We recently published a list of 12 Best Growth Stocks to Invest In According to Analysts. In this article, we are going to take a look at where Vertiv Holdings Co (NYSE:VRT) stands against other best growth stocks to invest in according to analysts.
Companies experiencing above-average earnings growth, which is often fueled by innovations and market expansions, are known as growth stocks. However, investing in them requires more than just chasing their rising share prices. These companies typically command higher valuations than their peers, which reflects investor confidence in their future potential. While they offer the prospect of substantial returns, they also come with heightened volatility and are susceptible to economic pressures like inflation and supply chain disruptions. Despite recent market fluctuations, periods of decline can present strategic entry points for long-term investors.
On February 20, Adam Crisafulli, Vital Knowledge founder, and Ryan Detrick, Carson Group chief market strategist, joined ‘Closing Bell Overtime’ on CNBC to discuss the state of the market. Detrick addressed the broadening nature of the market and the lack of panic following recent Fed minutes. He noted that all 11 sectors have increased year-to-date, with 7 sectors outperforming the S&P 500. Detrick highlighted that after two consecutive years of over 20% gains, the market has continued its upward trajectory, showing an increase of over 4%, almost 5%, so far this year. He emphasized that surprises in a bull market typically lean towards positive outcomes and reiterated that the ongoing rotation among sectors is beneficial for investors because it allows for a diversified portfolio.
Crisafulli then shifted the focus to specific companies which are set to report earnings. He connected these companies to trends in digital payments and marketing, emphasizing the role of data in driving customer loyalty and business growth in a modern economy. He discussed a broader theme of valuation reversion among high-multiple stocks and suggested that cheaper segments of the market are starting to catch up in terms of valuation expansion. Detrick added to this by discussing record highs for major indexes such as the S&P 500 and NASDAQ 100, as well as European indices like the DAX and Stoxx Europe 600. He also mentioned gold trading at record levels and questioned whether it is wise to invest at these heights or if the opportunity has passed. Detrick explained that they incorporated gold into their tactical models back in March 2023, adding more during a pullback post-election when the dollar rose sharply. He attributed gold’s rise to central bank indecision and suggested that the US dollar may have peaked. He advocated for including gold in a diversified portfolio, particularly within a 60-40 asset allocation model.
The overall discussion underscored the importance of diversification in investment strategies amidst changing market dynamics.
Methodology
We used stock screeners to compile a list of the top growth stocks. We then selected 12 stocks that had high average upside potential of over 30% and were the most popular among elite hedge funds. The stocks are ranked in ascending order of their average upside potential. We’ve also added the hedge fund sentiment for each stock, as of Q4 2024, which was sourced from Insider Monkey’s database.
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 close-up of a group of technicians working on complex data center systems.
Vertiv Holdings Co (NYSE:VRT)
Number of Hedge Fund Holders: 92
Upside Potential as of February 19: 31.13%
Vertiv Holdings Co (NYSE:VRT) designs, manufactures, and services digital infrastructure technologies and lifecycle services. These are essential for data centers, communication networks, and industrial environments worldwide. It offers a portfolio of power management, thermal management, and IT infrastructure solutions under well-known brands like Vertiv and Liebert.
Bank of America’s Andrew Obin reiterated a Buy rating on this company on January 21. He cited the company’s AI and data center positioning for this sentiment while projecting a 25% yearly EPS growth from 2024-2027, despite market caution. He sees undervalued potential due to both AI and non-AI revenue growth, driven by hyperscaler capex and overall data center expansion.
Power management is a critical component of AI data centers, and Vertiv Holdings Co (NYSE:VRT) is a market leader in this area. AI’s demand for complex power distribution plays to the company’s strengths in AC and DC power conversion. It’s also investing in R&D and strategic acquisitions, such as BSE, to enhance its technology portfolio and maintain a competitive edge. It acquired BSE to enhance its cooling solutions for demanding AI data centers.
In Q4 2024, the company reported adjusted EPS of $0.99, which was a 77% year-over-year increase. 2025 adjusted EPS is projected between $3.5 and $3.6, with sales expected to reach $9.2 billion. The Americas are forecast to lead this growth, with sales increasing in the low 20% range. The company aims to stay price-cost positive and is expanding its capacity to meet the rising demand driven by AI and data center growth.
Baron Small Cap Fund highlighted the company’s strong performance as a key data center infrastructure provider. It cited its leadership in power and cooling, raised growth forecasts, and potential for further gains. The fund stated the following regarding Vertiv Holdings Co in its Q4 2024 investor letter:
“Vertiv Holdings Co (NYSE:VRT), a critical digital infrastructure solutions provider for data centers, continued to perform well. With a leading market share in power and cooling applications for data centers, Vertiv is seen as a prime beneficiary of the AI-related data center buildout. At its November Analyst Day, Vertiv raised organic sales guidance to 12% to 14% CAGR for the next five years and gave guidance of 16% to 18% organic revenue growth for 2025. Vertiv also increased its target adjusted operating profit margin from 20% to 25%. While impressive on their own, these forecasts can prove conservative we think. With the stock up 141% in 2024, we have been trimming the stock into strength to manage position size but hold a large stake as we believe in its growth and that the stock is reasonably valued even after great appreciation the last two years.”
Overall, VRT ranks 12th on our list of the best growth stocks to invest in according to analysts. While we acknowledge the growth potential of VRT as an investment, our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than VRT 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.