We recently compiled a list of 8 Hot Growth Stocks to Buy According to Hedge Funds.In this article, we will look at how Micron Technology, Inc. (NASDAQ: MU) where it stands against other hot growth stocks.
A month before the election that marked Donald Trump’s victory, the United States Bureau of Labor Statistics released a report showing a strong labor market with rising wages, declining unemployment, and the addition of 254,000 jobs in September. The unemployment rate fell to 4.1% in September, from 4.2% in August and 4.3% in July. Earlier concerns emerged as the unemployment rate rose, prompting some economists to worry that the Federal Reserve’s decision not to cut interest rates had an impact on labor market.
However, the Fed eased those concerns in September by cutting the federal funds rate by half a percentage point. The Fed had originally raised rates sharply starting in March 2022 to fight inflation, stopping in mid-2023. Although inflation has fallen sharply since peaking in June 2022, economists note that higher rates are continue to affect the economy, especially the housing market. That said, Fed Chairman Jerome Powell addressed the housing market on September 30, stating that he expects inflation to continue to improve and that overall economic conditions are conducive to disinflation.
On the other hand, while the Consumer and Producer Price Index are in line with expectations, indicating that inflation is approaching the Federal Reserve’s target of 2%, Goldman economists believe that the Fed may be has already achieved that goal. The investment bank predicts that the Personal Consumption Expenditure (PCE) index for September will show a 12-month inflation rate of 2.04%. If correct, this figure could be reduced to 2%, well in line with the Fed’s long-term target. This would come just two years after inflation hit a 40-year high, sparking a strong streak of interest rate hikes. Additionally, the S&P 500 has gained 4% since the Fed’s initial tapering last month, as investors poured more than $20 billion into US stock funds.
Both Fundstrat and Goldman raised their year-end stock market forecasts for the 41st week of this year, with Goldman predicting an additional 2% increase after the S&P 500 surpassed its target the first. This could cap an already strong year, with the index up more than 20%. A key driver behind the forecast for continued stock price growth is the expectation that a wide range of industries will contribute to the growth of the market. However, in reality, indexes like the S&P 500 are always heavily dependent on investors’ enthusiasm for technology, especially in the area of artificial intelligence. In that report, the bank also points to the supply chain for microchips, which is expected to boost profits for chipmakers and tech giants as they develop new AI applications.
While historical performance isn’t always a reliable indicator, seasonal trends suggest that Q4 generally saw growth in the broader US market, in part driven by consumption that is still increase in customers during the holidays. Market analysts also note that growth stocks tend to perform better when global interest rates are in retreat. However, Adam Parker, CEO of Trivariate Research, shared in an interview with CNBC that he feels more optimistic about the growth of products compared to his view before the August 5 drop, citing the conditions unusual market conditions and a slight decrease in the company’s earnings growth estimates.
Moreover, despite high expectations that the reduction of the interest rate by the Federal Reserve will strengthen the stock market, this has not happened as expected. Investors seem to be increasingly concerned about growth problems amid global conditions marked by the US presidential election, instability in the Middle East, and an uncertain outlook for Fed rate hikes next year. While the Fed has indicated it will cut rates, moving too quickly could jeopardize inflation targets. In this regard, Stifel analysts said the following:
“The bottom line…is that if the Fed cuts rates in 2025 in the absence of a recession (two of the 25 by the end of this year doesn’t count) then that would be a mistake, as investors pay the price for by the end of 2025/2026, according to the historical model.
When it comes to making money in the stock market, many investors are naturally attracted to growth. Although security investments are increasing due to the global economic downturn, Andrew Slimmon of Morgan Stanley Investment Management advises against this approach. This view emphasizes that growth stocks can outperform the market and provide strong returns even if stocks change in the short term. Many of these stocks have shown impressive earnings growth and, with significant catalysts, may continue to do so.
In addition, hedge funds see the most promising stocks as those in a position to benefit from the increasing purchasing power of consumers. As the Fed aims to ease the economy, consumer stocks may gain, boosted by improved consumer spending. Lower rates should also support growth and technology infrastructure, setting the stage for potential gains across these sectors. Similarly, the average annual return for the largest 500 companies has been over 10%, giving investors strong confidence in the stock market’s favor. than more conservative instruments such as bonds or fixed income securities.
Our method
In this article, we have compiled a list of high growth stocks with annual returns of more than 20%. These hot stocks to buy are ranked in ascending order of hedge fund opinion, which provides a clear view of which large stocks are most popular with institutional investors.
At Insider Monkey, we are very concerned about the stocks that hedge funds are investing in. The reason is simple: our research has shown that we can outperform the market by mimicking the best hedge fund options. Our quarterly strategy picks 14 small and large stocks each quarter and has returned 275% since May 2014, outpacing its benchmark by 150 percent (see more details here).
A close-up view of a computer circuit board with integrated semiconductor chips.
Annual Return as of November 6: 23.55%
Number of Hedge Fund Holders: 120
Micron Technology, Inc. (NASDAQ:MU) is a leading manufacturer of memory and data storage solutions, including non-volatile access memory (DRAM), flash memory, and solid state drives (SSDs). As one of the world’s largest manufacturers of DRAM and NAND flash memory, its components are essential to various electronic devices.
Cantor Fitzgerald reaffirmed its strong position on Micron Technology, Inc. (NASDAQ: MU), maintaining an overweight rating and a $150 price target. This follows an investor call focused on the health of the DRAM market and high bandwidth memory (HBM), as well as a list of Micron’s developing products. The firm highlighted Micron’s strategic shift toward high-quality solutions, particularly in high-end DRAM servers, LPDDR5, and enterprise SSDs. Although HBM has gained attention, the broader shift to high-end products is still underappreciated by many investors. These proposals are expected to bring in more revenue in fiscal year 2025.
In Q4 2024, Micron Technology, Inc. (NASDAQ:MU) reported net income of $887 million on $7.75 billion in revenue, marking a 93% increase from $4 billion in the same period last year. Non-GAAP earnings were $1.18 per share. For the first quarter of 2025, the company expects revenue to reach $8.7 billion, exceeding Wall Street’s estimate of $8.21 billion.
Parnassus Value Equity Fund said the following about Micron Technology, Inc. (NASDAQ:MU) in its Q2 2024 investor letter:
“Shares of Micron Technology, Inc. (NASDAQ:MU) posted third-quarter financial results that met expectations. Micron’s DRAM (dynamic access non-volatile memory) and NAND (non-volatile storage technology) segments have grown revenue strongly, continuing the company’s recovery from last year’s cyclical downturn. We believe Micron is well-positioned to capitalize on AI-driven demand for big memory. ”
In general MU level 4 on our list of hot growth stocks to buy according to hedge funds. While we accept the potential of MU as an investment, our confidence lies in the belief that AI stocks have the greatest promise to bring high returns, and we do so in the short term. If you’re looking for an AI stock that’s more promising than MU but trades for less than 5 times its earnings, check out our report on low price of AI stock.
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Description: None. This article was originally published on Insider Monkey.
