In this article, we will be taking a look at the 10 best American stocks to buy for foreign investors.
With August Ending, What Can We Expect From US Markets?
Historically, September is considered to be the worst month for stocks. The S&P 500 index has generally averaged a decline in the month of September for decades, which has resulted in many financial news reporters, such as the Wall Street Journal, dubbing September as a weak month for US stocks. So with August coming to an end, many investors in the US and abroad may be wondering whether now is a good time to pick up US stocks for their portfolios.
While history can often be an accurate indicator of stock performance, this is not always the case. This year may very well be an outlier in the historical trend outlined above, seeing as many financial analysts are expecting the US Federal Reserve to move ahead with a rate cut this September. CNBC’s “Power Lunch” on August 21 highlighted that according to the Fed’s recent meeting minutes, it is quite probable that we will be seeing a rate cut this September, which will probably result in stock prices rising and the markets performing better. This is because when a rate cut is announced, consumers and businesses tend to increase their spending and investment, which has a direct and positive impact on stock prices, causing them to rise. As such, if we do see a rate cut next month, investors may actually benefit from investing in American stocks.
How Would a Potential Rate Cut Impact The Markets?
On August 22, Tom Lee, Fundstrat Global Advisors Managing Partner, joined CNBC’s “Squawk Box” to discuss the status of the US markets at present. Here’s what he had to say:
“The FMOC minutes that came out yesterday showed the Fed staff saying this is a strong labor market, while that jobs report that came out Friday and the revisions that just came out show a lot of jobs disappearing. It’s not a stronger market, and I think it gives more ammunition for the Fed to start a cutting cycle, and that’s gonna give a lot of life to the economy and to the markets. Especially cyclical stocks and small-cap stocks.”
According to Lee, investors looking to buy into US equities right now would benefit greatly from a rate cut if it does come about in September. A major beneficiary of such a cut would actually be the tech sector. In this regard, Lee said the following:
“I think tech is still in a good place because of AI, and NVIDIA should reinforce that. It’s not a demanding multiple, maybe 28x forward earnings, which is, for the best, one of the most important companies in the world, not a high multiple. So, if tech is in a good place, and then we get fed cuts, I think it allows the whole overall market to expand.”
Considering the above, US markets may actually be a good place to invest for foreign investors at present, and within these markets, tech may be a good place to start. This is why we’ve compiled a list of the best American stocks to buy for foreign investors, comprising most tech companies. Our list includes some of the best American tech stocks to buy, alongside some of the top US stocks for foreigners.
Stocks
Our Methodology
We selected the most popular American stocks among major hedge funds to compile our list, by using Insider Monkey’s hedge fund data for the second quarter of 2024. These companies are considered to be the best US stocks to invest in today according to major institutional investors, and should thus be considered by foreign investors looking to buy into American equities.
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).
10 Best American Stocks To Buy For Foreign Investors
10. Broadcom Inc. (NASDAQ:AVGO)
Number of Hedge Fund Holders: 130
Broadcom Inc. (NASDAQ:AVGO) is a semiconductor company based in Palo Alto, California. The company is among the most popular American stocks in the market right now, probably because of its heavy reliance on AI-driven revenue. So it’s not surprising that AI is one of its major growth drivers.
We believe that Broadcom Inc. (NASDAQ:AVGO) would be a smart stock pick for foreign investors because it’s set for immense growth in light of its AI semiconductors and the acquisition of a software business, VMware. These two factors helped the company grow its earnings in the second quarter, with revenue rising 43% year-over-year. Broadcom Inc. (NASDAQ:AVGO) also increased its outlook for AI-related revenue after the second quarter, primarily relying on its strength in hyper-scale custom compute and networking chips, where the company is dominating in the market.
Some of the most reputable clients for Broadcom Inc. (NASDAQ:AVGO) include Google and Meta, both big tech names with a lot to offer. Broadcom Inc. (NASDAQ:AVGO) is responsible for designing custom accelerators for these companies. Investors like this stock because of its incredible involvement and contribution to the AI space, seeing as this area of tech is driving up growth for all its major players.
There were 130 hedge funds long Broadcom Inc. (NASDAQ:AVGO) in the second quarter of 2024, with a total stake value of over $20 billion. GQG Partners was the largest shareholder in Broadcom Inc. (NASDAQ:AVGO) at the end of the second quarter, holding 32,349,800 shares in the company.
