In this article, we will take a look at the 10 most promising long-term stocks according to hedge funds.
Another 50 bps Cut is Still Restrictive
The labor market has been more resilient than ever. On October 4, Gary Cohn, the IBM vice chairman, and former US National Economic Council director in the Trump administration, appeared in an interview on Yahoo Finance to discuss the job report and the US economy.
Cohn suggests that the jobs data is the least scientific information the government puts out and therefore, it must be taken with a grain of salt. However, he emphasizes the importance of understanding trends. The number of people entering the workforce is expanding and jobs are being created, deducing that the market is in a neutral place.
Cohn believes that the US economy is normalizing. He reveals that we have not lived in a normal economy in over a decade, therefore, relative to history, the status quo is fairly reasonable. He adds that the Fed has orchestrated a soft landing and expects another 50 basis point cut before the end of 2024, which according to him is still restrictive.
Portfolio Manager Highlights High Growth Sectors
As the AI flame starts to settle, the market may be up for a major shift. On October 7, Keith Buchanan, GLOBALT Investments senior portfolio manager, appeared in an interview on Yahoo Finance to discuss his expectations of the market.
Expectations for earnings have been revised from mid-single digits to mid-double digitals, promising robust growth as 2024 comes to a close. Buchanan suggests that most of the growth comes from artificial intelligence and the widening of earnings growth beyond traditional growth sectors like technology.
This year, the industrial and energy sectors have enjoyed greater returns capturing a large chunk of the market. Buchanan is highly bullish on AI plays and value stocks. He also adds that names in financials, industrials, and consumer discretionary are poised for growth ahead of 2024. He advises investors to consider geopolitical events before making any investment decisions.
Now that we have assessed the future of the financial markets and possible sectors eyeing growth, let’s take a look at the 10 most promising long-term stocks according to hedge funds.
A trader in a financial institution using fundamentals analysis to select stocks for a portfolio.
Our Methodology
To find the most promising long-term stocks according to hedge funds, we went over multiple rankings over the internet to list long-term blue chip stocks. We then examined the analyst upside and the hedge fund sentiment of these stocks as of Q2 2024 and picked the most popular ones. The stocks are sorted in ascending order of the number of hedge fund holders as of Q2 2024 as a primary metric and analyst upside as of October 13, as a secondary metric.
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 Most Promising Long-Term Stocks According to Hedge Funds
10. Chevron Corporation (NYSE:CVX)
Number of Hedge Fund Holders: 64
Analyst Upside as of October 13, 2024: 10%
Chevron Corporation (NYSE:CVX) ranks 10th on our list of the most promising long-term stocks according to hedge funds. The energy and petroleum company is headquartered in California, United States, and is present in more than 180 countries
During the second quarter of 2024, the company forged alliances in Namibia, Brazil, Equatorial Guinea, and Angola to expand its exploration base and enhance its acreage position. Chevron Corporation (NYSE:CVX) is also making strides in clean and renewable energy. In May, the company operated a gas turbine on a 60% hydrogen fuel blend, significantly reducing emissions.
Chevron Corporation (NYSE:CVX) is committed to innovation. Previously in August, the company started production at Anchor using its industry-first deepwater technology. This technology is a breakthrough for CVX, enabling it to explore difficult-to-access resources and develop deepwater developments.
The company also owns a 16.5-megawatt wind farm that can power more than 13,000 homes annually. Overall, Chevron Corporation (NYSE:CVX) has huge potential in the clean energy industry and is consistently working to introduce clean energy policies.
Diamond Hill Capital’s Diamond Hill Large Cap Strategy stated the following regarding Chevron Corporation (NYSE:CVX) in its fourth quarter 2023 investor letter:
“Other bottom contributors included Chevron Corporation (NYSE:CVX), Carrier Global and Becton, Dickinson. Shares of integrated oil and gas company Chevron were pressured as global oil production is growing — particularly in the US, which has now surpassed its past production levels — in turn pressuring oil prices and company profit margins.”
