In this article, we will take a look at the 10 Best Stocks to Invest in According to Billionaire Cliff Asness.
The founder, managing principal, and chief investment officer of AQR Capital Management, Cliff Asness is a well-known name in the financial industry. Setting off with a $10 million commitment from a small group of investors in 1995, Asness managed to grow the Goldman Sachs Global Alpha Fund’s assets to over a $100 million in a matter of months. Distinct even among hedge fund managers, Cliff Asness’ investment strategies, focusing on value and momentum strategies, have produced impressive outcomes for AQR Capital over the years. As an example, AQR’s flagship Absolute Return fund had a spectacular year in 2022 after declining by over 30% from its peak in 2018. It rose 43.5%, the best performance since launch in 1998. The fund saw a 16.8% increase in 2021, and 18.4% in 2023, making it the best performing multi-strategy fund among its competitors. In its latest 13F filing for Q3 2024, AQR Capital Management disclosed a portfolio value $72.4 billion in 13F securities, with a top 10 holdings concentration of 14.07%.
In his interview for the book Efficiently Inefficient, Cliff Asness talks about the similarities between judgmental (discretionary) and quantitative investing, stating that both strategies look for cheap stocks with potential catalysts to raise or lower their values. He emphasized how quants use diversification and apply models across thousands of stocks to lower the risk factor, whereas judgmental investors tend to concentrate their holdings, thus relying on in-depth company knowledge. That said, Asness admitted that quant investors do go through periods of underperformance, even with the advantages of thorough data analysis.
Bitcoin: Little More Than a Speculative Bubble
Asness has had much to say about Bitcoin over the years. According to the billionaire, the cryptocurrency remains in a speculative bubble after the post-election rally carried it over the $100,000 mark. Speaking on the cryptocurrency on CNBC’s Money Movers, Asness stated the following:
“I’m on the bubble side, on net. To move me off that, you really need not a price change, but a use case. That’s what could convince me to become maybe more of a crypto person when I find any use for it, aside from speculation and criminality.”
Following a massive year-end surge following president-elect Donald Trump’s victory, Bitcoin surged 120% in 2024. With hopes of a national strategic Bitcoin reserve and pro-industry deregulation, investors expected Trump to bring about a golden age of crypto. Although Asness doesn’t harbor good prospects for Bitcoin, he stated that he wouldn’t short the cryptocurrency either, due to the volatile nature of crypto.
Despite proponents of Bitcoin contending that the cryptocurrency is here to stay and will eventually gain widespread acceptance, Asness’ criticisms highlight the absence of real-world applications outside speculative investing. He still views Bitcoin cautiously because he thinks its legitimacy as a store of value and a medium of exchange has not been established. Along with his comments regarding Bitcoin, Asness also expressed his worries about the larger U.S. stock market, stating that high cyclically-adjusted price-to-earnings (CAPE) ratios will cause equities to struggle in the upcoming years. He predicts that during the following ten years, U.S. stocks will probably provide mediocre returns, with just slight outperformance over cash.
Cliff Asness of AQR Capital Management
Our Methodology
To make our list of the ten best stocks to invest in according to Cliff Asness, we ranked all the stocks part of AQR Capital Managment’s Q3 2024 13F SEC filings and picked the fund’s top 10 stock holdings. The stocks are sorted in ascending order of AQR Capital Management’s stake value.
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. Johnson & Johnson (NYSE:JNJ)
AQR Capital Management’s stake as of Q3: $509.9 million
Often abbreviated as J&J, Johnson & Johnson (NYSE:JNJ) is one of the biggest names in healthcare, offering a portfolio that spans pharmaceuticals, Medtech devices, and consumer health products. The company is known for creating medicines to treat a host of different conditions and diseases, including cancer, diabetes, and HIV/AIDS.
