雅虎香港財經 10 Best Engineering Stocks to Buy Now
In this article, we will discuss the 10 best engineering stocks to buy now. To skip the detailed analysis and recent updates about the engineering industry, go directly to the 5 Best Engineering Stocks to Buy Now.
Engineers have been in demand since ancient times. However, the most significant impact of the engineering services started in the 18th century. Engineering services are the backbone of technological growth which is one of the three main factors of Total Factor Productivity (TFP). The TFP has a correlation of 60% with economic progress in advanced countries.
The global engineering services market was worth $707 billion in 2022 and is expected to reach around $1.22 trillion in 2023, registering a CAGR of 5.9%. The market share of engineering services was largely captured by North America at 38%, which is expected to grow at a CAGR of 5.6% during the forecasted period. On the other hand, the CAGR in East Asia is expected to be 6.5%.
In the United States, engineering services contributed to 3% of the jobs and accounted for 2.8% of the country’s GDP in 2020. In addition, they were also responsible for $64.5 billion in taxes paid. According to the US Bureau of Labor Statistics, employment in architecture and engineering is expected to grow by 4% between 2021 and 2031 and their median annual income was $79,840 in May 2021, which was almost 75% more than the average median income of all occupations. The highest median income was recorded by petroleum engineers at $130,850 per year or $62.91 per hour and employment in the field is expected to grow by 8%. It was followed by computer hardware engineers with a median income of $128,170 per year or $61.62 per hour.
One of the major growth prospects of the engineering industry in the United States is The CHIPS and Science Act, an act that will provide $52.7 billion for American semiconductor research, development, manufacturing, and workforce development. The semiconductor industry is highly dependent on engineers as they are the ones who have to design, produce, and test the products. In light of the news, the semiconductor company Micron Technology, Inc. (NASDAQ:MU) announced an additional $40 billion investment in memory chip manufacturing.
The CHIPS Act is also expected to benefit the industrial sector’s engineering and construction industry as it will lead to huge construction projects of new semiconductor plants, research centers, and general infrastructure. The automotive industry which is dependent on mechanical and electrical engineering is also set to benefit from the act as semiconductors are essential for the growing demand of electric vehicles in the market.
Engineering includes a very broad scope of sciences and has significant importance in the defense, construction, software, automotive, and energy sector, along with many others. In our article, hedge fund sentiment has been used as a primary criteria for stock selection but since the engineering sector covers many companies, we won’t be able to discuss all of them. However, some of the important engineering stocks that have been discussed are Microsoft Corporation (NASDAQ:MSFT), Alphabet Inc. (NASDAQ:GOOG), and Apple Inc. (NASDAQ:AAPL).
Photo by ThisisEngineering RAEng on Unsplash
Our Methodology
For this article, we chose the stocks which rely heavily on engineering to function. These stocks were picked based on the hedge fund sentiment of each stock and were listed accordingly. These are thus the best engineering stocks to buy according to hedge funds.
The hedge fund sentiment around each stock has been taken from Insider Monkey’s database of 943 elite hedge funds.
Best Engineering Stocks to Buy Now
10. Micron Technology, Inc. (NASDAQ:MU)
Number of Hedge Fund Holders: 74
Micron Technology, Inc. (NASDAQ:MU) is an Idaho-based semiconductor manufacturing company that produces and sells data and memory devices for computers. The company is one of the best engineering stocks to buy now as it has won an Award for Data Engineering Transformation by Analytica India Magazine, 2023, and its DRAM and NAND flash memory chips are feats of engineering.
In Q4 2022, Connecticut-based Viking Global Investors increased its stake in Micron Technology, Inc. (NASDAQ:MU) by 55% with nearly 836 million shares worth $417.7 million. In the same quarter, 74 hedge funds were bullish on the stock.
On April 13, New Street analyst Pierre Ferragu maintained a Buy rating on Micron Technology, Inc. (NASDAQ:MU) stock and raised the price target to $100 from $70, citing recovery of “cost of goods sold”. According to the analyst, the company’s inventory disaster is in the past, and the future looks bright with “positive earnings revision”.
