10 Best Growth Stocks to Buy According to Billionaire Dan Loeb

2. Microsoft Corporation (NASDAQ:MSFT)

Third Point’s Stake Value: $742,570,800 

Number of Hedge Fund Holders: 293

Microsoft Corporation (NASDAQ:MSFT) accounts for 9.5% of Third Point’s Q1 2024 portfolio. According to Loeb, Microsoft Corporation (NASDAQ:MSFT) is a “best run legacy” company that has built clear moats in its industry and has established itself as a leader. The billionaire has held MSFT since Q4 2022 and holds a position worth over $742.5 million, as of Q1 2024. In total, there were 293 hedge funds with long positions in MSFT at the close of Q1 2024 with stakes worth over $88 billion. Microsoft Corporation (NASDAQ:MSFT) is one of Dan Loeb’s top growth stock picks.

Microsoft Corporation (NASDAQ:MSFT) generated $61.9 billion, up 17% year over year, and reported net income of $21.9 billion, up 20% year over year. The company’s Azure and cloud services revenue increased 31% year over year, outpacing its rivals’ Amazon Web Services’ and Google Cloud’s revenue growth rates of 17% and 28%, respectively. The company also returned $8.4 billion to shareholders through dividends during the quarter.

Azure continues to gain market share, driven by a broad portfolio of AI and cloud services. The Azure OpenAI Service is being used by over 65% of Fortune 500 companies and the introduction of the Models as a Service API and partnerships with major players including Nvidia and AMD for AI hardware accelerators are all driving the company’s cloud business’ growth. Moreover, Microsoft’s Copilot offerings are revolutionizing productivity across various domains. With Copilot now integrated into Microsoft 365, Dynamics 365, and GitHub, the company is democratizing AI-powered capabilities and capturing further market share in office productivity tools.

Microsoft Corporation (NASDAQ:MSFT) stands to benefit from multiple markets including AI, cloud, and office productivity. The company has grown its revenue by a CAGR of 11% over the past 10 years and its net income by 14.4%. The company also has a solid dividend profile and has grown its dividends for the past 2 decades. Is it too late to buy MSFT and are all its near-term growth prospects priced in? The stock has gained 32% over the past 12 months and analysts’ 1-year median price target implies an upside of 13% from current levels, however the Street-high target implies an upside of 41%. Analysts expect MSFT’s EPS to grow by 20% in 2024 and 35% in 2025, compared to 2023 levels. We think MSFT is attractive while it trades at 31.6 times its forward earnings, close to its 5-year average multiple of 31x.