We recently compiled a list of the 10 Best Monopoly Stocks to Buy. In this article, we are going to take a look at where ASML Holding N.V. (NASDAQ:ASML) stands against the other monopoly stocks.
Morgan Stanley believes the bull market might not be finished, and the S&P 500 might close the year with single-digit gains. There can be further declines in the S&P 500, which can result in attractive entry points. Historically, when stocks decline 15%, the average returns after a year tend to be attractive, says Morgan Stanley. Furthermore, the returns are even more attractive when a 20% drop becomes an entry point. That being said, a major risk to the broader equity market can be a resurgence of inflation and the US Fed increasing rates, along with tariff impacts.
S&P 500 Can Deliver Single-Digit Returns
Morgan Stanley Investment Management’s Applied Equity Team believes that 2025 can be a “pause” year for the broader S&P 500, posting single-digit gains. This remains consistent with the firm’s outlook, which was shared at the beginning of the year, suggesting that 3rd year of a bull market tends to deliver mediocre—but positive returns, together with increased volatility. Analyzing 12 times since 1950 that the broader S&P 500 declined a minimum of 20% from its peak, there was a recession in 9 of such instances, says the investment firm. In the current instance, the combination of the market decline or the recession talk appeared to be sufficient to spur a policy response.
READ ALSO: 7 Best Stocks to Buy For Long-Term and 8 Cheap Jim Cramer Stocks to Invest In.
Pockets of Opportunities
Morgan Stanley believes that stocks can retest lows seen in early April. The base case outlook is for gains in 2025, and the market is open 251 days a year. If stocks decline 20% or more, the investment firm opines that investors will do well to consider increasing the equity allocations more aggressively. In the 12 times since 1950 in which the S&P 500 fell 20%, the average subsequent 1-year return with that fall as an entry point is 19%. Fidelity International believes that, in this market, which is characterised by increased uncertainty, a focus on dividends as a component of total return can offer support.
Furthermore, the firm believes that it is critical to combine an emphasis on high-quality businesses with valuation discipline in a bid to avoid overpaying for companies and have a better chance of generating strong long-term returns. In difficult market environments, earnings resilience remains critical. This doesn’t mean a top-down allocation to defensive industries, but selecting companies possessing resilient business models throughout a broad range of sectors with the help of detailed bottom-up analysis. Owning resilient businesses, diversified across industries, leads to increased earnings persistence as compared to the broader market indices, says Fidelity International.
Our Methodology
To list the 10 Best Monopoly Stocks to Buy, we scanned through monopoly ETFs and several online rankings. After getting an extensive list, we chose the ones that were the most popular among hedge funds. Finally, the stocks were arranged in ascending order of their hedge fund sentiment, as of Q4 2024.
Why are we interested in 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 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
A technician in a clean room working on a semiconductor device, illuminated by the machines.
ASML Holding N.V. (NASDAQ:ASML)
Number of Hedge Fund Holders: 86
ASML Holding N.V. (NASDAQ:ASML) offers lithography solutions for the semiconductor industry. The company’s market dominance stems from its technological superiority, mainly its EUV lithography systems. These are critical for manufacturing the most advanced semiconductor chips. Bank of America Securities analyst Didier Scemama remains optimistic about ASML Holding N.V. (NASDAQ:ASML)’s stock, thanks to a combination of factors demonstrating its robust market position and financial outlook.
ASML Holding N.V. (NASDAQ:ASML) showcased strong pricing power, enabling it to manage tariff-related costs effectively, as it can pass them to the customers, says the analyst. Furthermore, ASML Holding N.V. (NASDAQ:ASML)’s strong order book further aids the analyst’s rating, which indicates confidence in meeting revenue targets. Its quarterly net bookings in Q1 2025 came in at €3.9 billion, of which €1.2 billion is EUV. ASML expects Q2 2025 total net sales of between €7.2 billion – €7.7 billion, and a gross margin of between 50% – 53%. The company’s advancements in lithography intensity and average selling prices (ASPs) demonstrate future growth potential, says Scemama.
Generation Investment Management, an investment management firm, released its Q4 2024 investor letter. Here is what the fund said:
“ASML Holding N.V. (NASDAQ:ASML), a Dutch company and a recent addition to our portfolio, is a critical enabler of the semiconductor industry. They provide advanced lithography equipment, which is essential for producing semiconductors. As demand for chips accelerates – driven by AI, electrification and broader applications across the economy – ASML stands to benefit significantly.
ASML operates in a near-monopolistic position in lithography machines, thanks to decades of engineering expertise and innovation. Over the past five years, the company has grown revenues at 20% annually. We expect the company’s revenue growth to moderate but continue to grow strongly, in line with the semiconductor industry. Margins are likely to expand over time, underscoring ASML’s high quality and earnings potential.
There are risks. Short-term volatility in orders, and geopolitical trade restrictions, could affect growth. Over the long term, disruptive innovation outside of lithography poses a challenge, though we believe ASML’s position is secure. We therefore find the valuation of the company attractive. We are confident in its ability to compound value over the coming years.”
Overall ASML ranks 9th on our list of the monopoly stocks to buy. While we acknowledge the potential of ASML 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 time frame. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for a deeply undervalued AI stock that is more promising than ASML but that trades at less than 5 times its earnings, check out our report about this cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.