Other than Microsoft Corporation (NASDAQ:MSFT), Alphabet Inc. (NASDAQ:GOOG), and Apple Inc. (NASDAQ:AAPL), Micron Technology, Inc. (NASDAQ:MU) is a noteworthy stock of the engineering sector.
Claret Asset Management mentioned Micron Technology, Inc. (NASDAQ:MU) in its third-quarter 2022 investor letter. Here is what it said:
“Inflation is still higher than interest rates… not an incentive to save for most people. Either inflation must come down or interest rates have to go up further. Or both. And probably both. Now that they are taking the punch bowl away and the party is over, what happens next? For whatever reason, the stock market seems to always precede the economic reality: Micron reached a high of $98.45 on January 5th, 2022 and is trading at $50.00 today.”
9. Analog Devices, Inc. (NASDAQ:ADI)
Number of Hedge Fund Holders: 75
Analog Devices, Inc. (NASDAQ:ADI) is a leader in utilizing analog, mixed-signal, and digital signal processing technologies to manufacture integrated circuits, software, etc. The team of field applications and software engineers at the company is responsible for making it a leader in Intelligent Edge, an on-premises data collecting and processing system.
Analog Devices, Inc. (NASDAQ:ADI) has been increasing its dividend for nearly two decades, and at the time of writing, its dividend yield was 1.88%. On February 14, the company increased its quarterly dividend by 13.2% to $0.86 from $0.76.
As Analog Devices, Inc. (NASDAQ:ADI)’s performance was solid in the first quarter with revenue up 21% YoY, the company is now set on opening up a $200 million new R&D facility in the Philippines which will be tech-forward and boast a 300-mm Center of Excellence.
Madison Investments mentioned Analog Devices, Inc. (NASDAQ:ADI) in its first-quarter 2023 investor letter. Here is what it said:
“Analog Devices, Inc. (NASDAQ:ADI) grew profits nicely in 2022, bucking the overall semiconductor industry trend of a decline brought on by a drop in demand and excess inventory in the channels. Analog is one of the leaders in the analog semiconductor segment, where supply is much more constricted due to the shortage of engineering expertise and new capacity construction. Thus, the company often beats to a different drummer than the rest of the semiconductor industry.”
8. Exxon Mobil Corporation (NYSE:XOM)
Number of Hedge Fund Holders: 79
Exxon Mobil Corporation (NYSE:XOM) is one of the oil Supermajors and it mainly requires petroleum engineers for its upstream business, mechanical engineers for midstream, and chemical engineers for its downstream business.
Exxon Mobil Corporation (NYSE:XOM) released its first-quarter earnings report on April 28 where it posted record first-quarter earnings of $11.4 billion. In addition, the company increased the net production of oil and gas by 300,000 barrels of oil equivalent compared to the first quarter of 2022.
Exxon Mobil Corporation (NYSE:XOM) has recently been working on making the company greener. In its latest quarter, the company announced its long-term commercial agreement with Linde plc (NYSE:LIN) for carbon capture and storage. According to the agreement, Exxon Mobil Corporation (NYSE:XOM) will capture, transport, and store up to 2.2 million metric tons of CO2 from the company.
Here’s what First Eagle Investments said about Exxon Mobil Corporation (NYSE:XOM) in its Q2 2022 investor letter:
“Integrated oil and gas giant Exxon Mobil performed well in the second quarter as continued high prices for energy products supported the stock. As the largest refiner in the US, the company has benefitted from wide “crack spreads,” or the margin between the cost of crude oil and the petroleum products extracted from it. Exxon continues to invest in refining capacity in the US, which industrywide has been in steady decline since 2019. We are pleased that Exxon has been using its strong cash flows to reduce debt and to return cash to shareholders through dividends and stock repurchases.”