9. NIKE, Inc. (NYSE:NKE)
Number of Hedge Fund Holders: 66
Analyst Upside as of October 13, 2024: 12%
NIKE, Inc. (NYSE:NKE) is one of the most promising long-term stocks according to hedge funds. NIKE, Inc. (NYSE:NKE) is an athletic footwear and apparel company, with a market share of almost 35% in the sports footwear category in the United States.
NIKE, Inc. (NYSE:NKE) regularly adds new products to its shelves, keeping its hype alive. In September, the company partnered with NIGO to launch an exclusive Air Force 111 and apparel collection. In addition to that, earlier in September, the company partnered with Patta and Isabel to launch new collections. These partnerships allow Nike to attract people with all kinds of aesthetics and needs from across the globe.
While the company experienced a decline in revenue for the Nike brand in North America, it was offset by the growth in China and the APLA (Asia Pacific and Latin America) region. Despite moderate revenue growth, NIKE, Inc. (NYSE:NKE) managed to deliver $6.4 billion to shareholders in fiscal 2024. Of this, $2.2 billion was paid in dividends and a share repurchase worth $4.3 billion was executed.
NKE is a consumer favorite for its high-quality athletic wear. While its sales may come across as saturated, its consistent performance is an implication of its loyal and solid customer base. Overall, according to the Insider Monkey database, 66 hedge funds were bullish on the stock at the close of Q2 2024.
Mar Vista Investment Partners’ Mar Vista Focus strategy stated the following regarding NIKE, Inc. (NYSE:NKE) in its Q2 2024 investor letter:
“NIKE, Inc.’s (NYSE:NKE) stock declined following management’s revised forecast for fiscal year 2025, projecting negative mid-single-digit revenue growth instead of the previously anticipated positive growth. The company has observed a marked slowdown in lifestyle product sales since April, a trend that persisted into June. Our current projections indicate that both sales and earnings will fall 15-20% below the conservative estimates set by management just a quarter ago. This substantial downward revision in sales and earnings is attributed to insufficient product innovation, wholesale channel shift, and intentional reduction of supply in lifestyle franchises. While the negative adjustments to guidance could potentially act as a clearing event for the stock, the degree of conservatism in the new projections remains uncertain.
Nike maintains its position as the global leader in sportswear. However, its revenue growth has been hampered by a lack of innovation, and its recovery is further complicated by deteriorating macroeconomic conditions in the US and China. The company’s renewed focus on innovation and efforts to re-engage with wholesale channels may eventually help restore growth, but we believe increased skepticism regarding management’s ability to execute is justified”
8. Bank of America Corporation (NYSE:BAC)
Number of Hedge Fund Holders: 92
Analyst Upside as of October 13, 2024: 10%
Bank of America Corporation (NYSE:BAC) is a financial services company that provides investment and wealth management services to individuals, institutions, small to medium-sized businesses, large corporations, and the government. Some of its subsidiaries include Merrill, BofA Securities, and Bank of America Private Bank.
The company is a leading credit card issuer in the United States that has a strong retail network. The company has over 3,800 retail locations and 15,000 ATMs across the United States servicing a large clientele of 69 million individual customers. Bank of America now manages $5.7 trillion in client balances, loans, deposits, and investments in its consumer and wealth management segments.
During the second quarter of 2024, Bank of America Corporation (NYSE:BAC) added another 278,000 checking accounts to its system, bringing the fiscal half-year 2024 total to 500,000. Its expansion trajectory is ever-growing. By the end of 2026, BofA is set to open an additional 165 financial centers, and 40 by the end of this year.
Bank of America Corporation (NYSE:BAC) is one of the best long-term stocks according to hedge funds and we say that because of its strong ecosystem that is deeply integrated into the lives of individual customers and institutions alike. According to the Insider Monkey database, at the end of Q2, 92 hedge funds were bullish on the stock.