As of the end of the third quarter of 2024, J&J’s Innovative Medicine segment crossed the $14 billion mark in sales, with flagship brands like DARZALEX scoring double-digit growth. In addition, the Medtech sector also showed decent progress, supported by Shockwave and Abiomed’s acquisitions. As of the end of the fiscal quarter, the healthcare titan claimed $20 billion in cash and marketable securities against $36 billion in debt. On the other hand, J&J remains optimistic about its prospects, with several medicines already under review, each projected to affect around $5 billion in peak-year sales.
9. Broadcom Inc. (NASDAQ:AVGO)
AQR Capital Management’s stake as of Q3: $558.8 million
One of the largest names in technology, Broadcom Inc. (NASDAQ:AVGO) has a strong presence in both the hardware and software sectors. The company’s core strength lies in providing networking and custom chips for a number of different applications.
Back on December 23, 2024, UBS increased its price target for Broadcom (NASDAQ:AVGO) to $270, up from $220, while maintaining a Buy rating. The updated artificial intelligence revenue forecasts for fiscal years 2026 and 2027 reflect roughly 20% and 40% in expected growth, respectively. This outlook was determined on the assumptions of a conservative market share, as well as anticipations around the expansion of the company’s serviceable addressable market (SAM), as Broadcom Inc. (NASDAQ:AVGO) gets ready to add two more hyperscaler clients for its AI offerings.
For its fiscal fourth-quarter 2024 results, Broadcom Inc. (NASDAQ:AVGO) reported $14.1 billion in revenue alongside an EPS of $1.42. The company’s semiconductor division did incredibly well, generating about $8.2 billion in revenue driven by sustained AI demand. In comparison, the software segment didn’t fare quite as well, generating $5.8 billion in revenue. Even so, the tech giant expects $14.6 billion in revenue, a 66% EBITDA margin, as well as an implied EPS of $1.51 for Q1 2025. On top of that, Broadcom counts on a sizable increase in XPU ASIC production during the second half of the year, powered by new 3nm products expected to deliver unit growth and higher average selling prices.
8. Alphabet Inc. (NASDAQ:GOOGL)
AQR Capital Management’s stake as of Q3: $582.5 million
Alphabet Inc. (NASDAQ:GOOGL) is a prominent name in technology. Through its various offerings, such as Google Cloud and Google Services, the company leads several market divisions. Its primary products—such as Search, YouTube, Android, Chrome, and advertising services—dominate their respective markets, driven by advanced innovations in artificial intelligence.
In light of possible antitrust sanctions that might affect Google’s search distribution and earnings in the United States, JMP Securities lowered the GOOGL stock from Market Outperform to Market Perform on January 2. There have been some concerns around the stock’s ability for multiple expansion due to uncertainty around a court decision that is expected to come in August.
Yet September 2024 earnings for Alphabet Inc. (NASDAQ:GOOGL) showed record revenue, reaching $88.3 billion during the quarter. Google Advertising generated $65.9 billion, making up more than 74% of the company’s total revenue. In order to meet investor expectations for returns on its substantial AI investments, the company is improving its monetization strategies with tools such AI Overviews.
Qualivian Investment Partners stated the following regarding Alphabet Inc. (NASDAQ:GOOGL) in its Q3 2024 investor letter:
“Alphabet Inc. (NASDAQ:GOOGL): Q2 2024 revenues and EPS beat expectations, with total revenues growing 14%, Search ad revenues growing 14%, YouTube ads growing 13%, and Google Cloud revenues growing 29%. Revenue growth in the quarter constituted a continued sequential improvement from earlier quarters in the year, suggesting a continued rebound in Alphabet’s core business except for YouTube ad revenues, which missed expectations and showed deceleration in the growth rate as compared to Q1 when it grew 21%. Operating margins improved by 310 bps vs. the same quarter last year.
Management continued to highlight developments with their generative AI program, which is seen as a foundational platform with opportunities across their businesses but particularly in search and cloud. However, this comes with material capex investment well ahead of the expected economic benefits from Gen AI, and the level of spending is leading investors to worry about the ROI on that spend for Alphabet, as well as the other hyperscalers (Microsoft and Amazon). We continue to have confidence in Alphabet’s ability to generate strong revenue, earnings, and cash flow growth well above the S&P 500’s in the years to come and view it as a core holding for the long term.”
