We recently compiled a list of the 15 Best Growth Stocks to Buy for the Next 5 Years.In this article, we are going to take a look at where Monolithic Power Systems Inc. (NASDAQ:MPWR) stands against the other growth stocks.
Kevin Mahn, President & CIO at Hennion & Walsh Asset Management, recently appeared on CNBC on January 6 to discuss the current market momentum and emphasize the need for investors to be selective in 2025 to find growth opportunities. He highlighted that while the MAG7 have led the market recently, their leadership may not continue. Mahn referenced historical data, noting that since 1950, there have been nine instances where the market rallied by 20% or more, with the market rising in eight of those cases. However, he pointed out that gains in the following year averaged only 3.6%, indicating a need for careful selection. He also acknowledged recent market trends, including a decline in the S&P 500's performance and a potential shift in investor sentiment following events like the Santa Claus Rally.
He predicted a path of lower interest rates, expecting 50 basis points of cuts this year instead of the previously anticipated 100 basis points. Mahn suggested that this environment would create favorable conditions for stocks and bonds but urged investors to diversify beyond mega-cap tech stocks into sectors like biotech and aerospace. Earlier on January 3 as well, Mahn noted that after two consecutive years of gains, a third year of strong performance appears unlikely. He remarked that it seems the Grinch got in the way of the Santa Claus rally this year.
He also addressed concerns from investors tempted to time the market or sell their holdings. He warned against trying to time the market, describing it as often futile. Instead, he advocated for rebalancing portfolios to align with long-term goals and risk tolerance. He suggested that the economic landscape is changing, with lower interest rates and stagnant economic growth expected moving forward. Mahn advised investors to take profits from sectors that previously led the market and consider reallocating those funds into different areas poised for future growth. He highlighted biotech as a promising sector, noting bipartisan agreement on the need to lower drug prices. This shift could lead large-cap pharmaceutical companies to seek new revenue sources, making smaller biotech firms attractive.
Methodology
We first sifted through online rankings, and internet lists to compile a list of the top growth stocks to buy for the next 5 years. We then selected the stocks with high 5-year revenue growth and high analysts' upside potential. From those we picked 15 stocks that were the most popular among elite hedge funds and that analysts were bullish on. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q3 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 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
An engineer examining a DC to DC integrated circuit board, looking for any flaws.
Monolithic Power Systems Inc. (NASDAQ:MPWR) designs and develops semiconductor-based power solutions for various electronic devices. It partners with manufacturers like NVIDIA to produce these chips and offers critical power management solutions for the rapidly growing AI market.
In mid-December of 2024, Truist analyst William Stein lowered his price target on the company from $887 to $762 while maintaining a Buy rating. This reduction reflects concerns about near-term headwinds within the semiconductor and AI sectors. Despite this, Truist expects the company to benefit from strong AI demand and secure a prominent role in NVIDIA's upcoming Blackwell GPUs. It powers NVIDIA's high-performance GPUs. These GPUs are essential for accelerating AI workloads across various applications, including data centers, gaming, and autonomous vehicles.
Notably, automotive revenue surged 28% sequentially in Q3 2024. In the same quarter, the company experienced demand for its power management solutions, particularly for AI applications. It recorded a revenue of $620.1 million, representing a 30% year-over-year growth. This was fueled by improved ordering trends across most end markets and the revenue ramps associated with design wins secured in prior years. While acknowledging potential near-term headwinds in the enterprise data segment, Monolithic Power Systems Inc. (NASDAQ:MPWR) remains optimistic about its long-term growth prospects.
Monolithic Power Systems Inc. (NASDAQ:MPWR) experienced strong performance driven by the demand for its power management solutions, particularly for AI and data center applications. ClearBridge SMID Cap Growth Strategy stated the following in its Q2 2024investor letter:
“Another top individual contributor was Monolithic Power Systems, Inc. (NASDAQ:MPWR), in the IT sector, which makes semiconductor-based power electronics for the computing and storage, automotive, industrial, communications, and consumer markets. Continued demand for AI-related companies and beneficiaries and anticipation of greater demand for data center components such as power management hardware for CPUs helped drive strong performance in the quarter. We believe Monolithic is one of the most attractive semiconductor plays within the SMID universe and that the company will continue to gain share in analog semiconductors as it wins design contracts.”
Overall MPWR ranks 13th on our list of the best growth stocks to buy for the next 5 years. As we acknowledge the growth potential of MPWR 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 MPWR but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