ClearBridge Investments’ ClearBridge Value Equity Strategy stated the following regarding Bank of America Corporation (NYSE:BAC) in its first quarter 2024 investor letter:
“We added several new positions during the quarter. Our largest new addition was Bank of America Corporation (NYSE:BAC), one of the world’s leading financial institutions, serving some 66 million consumer and small business clients across the U.S. as well as large corporations, financial institutions and governments globally. We believe that the interest rate pressure that Bank of America faced in early 2023 has subsided, and risks surrounding deposit outflows have abated, which should allow the company to improve its book value and capital growth as well as benefit from a rebound of capital markets activity.”
7. The Walt Disney Company (NYSE:DIS)
Number of Hedge Fund Holders: 92
Analyst Upside as of October 13, 2024: 22%
The Walt Disney Company (NYSE:DIS) is a mass media multinational company that ranks seventh on our list of the most promising long-term stocks according to hedge funds. The company operates across five major segments including media networks, parks and resorts, studio entertainment, consumer products, and interactive media.
The Walt Disney Company (NYSE:DIS) holds dominance in the media industry and we say that because of its intellectual property. Walt Disney owns some of the world’s biggest studios including Pixar, Marvel, and Lucasfilm, impossible for competitors to replicate. In addition to that, the company has received countless nominations for its awards and shows. It recently bagged its 60th Emmy at the 76th Emmy Awards Show.
The company’s exquisite partnerships further enhance its position as a mass media giant. Recently, The Walt Disney Company (NYSE:DIS) signed an agreement with the National Basketball Association allowing it to stream all NBA events on ESPN’s new platform launching in 2025.
Overall, saying Walt Disney is a market leader in media will not be a hyperbole. While some investors and analysts share concerns over Disney’s future profitability, its direct-to-consumer services like Disney+, Hulu, and ESPN+ are promising, logging their first operating profit in the fiscal third quarter of 2024.
Analysts are bullish on DIS and their 12-month median price target of $115 points to a 22% upside from current levels. According to the Insider Monkey database, 92 hedge funds held positions in the stock at the end of Q2 2024.
Mar Vista Investment Partners’ Mar Vista Focus strategy stated the following regarding The Walt Disney Company (NYSE:DIS) in its Q2 2024 investor letter:
“The Walt Disney Company’s (NYSE:DIS) shares declined after its earnings release, even though the company exceeded recently upgraded financial forecasts. While Disney+ and Hulu reached a milestone by turning their first quarterly profit, the company cautioned about theme park attendance returning to pre-pandemic norms. This signals a deceleration following a period of exceptional growth, impacting the stock as theme parks and experiences account for roughly 60% of Disney’s earnings. Despite broader consumer worries, Disney’s stock is still trading with a significant discount to fair value. We expect the gap between Disney’s market price and its intrinsic value to shrink as its streaming division evolves and increases profitability over time.”
6. Merck & Co., Inc. (NYSE:MRK)
Number of Hedge Fund Holders: 96
Analyst Upside as of October 13, 2024: 28%
Merck & Co., Inc. (NYSE:MRK) is one of the most promising long-term stocks according to hedge funds. The pharmaceutical company is engaged in the production of vaccines and the provision of hospital care services.
For the year ended 2023, the company had 52 drugs in rotation serving over 500 million people in the United States. In addition to that, its star cancer drug, first approved in 2014, generated $26.3 billion in sales in 2023 and $7.3 billion during the second quarter of 2024.
What sets Merck & Co., Inc. (NYSE:MRK) apart is its knack for expansion. Recently, it acquired EyeBio, expanding Merck’s position in the ophthalmology industry. In addition to that, its animal health segment closed the acquisition of Elanco’s aqua business, presenting it as a crucial stakeholder in the animal health industry. On October 1, Merck & Co., Inc. (NYSE:MRK) acquired CN201 from Curon Biopharmaceutical (Curon), a novel clinical-stage bispecific antibody for the treatment of B-cell diseases. Through the agreement, Merck now has complete global rights to CN201.