7. Eli Lilly and Company (NYSE:LLY)
AQR Capital Management’s stake as of Q3: $591.7 million
Eli Lilly and Company (NYSE:LLY) is a global leader in pharmaceuticals, offering treatments for diabetes, oncology, rheumatoid arthritis, psoriasis, migraines, and more. Its flagship products include Humalog, Trulicity, Alimta, and Taltz. The company has also emerged as a leader in the growing obesity treatment market, with its GLP-1 class drugs, Mounjaro and Zepbound, driving prescription growth and solidifying its competitive edge.
To support its growth ambitions, Eli Lilly and Company (NYSE:LLY) is investing heavily in manufacturing. It has committed an additional $1.8 billion to expand facilities in Limerick and Kinsale, Ireland, to meet rising demand for incretin therapeutics and produce Kisunla, its recently approved Alzheimer’s treatment.
On December 20, Citi reiterated its Buy rating on Eli Lilly and Company (NYSE:LLY) with a $1,250 price target. This outlook followed Novo Nordisk’s phase 3 REDEFINE-1 study results in the obesity market, which showed 22.7% weight loss at 68 weeks, below the anticipated 25% target. In comparison, Eli Lilly’s tirzepatide demonstrated 20.9% weight loss. Citi views Novo’s lower-than-expected results as favorable for Eli Lilly, strengthening its competitive position, especially among patients with higher body mass indexes.
Eli Lilly’s Q3 2024 revenue surged 42%, driven by strong U.S. demand for Mounjaro and Zepbound. Non-incretin product revenue increased by 17%, with the gross margin reaching to 82.2%. Likewise, Eli Lilly’s EPS rose significantly to $1.18, up from just $0.10 in Q3 2023. The company also returned $1.6 billion to shareholders while increasing R&D spending by 13%.
6. GE Aerospace (NYSE:GE)
AQR Capital Management’s stake as of Q3: $606.3 million
GE Aerospace (NYSE:GE), the aerospace spin-off of the General Electric conglomerate, is a leading player in the industry, specializing in the production of jet engines and propulsion systems for a wide range of aircraft, including commercial airliners, military jets, and private planes. Its customers include major industry giants including the likes of Boeing and Airbus, as well as the U.S. military.
The company’s defense segment is performing exceptionally well, evidenced by GE receiving an order from the Polish Ministry of National Defense for 210 T700 engines to power 96 Boeing AH-64E Apache Guardian helicopters. The company also announced a ten-year, multi-million-dollar service agreement with Emirates back in October of last year, focusing on the electrical load management system for its Boeing 777 fleet.
GE Aerospace (NYSE:GE) generated $9.8 billion in revenue, indicating a 6% improvement year-over-year. Its GAAP profit came in at $1.9 billion indicating an even better year-over-year growth rate of 14%. The company also improved its total orders by 28% to reach $12.6 billion in total secured orders indicating that demand for its products remains robust.
5. Meta Platforms, Inc. (NASDAQ:META)
AQR Capital Management’s stake as of Q3: $855.1 million
Meta Platforms, Inc. (NASDAQ:META) is a leading technology company known for its flagship platforms—Facebook, Instagram, and WhatsApp—alongside its innovative advancements in augmented reality (AR) and virtual reality (VR) technologies.
AI-powered enhancements to Meta’s algorithms and user experience continue to boost ad income for the social media giant. Over 500 million people use the company’s platforms each month, demonstrating the widespread adoption of its Llama AI approach. These developments put Meta Platforms, Inc. (NASDAQ:META) in a strong position to increase its profitability over the next two years as it expands its AI infrastructure.