7. General Motors Company (NYSE:GM)
Number of Hedge Fund Holders: 80
General Motors Company (NYSE:GM) is a Michigan-based automotive company, and it is one of the biggest automobile companies in the US by sales. The company's engineering marvels include its industry-famous EV batteries, Ultium Drive, and wireless battery management system.
On May 1, Morgan Stanley analyst Adam Jonas raised the price target on General Motors Company (NYSE:GM)’s shares to $38 from $35 and updated the rating on the stock to Overweight from Equal Weight. Bumping up the stock to the “top 5” position for his U.S. automotive coverage, the analyst highlighted the company’s “capital discipline” and free cash flows.
General Motors Company (NYSE:GM) is a dividend-paying stock with a dividend yield of 1.09% at the time of writing. A quarterly dividend of $0.09 was declared by the company on April 24, payable by June 15 to the shareholders of record on June 2.
Diamond Hill Capital mentioned General Motors Company (NYSE:GM) in its third-quarter 2022 investor letter. Here is what it said:
“Most recently, we initiated a position in General Motors Company (NYSE:GM), one of the largest automakers in the United States. Over the past several years, GM has taken steps necessary to focus the company on the most profitable segments and move into position to compete in an electrified and autonomous world. With the recent rise in interest rates there was a meaningful selloff in the auto industry, which presented us an attractive entry point to a name we know well.”
6. Tesla, Inc. (NASDAQ:TSLA)
Number of Hedge Fund Holders: 91
Tesla, Inc. (NASDAQ:TSLA) is an American automotive company. As an electric vehicle manufacturer, the company’s demand for engineers comes from the mechanical, production, and electrical engineering fields. This year has particularly been better than the last year for Tesla, Inc. (NASDAQ:TSLA). The stock was down almost 65% between the end of December 2021 and 2022 and in 2023, the stock is up by around 50% year to date at the time of writing.
Cathie Wood’s Ark Invest is quite bullish on Tesla, Inc. (NASDAQ:TSLA) and has been buying its shares since January 2023. Wood believes that the company’s valuation will cross over $6 trillion in the next 4 years.
Tesla, Inc. (NASDAQ:TSLA) is in the same league as other leaders of the engineering industry like Microsoft Corporation (NASDAQ:MSFT), Alphabet Inc. (NASDAQ:GOOG), and Apple Inc. (NASDAQ:AAPL).
Aristotle Atlantic Partners, LLC made the following comment about Tesla, Inc. (NASDAQ:TSLA) in its Q1 2023 investor letter:
“Tesla, Inc. (NASDAQ:TSLA) was a negative contributor to performance due to our underweight position relative to Russell 1000 Growth Index, as the company had strong performance in Q1. The strength occurred after the company partially reversed a previously announced price cut for its electric vehicles following a period of strong demand. Tesla also reported better-than-expected results for Q4 2022 during the first quarter.
Tesla Motors designs, develops, manufactures, and markets high-performance, technologically advanced electric cars and solar energy generation and energy storage products. Tesla sells more than five fully electric cars, among others, the Model X and Y SUVs, as well as the Model S sedan and Model 3 sedan. The company has a growing global network of Tesla Superchargers, which are industrial grade, high-speed vehicle chargers, typically placed along well-traveled routes and in and around dense city centers to allow Tesla owners quick and reliable charging. Tesla offers certain advanced driver assist systems under its Autopilot and Full Self-Driving options. US customers generate nearly half of Tesla’s sales.
We see Tesla as the leading manufacturer of battery powered electric vehicles (EVs). The company has achieved scaled production of EVs before the other large automobile manufacturers. The company’s technology in battery production and self-driving technology is more mature than competitors’ offerings. EVs are one of the fastest growing categories within automobile manufacturing. The profit margin in the automotive segment is significantly above automotive competitors which provides the company flexibility to price its vehicles more strategically as the competition eventually scales up their EV production. The direct-to-consumer sales model gives the company more control over its relationship with its customers as well as a source of higher profit margin since there is no dealership share of the profits.”
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Disclosure. None. 10 Best Engineering Stocks to Buy Now is originally published on Insider Monkey.