Merck & Co., Inc. (NYSE:MRK) boasts strong fundamentals and is a front-runner in the race to become a leading drug provider. To align with the goal, the company spent over $30.5 billion in research and development in 2023, which is expected to increase with every passing year.
Baron Funds’ Baron Health Care Fund stated the following regarding Merck & Co., Inc. (NYSE:MRK) in its first quarter 2024 investor letter:
“Global pharmaceutical company Merck & Co., Inc. (NYSE:MRK), Inc. contributed on the continued growth of Keytruda, the company’s key asset and the leading immuno-oncology agent used to treat a variety of cancers. The FDA’s late March approval of pulmonary arterial hypertension drug sotatercept, also drove share gains. We retain conviction as Merck has started to transition from prioritizing its Keytruda franchise to building a more diversified business, with a focus on the Gardasil vaccine, pneumococcal vaccine development, and cardiovascular drug development, well in advance of the scheduled expiration of patent protection/exclusivity rights.”
5. Visa Inc. (NYSE:V)
Number of Hedge Fund Holders: 163
Analyst Upside as of October 13, 2024: 14%
Visa Inc. (NYSE:V) is a payment card services provider based in the United States. It facilitates electronic fund transfers to people across the globe. It also offers commercial patent solutions, sells cards, and provides B2B payment options. In the past 12 months, Visa has facilitated 296.8 billion transactions with a total volume of $15.5 trillion.
The company has an immense focus on expansion. In the past quarter, Visa Inc. (NYSE:V) partnered with Yape, a super app in Peru housing over 15 million users, to facilitate money transfers directly through mobile devices. In addition to that, digital wallets with over 50 million users enabled Visa cards for their customers in Vietnam.
Towards the end of September, the company announced the acquisition of Featurespace, an AI payments protection technology developer. The acquisition will position Visa as a crucial stakeholder in fraud detection and risk scoring. Visa Inc. (NYSE:V) also launched a pilot project, its Visa Commercial Solutions Hub, to bring all its commercial payment services under the same roof, disrupting a $145 trillion market.
Analysts are bullish on the stock, which comes as no surprise. The company has a strong network that is prevalent in 200 countries and territories from across the globe. Visa Inc. (NYSE:V) has more than 130 million merchant locations and has over 4.5 billion cards in circulation across the globe.
Aoris International Fund stated the following regarding Visa Inc. (NYSE:V) in its Q2 2024 investor letter:
“Visa Inc. (NYSE:V) operates the world’s largest payments network, which facilitates the movement of money between merchants, financial institutions, consumers, businesses, and governments.
The company is best known for enabling consumers to make debit and credit card payments. In the year to September 2023, 4.3 billion Visa cardholders made 213 billion transactions on its network, to a total value of US$12.1 trillion.
Compared to cash and cheques, which are still widely used around the world, Visa’s network is a more convenient, secure, and ubiquitous way for consumers to pay. Visa has invested to reduce friction and fraud in the payments experience, to the benefit of both merchants and consumers…” (Click here to read the full text)
4. NVIDIA Corporation (NASDAQ:NVDA)
Number of Hedge Fund Holders: 179
Analyst Upside as of October 13, 2024: 11%
NVIDIA Corporation (NASDAQ:NVDA), also referred to as the AI star, is one of the most promising long-term stocks according to hedge funds. The chip maker is also a provider of cloud services and gaming products.
The company is rapidly growing and garnering attention from across the globe to the point that it has the power to influence financial markets. Such can be attributed to its advancements in technology and its strategic partnerships. Recently the company closed a deal with Salesforce and also launched a new AI tool to meet the needs of the next generation of mobiles, robots, autonomous vehicles, and 5G. On October 8, NVIDIA Corporation (NASDAQ:NVDA) partnered with TSMC to push the limits for the next generation of advanced semiconductor chips using Nvidia’s computational lithography platform.
NVIDIA Corporation (NASDAQ:NVDA) is expected to generate $32.5 billion in revenue during the fiscal third quarter of 2024. This revenue is likely to come from its rapidly growing Hopper architecture and its new and improved Blackwell Chips. By the end of this year, the company is also expected to ramp up production for the chips.