On January 1, Wolfe Research reaffirmed its positive outlook on Meta, maintaining an Outperform rating and a $730 price target. Analysts at Wolfe Research believe the market has yet to fully recognize the financial potential of Meta’s initiatives in video unification and Threads monetization. They project Meta’s 2025 EPS to surpass consensus estimates by 5.5%. In addition, Wolfe projects that Threads may make between $3 and $4 billion by 2026, with room for growth in the years to follow.
Hardman Johnston Global Equity stated the following regarding Meta Platforms, Inc. (NASDAQ:META) in its Q3 2024 investor letter:
“During the quarter, we initiated one new position in Meta Platforms, Inc. (NASDAQ:META) and had no liquidations. Management at Meta has effectively addressed concerns about investment efficiency by shifting resources from Reality Labs towards broader AI initiatives with a clearer path to profitability. We believe management has successfully articulated the benefits of this strategy, highlighting how AI is driving user engagement and advertiser productivity. This, in turn, fuels continued revenue momentum and increases the likelihood of positive earnings surprises in the future. Additionally, the parent company of the social media platform, Facebook, has recently taken positive steps to enhance safety, which suggests to us a shift towards a more proactive and responsive approach to addressing important potential challenges and concerns. Weak oversight over data privacy protection was a key reason why we sold the position in the portfolio back in 2021. Removing this governance overhang allows us to feel comfortable to enter back into the stock at a time when we believe it is poised for strong earnings growth going forward.”
4. Amazon.com, Inc. (NASDAQ:AMZN)
AQR Capital Management’s stake as of Q3: $927.6 million
The world leader in e-commerce, cloud computing, streaming, and online shopping, Amazon.com Inc. (NASDAQ:AMZN) is advancing artificial intelligence through partnerships with the U.S. government and companies like Anthropic for AI model testing.
Amazon.com Inc. (NASDAQ:AMZN) announced plans for Amazon Web Services (AWS) to invest roughly $11 billion in expanding its infrastructure in Georgia on January 7. With this investment, AWS, a significant source of revenue for Amazon, is expected to strengthen its position as the industry leader.
On January 3, analyst Shweta Khajuria of Wolfe Research reaffirmed her optimistic outlook for AMZN, keeping an Outperform rating and increasing the stock’s price target from $250 to $270. The optimism is predicated on several important growth factors, such as increased advertising income, continued global profitability, and enhanced retail margins from automation and operational savings. Wolfe Research initially named Amazon.com Inc. (NASDAQ:AMZN) was ranked as a top pick by Wolfe back in July 2024, and the revised price target shows ongoing faith in the company’s capacity for expansion.
Amazon.com Inc. (NASDAQ:AMZN) reported net sales of $158.9 billion in fiscal Q3 2024, an 11% year-over-year increase driven by AWS’s impressive growth. The company’s Q4 projections, which show continued progress across all its business areas, range from 7% to 11% year-over-year.
3. Microsoft Corporation (NASDAQ:MSFT)
AQR Capital Management’s stake as of Q3: $1.72 billion
Based in Redmond, Washington, Microsoft Corporation (NASDAQ:MSFT) is a global technology behemoth known for its flagship software products, including Windows operating systems, the Microsoft 365 suite, and the Edge web browser. Given its crucial position in the digital and artificial intelligence revolution, it is one of Cliff Asness’ top stock picks.
On January 4, Microsoft Corporation (NASDAQ:MSFT) announced that it will spend about $80 billion on AI infrastructure and data centers in 2025 to cover advanced AI workloads. This was seen as a catalyst for the company’s growth prospects, leading to analysts from Jefferies, Piper Sandler, Citi, and Bernstein to reiterate their Buy ratings on the MSFT stock.
Microsoft Corporation (NASDAQ:MSFT) announced $65.6 billion in revenue for the first quarter of fiscal 2025, a 16% increase over the same period the previous year. Operating income for the company also jumped to $30.6 billion. Additionally, its income from cloud services and server products increased by 23%, mostly due to a 33% growth in Azure and other cloud services.