Baron Funds said the following about Broadcom Inc. (NASDAQ:AVGO) in its second-quarter 2024 investor letter:
“Broadcom Inc. (NASDAQ:AVGO) is a global technology leader that designs, develops, and supplies a broad range of semiconductor and infrastructure software solutions. The stock rose during the quarter as it reported strong earnings on the back of its two key growth drivers, AI semiconductors and its acquired VMware software business. The company once again increased its outlook for AI-related revenue, now expecting $11 billion or more this year (versus prior guidance for $10 billion), on the back of strength in both hyperscale custom compute and networking chips, where Broadcom maintains dominating share. In networking, Broadcom’s solutions are critical to enabling AI training factories to scale towards 100,000 chip clusters in the near term and 1 million chip clusters over the coming years. In AI custom compute, Broadcom designs custom accelerators for large consumer- internet AI companies (such as Google and Meta), who are building increasingly large AI clusters to drive improvements in user engagement and targeted advertising on their consumer media platforms. VMware remains on track to continue rapid sequential growth while simultaneously reducing operating expenses, driving faster-than-expected margin expansion and accretion, as management has simplified the product offering and is converting customers from a license model to subscriptions. We believe VMware will grow beyond the $4 billion near-term quarterly target, well above current analyst expectations. These two factors combined have caused a re-rating to the growth profile for the overall company. To quote CEO Hock Tan, “there is only one Broadcom. Period.”
9. Mastercard Incorporated (NYSE:MA)
Number of Hedge Fund Holders: 142
Mastercard Incorporated (NYSE:MA) is a financial company based in Purchase, New York. It is primarily responsible for transaction processing and payment-related products and services in the US and internationally. We’ve added Mastercard Incorporated (NYSE:MA) to our list because it’s not only a highly popular US stock, but it has also seen immense growth in the second quarter and seems well prepared for further growth down the line.
In the company’s second-quarter earnings call, Michael Mieback, the CEO, noted that the company’s growth in the second quarter is set to continue in the remainder of 2024 because of two reasons. First, Mastercard Incorporated (NYSE:MA) has incorporated several organizational changes to support its growth algorithm, and second, it is planning on enhancing and expanding its value-added services, such as data analytics, as it continues to embed AI in its products and services.
Another major reason why foreign investors should consider Mastercard Incorporated (NYSE:MA) is that it’s currently breaking into a large untapped emerging market, namely Africa. The company has recently executed two deals, one with Dashen and Ethiopian Airlines and the other with RwandAir and INM Rwanda. Mastercard Incorporated’s (NYSE:MA) involvement in Africa is expected to open up great opportunities for the company, since approximately 90% of transactions in Africa are presently made in cash, leaving great room for a financial company like Mastercard Incorporated (NYSE:MA) to make a significant impact by way of digital transformation there. Additionally, other partnerships with the Commercial Bank of Ethiopia, and I&M Bank in Kenya are also expected to help Mastercard Incorporated (NYSE:MA) increase its share in both of these markets as well.
A total of 142 hedge funds held stakes in Mastercard Incorporated (NYSE:MA) in the second quarter, with a total stake value of $15.3 billion. Akre Capital Management was the most prominent shareholder in Mastercard Incorporated (NYSE:MA) at the end of the second quarter, holding 4,039,349 shares in the company.
L1 Capital mentioned Mastercard Incorporated (NYSE:MA) in its second-quarter 2024 investor letter:
“The share prices of Mastercard Incorporated (NYSE:MA) and Visa, both long term Fund investments, have both drifted down over recent months. There have been no dramatic developments, but there has been a general slight softening in the rate of growth of consumer spending in the U.S. and globally, a court decision rejecting Mastercard and Visa’s proposed settlement of a long-lasting dispute with U.S. merchants as well as other modest adverse regulatory developments. We continue to view Mastercard and Visa as two of the highest quality businesses in the world, and both are well placed to continue to deliver attractive, risk adjusted returns to shareholders over time.”
8. Uber Technologies, Inc. (NYSE:UBER)
Number of Hedge Fund Holders: 145
Uber Technologies, Inc. (NYSE:UBER) is a San Francisco-based company well known for its ride-hailing app. We believe it is one of the best American stocks for foreign investors to buy right now because of its stellar consistent growth and ability to continue this growth even in a difficult economy.
According to the company’s CEO, Dara Khosrowshahi, in Uber Technologies, Inc.’s (NYSE:UBER) second-quarter earnings call, the main challenges that may arise for the company are the strength of its consumer and the possibility of a recession impacting its growth. To alleviate these concerns, Khosrowshahi noted that, first off, the Uber consumer seems to be in great shape, with the company’s audience being larger than ever, resulting in its services continuing to be used consistently on a large scale. Since ride-hailing apps offer expensive transport relative to public transport, the Uber consumer generally tends to have a higher income, and according to Uber Technologies, Inc.’s (NYSE:UBER) current analysis, there doesn’t seem to be any trading down across its consumers’ income cohort.
With consumer strength out of the way, the bigger issue of performance in a time of economic difficulty comes up. However, Uber Technologies, Inc. (NYSE:UBER) has developed a mechanism to ensure its consistent growth because it is uniquely positioned to offer immense value for autonomous vehicle (AV) players looking to publicize their tech at scale. Many AV players are currently facing the issue of their vehicles being too costly for the average consumer. In this regard, passenger ground transportation providers such as Uber Technologies, Inc. (NYSE:UBER) can act as a valuable partner for AV players, and the company is presently in talks with many AV companies to encourage them to join its platform for mutual benefit.
Uber Technologies, Inc. (NYSE:UBER) had 145 hedge funds long its stock in the second quarter, with a total stake value of $8.7 billion.