There is no denying that NVIDIA Corporation (NASDAQ:NVDA) has a crucial role to play in the artificial intelligence industry, which explains why 179 hedge funds were bullish on the stock at the close of Q2 2024. Analysts’ 12-month median price target of $150 points to a 111% upside from current levels.
Ithaka Group’s Ithaka US Growth Strategy stated the following regarding NVIDIA Corporation (NASDAQ:NVDA) in its Q2 2024 investor letter:
“NVIDIA Corporation (NASDAQ:NVDA) is the market leader in visual computing through the production of high-performance graphics processing units (GPUs). The company targets four large and growing markets: Gaming, Professional Visualization, Data Center, and Automotive. NVIDIA’s products have the potential to lead and disrupt some of the most exciting areas of computing, including: data center acceleration, artifi cial intelligence (AI), machine learning, and autonomous driving. The reason for the stock’s appreciation in the quarter was twofold: First, the stock benefi ted from tremendous excitement surrounding the further development of generative AI and the likelihood this would necessitate the purchase of a large number of Nvidia’s products far into the future; Second, Nvidia posted another strong beat[1]and-raise quarter, where the company upped its F2Q25 revenue guidance above Street estimates, showcasing its dominant position in the buildout of today’s accelerated computing infrastructure.”
3. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 184
Analyst Upside as of October 13, 2024: 10%
Apple Inc. (NASDAQ:AAPL), the popular company behind the iPhone, ranks third on our list of the most promising stocks according to hedge funds. The company offers a range of products including iCloud, Apple Pay, Apple Music, and Apple TV+.
The company is leveraging artificial intelligence to offer unmatched experiences to its customers. During the fiscal third quarter of 2024, Apple Inc. (NASDAQ:AAPL) launched Apple Intelligence, a personal intelligence by Apple backed by AI. The system is integrated into the new iPhone, iPad, and Mac.
Speaking of its biggest avenue for revenue, the iPhone generated revenue worth $39.3 billion during FQ3 2024, making up for nearly 45% of the total revenue. Over the past 10 years, Apple Inc. (NASDAQ:AAPL) has grown its revenue and net income by 8% and 10% respectively.
Last month, the company launched its new iPhone 16, iOS 18 system, AirPods 4, and Apple Watch Series 10 around the world. While Apple has its bets on the new iPhone, one can say that its integrated artificial intelligence systems will play a role in boosting financial performance for Apple Inc. (NASDAQ:AAPL).
Columbia Contrarian Core Fund stated the following regarding Apple Inc. (NASDAQ:AAPL) in its Q2 2024 investor letter:
“Apple Inc. (NASDAQ:AAPL) – Despite the stock falling after announcing earnings in late May, Apple regained ground toward the end of the quarter, fueled by the company’s long-awaited AI announcement at its annual Worldwide Developers Conference (WDC). At the conference, the company showcased some of its new AI features powered by Apple Intelligence that would be coming to Apple products and also announced a partnership with ChatGPT. Investors greatly welcomed the announcement of Apple’s AI strategy and the stock surged, passing Microsoft as the world’s most valuable company (although this hallmark wouldn’t last). Beta testing of these new features will be coming later this summer, but the initial promise and excitement looks to be a potential catalyst for an upgrade cycle, as the company looks to persuade users who have had the same smartphone for years to consider an upgrade.”
2. Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders: 279
Analyst Upside as of October 13, 2024: 19%
Microsoft Corporation (NASDAQ:MSFT) is a well-known technology company behind the commonly used Microsoft Suite. The company also develops cloud products and personal computing products.
Like its peers, Microsoft Corporation (NASDAQ:MSFT) is pouring capital into artificial intelligence. Over the past few months, the company has closed deals with startups and technology companies to run their workloads on Microsoft Azure, its cloud platform. A few days ago, the company made an addition to its list of partnerships by signing an agreement with Rezolve AI, a startup revolutionizing the online retail landscape.
