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 L3Harris Technologies, Inc. (NYSE:LHX) 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 military jetfighter against a deep blue sky with the sun behind it.

L3Harris Technologies, Inc. (NYSE:LHX)

Number of Hedge Fund Holders: 48

Upside Potential as of February 19: 31.51%

L3Harris Technologies, Inc. (NYSE:LHX) is an aerospace and defense technology company that delivers mission-critical solutions across several domains. Operating through specialized segments, it provides advanced technologies ranging from satellite payloads and ISR systems to tactical radios and propulsion systems. It serves both government and commercial clients worldwide.

The company has built a substantial satellite business, achieving a record backlog of 40 satellites in just five years. It’s a key partner in the SDA’s (Space Development Agency) Tranche 2 tracking layer program, which is a US government initiative to deploy a constellation of satellites. In the program, this company’s satellites are designed to detect and track hypersonic threats. L3Harris Technologies, Inc. (NYSE:LHX) has already secured contracts for 38 satellites across various tranches, demonstrating its position in space-based missile defense. In 2024, it launched 4 satellites for SDA and 1 for MDA (Missile Defense Agency).

Its commitment to missile defense extends beyond satellites. It won contracts for the Glide Phase Interceptor and next-generation interceptor programs, which will fuel growth in its solid rocket motor business for decades. This aligns with national security priorities, including the development of advanced missile defense systems. The Space and Airborne Systems segment, which encompasses these activities, is projected to generate revenue between $6.9 billion and $7.1 billion in 2025. While facing some budgetary constraints in the space sector, the company anticipates growth resuming in 2026.

Diamond Hill Mid Cap Strategy initiated a position in L3Harris Technologies, Inc. (NYSE:LHX) due to a favorable future defense budget, alignment with current defense priorities, and a compelling valuation after a share-price decline. It made the following comment about the company in its Q3 2023 investor letter:

“L3Harris Technologies, Inc. (NYSE:LHX) is a defense contractor focused primarily on communications, surveillance and electronic warfare. We anticipate the US’s defense budget will be better than expected over the next few years as the Defense Department focuses on preparing for peer-level threats — an area in which LHX’s capabilities fit nicely. We believe there is room for improvement in recent execution — particularly at recently acquired Aerojet Rocketdyne — and we think LHX’s new management team is well-qualified to improve results. We accordingly capitalized on a recent share-price decline to initiate a position at what we consider a compelling valuation.”

Overall, LHX ranks 11th on our list of the best growth stocks to invest in according to analysts. While we acknowledge the growth potential of LHX 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 LHX but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

 

READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap

 

Disclosure: None. This article is originally published at Insider Monkey.