segment. This investment will allow MDU Resources Group, Inc. (NYSE:MDU) to modernize its pipeline infrastructure and address increasing customer demand. Overall, the investment strategy aligns with MDU Resources Group, Inc. (NYSE:MDU)’s goal of achieving a 6%–8% annual earnings growth target.
Overall MDU ranks 5th on our list of the best conglomerate stocks to buy according to hedge funds. While we acknowledge the potential of MDU 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 MDU 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.