The list does not end here. Microsoft Corporation (NASDAQ:MSFT) along with other crucial stakeholders made a $100 billion deal to improve the functioning of data centers and artificial intelligence. In addition to that, the company has also been making strategic investments in AI and data in other countries.
Microsoft Corporation (NASDAQ:MSFT) is a long-standing company with immensely strong fundamentals. This coupled with its investments in AI and data make it one of the most promising stocks according to hedge funds.
Fred Alger Management’s Alger Spectra Fund stated the following regarding Microsoft Corporation (NASDAQ:MSFT) in its Q2 2024 investor letter:
“Microsoft Corporation (NASDAQ:MSFT) is a beneficiary of corporate America’s transformative digitization. The company operates through three segments: Productivity and Business Processes (Office, LinkedIn, and Dynamics), Intelligent Cloud (Server Products and Cloud Services, Azure, and Enterprise Services), and More Personal Computing (Windows, Devices, Gaming, and Search). During the quarter, shares contributed to performance after the company reported strong fiscal third quarter results, underscoring its leadership position in the cloud and highlighted its role as a primary facilitator and beneficiary of AI adoption. Company revenue growth, operating margin, and earnings growth surpassed consensus expectations. The utility scale Azure cloud business grew 31% in constant currency of which 7% was AI related versus 3% two quarters ago. Further, management noted most of the AI revenue continues to stem from inference rather than training indicating high quality AI applications by Microsoft’s clients. Management also indicated that the significant cost-cutting programs in corporate America are done, suggesting that the cost optimization headwinds previously impacting Azure’s growth are over. Separately, management provided color on their new AI-productivity tool, Copilot, noting that approximately 60% of Fortune 500 companies are already using Copilot, and that the quarter witnessed a 50% increase in Copilot assistance integration within Teams. We continue to believe that Microsoft has the potential to hold a leading position in AI, given its innovative approach and demonstrated high unit volume growth opportunity.”
1. Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Fund Holders: 308
Analyst Upside as of October 13, 2024: 17%
Amazon.com, Inc. (NASDAQ:AMZN) ranks first on our list of the most promising long-term stocks according to hedge funds. The technology company is an e-commerce giant that also provides streaming and data cloud services.
The company launched its e-commerce platform in 1994 and is now close to capturing 40% of the market in the United States. Amazon Web Services (AWS), its proprietary cloud service, reported an 18.8% revenue growth during the second quarter of 2024.
This year, the company achieved significant milestones. Amazon.com, Inc. (NASDAQ:AMZN) has not only been actively involved in the development of AI hardware and software but has also signed partnerships with the government and AI startups. Speaking of innovation, on October 11, the company launched its first autonomous robot, Proteus. The autonomous robot fulfills miscellaneous tasks in the Amazon fulfillment centers independently and safely.
On the artificial intelligence front, AWS is housing the next generation of Llama models from Meta, enabling customers to build and deploy AI applications freely. In addition to that, the company also launched an AI personal assistant in September that helps Amazon sellers meet the unique needs of their customers.
Overall, Amazon.com, Inc. (NASDAQ:AMZN) is poised to become a complete artificial intelligence company as it adapts to autonomous technologies and AI-backed systems, contributing to its ranking on our list.
Diamond Hill Select Strategy stated the following regarding Amazon.com, Inc. (NASDAQ:AMZN) in its Q2 2024 investor letter:
“Among our top individual contributors in Q2 were Amazon.com, Inc. (NASDAQ:AMZN), Texas Instruments and Mr. Cooper Group. Internet retail and cloud infrastructure company Amazon is benefiting from strong profitability, particularly in its Amazon Web Services (AWS) business. Shares also received a boost amid growing optimism around the demand for AWS as Amazon customers’ investments in generative AI projects continue growing.”
Overall, AMZN ranks first among the 10 most promising long-term stocks according to hedge funds. While we acknowledge the potential of cloud and e-commerce companies, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than AMZN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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