5 Best European Stocks to Buy Now

2. ASML Holding N.V. (NASDAQ:ASML)

Number of Hedge Fund Holders: 47

ASML Holding N.V. (NASDAQ:ASML) is a Netherlands-based semiconductor company founded in 1984. The company is a maker of lithography systems for manufacturing semiconductor chips.

On August 31, Francois-Xavier Bouvignies at UBS upgraded ASML Holding N.V. (NASDAQ:ASML) stock from a Neutral to a Buy rating and increased the target price from $615.71 to $635.26. The target price provides a potential upside of over 50% from the stock price as of September 30. The analyst believes that ASML Holding N.V. (NASDAQ:ASML) stock is one of the best European stocks to invest in during the current uncertain macroeconomic environment. Bouvignies thinks ASML Holding N.V. (NASDAQ:ASML) stock offers limited downside risk, given the company’s strong pricing power over its customers and significant market presence.

ASML Holding N.V. (NASDAQ:ASML) has a monopoly position in the semiconductor industry because of its specialty in producing cutting-edge lithography systems. Experts believe the company has robust intangible assets due to high investment in research and development (R&D). Over the last decade, 17.5% of ASML Holding N.V.’s (NASDAQ:ASML) revenue was invested in R&D, amounting to $14.2 billion.

Here’s what Baron Funds said about ASML Holding N.V. (NASDAQ:ASML) in its Q2 2022 investor letter:

“ASML Holding N.V. designs and manufactures semiconductor production equipment. It specializes in photolithography equipment, where light sources are used to photo-reactively create patterns on wafers that become printed circuits. ASML is the dominant leader across all types of lithography but, most importantly, is the only company selling equipment for extreme ultra-violet (EUV) lithography, the latest generation technology.

Indeed, because of the stalling out of Moore’s Law, advanced lithography of larger and multi-patterned silicon chips has been critical for leading-edge chip manufacturing and continued improvement in semiconductor chip performance over time. The company is well positioned to continue growing above industry rates as it rapidly adds capacity across its entire business to meet rising industry demand, especially from leading-edge customers continuing to invest to stay ahead of their competitors and drive chip performance forward.

Additionally, the introduction of high-NA EUV technology in the middle of the decade will add another leg to the growth opportunity.”

As of Q2 2022, ASML Holding N.V. (NASDAQ:ASML) was held by 47 hedge funds.