2. Apple Inc. (NASDAQ:AAPL)
AQR Capital Management’s stake as of Q3: $1.87 billion
Global tech behemoth Apple Inc. (NASDAQ:AAPL) is well-known for its flagship devices, which include the iPhone, Mac, and Apple Watch, as well as its extensive network of services, including iCloud and Apple Music. Given that there are about 2.2 billion Apple devices around the globe, the company has a large platform suitable for launching its AI services.
On January 6, Evercore ISI reaffirmed its Outperform rating on Apple Inc. (NASDAQ:AAPL) stock, maintaining a price target of $250. Analysts noted that App Store revenue grew by 13% in December, down from November’s 17% growth. However, the App Store’s December quarter performance still delivered a 15% growth rate, surpassing Evercore ISI’s initial forecasts. This stronger-than-expected showing is anticipated to bolster Apple’s overall services revenue, where the App Store and payments from Google (NASDAQ:GOOGL) remain key contributors.
In the fourth quarter of 2024, Apple Inc. (NASDAQ:AAPL) posted a revenue of $94.9 billion, marking a 6% increase compared to the same quarter the previous year. Product revenue reached nearly $70 billion, up from $67 billion in the same period in 2023. Moreover, the company reported an operating cash flow of $27 billion and paid $29 billion to shareholders.
In its third quarter 2024 investor letter, Madison Investments said the following regarding Apple Inc. (NASDAQ:AAPL):
“Alphabet Inc., Eli Lilly and Company, Qualcomm Incorporated, Microsoft Corporation, and Apple Inc. (NASDAQ:AAPL) were the largest detractors. Apple has been volatile in the last quarter but ended on strength. Early in the quarter, Apple benefited from the introduction of their AI strategy, Apple Intelligence. They followed in September with the new iPhone 16, which also created some excitement. We are underweight to Apple, which has resulted in a headwind for performance.”
1. NVIDIA Corporation (NASDAQ:NVDA)
AQR Capital Management’s stake as of Q3: $1.95 billion
When it comes to the creation and production of graphics processing units (GPUs), application programming interferences (APIs), and system-on-a-chip (SoC) components, NVIDIA Corporation (NASDAQ:NVDA) arguable stands as king. The company plays an essential part in domains like data science and high-performance computing. AQR Capital’s portfolio consists of 16.27 million NVDA shares, worth about $1.95 billion.
In a note to clients, Oppenheimer named NVIDIA Corporation (NASDAQ:NVDA) as a standout among semiconductor stocks due to its dominance over the chips used to power AI applications and models, particularly in data centers. The firm stated that NVIDIA Corporation (NASDAQ:NVDA) remains the “largest volume producer of AI accelerators” in the world and continues to dominate the AI infrastructure market ahead of its competitors. Oppenheimer expects NVIDIA’s data center AI sales to hit the $172 billion mark in 2025.
In the third quarter of 2024, NVIDIA Corporation (NASDAQ:NVDA) reported record revenue of $35.1 billion, a 94% increase from the previous year. At $30.8 billion, the data center segment along saw a 112% increase. Over the last couple of years, the company’s GPU revenue has increased sharply by 67% yearly, primarily due to the increased demand for computational capacity brought on by advances in AI.
Manole Capital Management stated the following regarding NVIDIA Corporation (NASDAQ:NVDA) in its Q3 2024 investor letter:
“As of this publication, Nvidia is up roughly 150% year-to-date. NVIDIA Corporation (NASDAQ:NVDA) was the largest gainer in the S&P 500 last year and has more than tripled in value over the last year. It hit an eye-opening market capitalization of $3 trillion in June, less than four months after it eclipsed the $2 trillion mark. Enthusiasm for everything AI-related, especially for the primary chip maker whose products are essential to powering AI technology, continues to fuel the market. Last quarter, and for the fifth consecutive quarter, Nvidia reported sales and profits that blew past Wall Street expectations. The stock rose +37% in the second quarter alone.”
While we acknowledge the potential of NVDA, our conviction lies in the belief that certain AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than NVDA 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.
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