In this article, we will be taking a look at the 12 best forever stocks to buy now.
Investment opportunities are increasingly cropping up as volatility in the equity markets edges higher in response to changes in the investment environment. Investors have had to tweak their portfolios as global central banks tweak their monetary policies in response to slowing inflationary pressure.
Uncertainty over the upcoming US election is another headwind that is fueling volatility in the markets. Geopolitical tensions, especially in the Middle East, have also weighed significantly, forcing some investors to resort to defensive investment plays.
READ ALSO: 12 Best Long-Term Stocks to Buy According To Warren Buffett and 10 Best Debt-Free Penny Stocks to Buy Now.
Nevertheless, the array of disappointing economic data led by weakness in the labor market has raised serious doubts about whether the US economy is overheating amid the high interest rates. With the economy creating partly 142,000 jobs and the unemployment rate at 4.25% in August, serious doubts were cast about the resilience of the US economy.
Investors need help understanding the state of the US economy, which had decelerated from the rapid expansion it experienced right after the pandemic when companies rushed to reopen and recruit new employees.
Reducing inflation has provided some relief for families struggling with rising costs. However, the job market has also slowed down, with fewer people being hired, wages increasing at a slower pace, and the duration of unemployment increasing as it becomes harder to secure employment.
A survey carried out by CNBC indicates that the probability of the US economy experiencing a soft landing stands at 53% as the US Federal Reserve starts its interest rate cut cycle. According to Michael Englund of Action Economics, the US economy is growing much faster than expected, even as it stares at economic risks on the horizon.
However, there is also a probability that the economy will plunge into recession at 36%, owing to the negative effects of the high interest rates. According to Diane Swonk, chief economist at KPMG US, Federal Reserve chair Jerome Power’s legacy highly depends on him engineering a soft landing after keeping interest rates high for too long.
Amid the monetary policy uncertainty and economic growth slowdown concerns, the US equity market has remained resilient and supported by solid financial results. The S&P 500 rallying by double percentage points affirms growing investor sentiment.
The artificial intelligence frenzy has been one of the main catalysts driving sentiments in the equity markets. Some stocks with exposure to AI have rallied by more than 50%. On the other hand, the Fed cutting interest rates is expected to provide the much-needed fuel to sustain the upward momentum in the equity markets.
The best forever stocks to buy now are companies with solid revenue and earnings growth with low debt levels poised to generate long-term shareholder value.
Photo by Tech Daily on Unsplash
Our Methodology
The best forever stocks offer stability and growth, making them ideal for long-term investors. We analyzed the iShares MSCI USA Quality Factor ETF, focusing on high-quality US stocks with strong competitive advantages. We ranked the top 10 based on market cap and hedge fund holdings.
At Insider Monkey, we are obsessed with 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).
12 Best Forever Stocks To Buy Now
12. Automatic Data Processing, Inc. (NASDAQ:ADP)
Number of Hedge Funds Holding Stakes as of Q2: 52
Market Cap as of September 18, 2024: $113.94 Billion
Automatic Data Processing, Inc. (NASDAQ:ADP) is a technology company that provides cloud-based human capital management (HCM) solutions worldwide. It offers strategic, cloud-based platforms and outsourcing solutions for human resources (HR).
The company’s competitive edge stems from being a leader in business outsourcing solutions focused on offering a comprehensive suite of human capital management solutions. It has a clientele base of over 1 million spread across 140 countries. Consequently, it generates lots of recurring revenue and cash flow owing to its high % retention rate of 92%.
Automatic Data Processing, Inc. (NASDAQ:ADP) disclosed a 6% rise in revenue for the fourth quarter of the fiscal year 2024, indicating a notable surge in earnings per share (EPS). Looking ahead to fiscal year 2025, ADP expects a revenue growth of 5-6% in the employer services division and a 4-6% rise in the PEO division.
The company’s overall revenue forecast for the same timeframe suggests a 5-6% growth, accompanied by an EBIT margin expansion of 60 to 80 basis points. According to the company’s valuation techniques and projections, these recent developments point to a bright future for ADP.
Last year alone, the company generated $18 billion in revenue with $4.2 billion in free cash flow, up 36% year over year. While it paid $1.9 billion in dividends, it remains with Eve’s cash to fund long-term plans.
Automatic Data Processing, Inc. (NASDAQ:ADP) is one of the best forever stocks to buy now, owing to its credentials in generating passive income. It is billed as an elite dividend company as it has raised its payout for 49 years. Last year, it raised its dividend payout by 12% and currently yields 2.01%.
As of the end of Q2 2024, 52 hedge funds tracked by Insider Monkey reported having stakes in Automatic Data Processing, Inc. (NASDAQ:ADP). The consolidated value of these stakes is more than $3.06 billion.
11. Prologis, Inc. (NYSE:PLD)
Number of Hedge Funds Holding Stakes as of Q2: 56
Market Cap as of September 18, 2024: $119.32 Billion
Prologis, Inc. (NYSE:PLD) is a global leader in the logistics real estate sector. It owns and operates properties in large, supply-constrained infill markets near airports, seaports, and ground transportation facilities. Its properties facilitate the rapid distribution of customers’ products. The solid demand for Prologis’ strategically located facilities is a key driving force for its healthy operating performance.
Even though the industrial real estate market has slowed down, the average number of tenants in Prologis, Inc. (NYSE:PLD)’s owned and operated properties remained at 96.1% during the second quarter. Looking ahead to 2024, the company has kept its earlier range for the average number of tenants, expecting it to fall between 95.75% and 96.75%.
Prologis, Inc. (NYSE:PLD) is strengthening its position in markets with high barriers to entry and strong growth potential through strategic purchases and building projects. Its portfolio of investments spans a broad spectrum, including the biggest mergers and acquisitions in the real estate industry and smaller, off-market transactions under $5 million. For 2024, Prologis plans to make acquisitions worth between $1.0 and $1.5 billion and to begin development projects costing between $2.5 and $3.0 billion.
Additionally, it remains in a solid financial position with a total available liquidity of $6.45 billion as of the end of June. It is one of the best forever stocks to buy now, owing to its regular dividend payments. Over the past five years, Prologis, Inc. (NYSE:PLD) has raised its dividend five times, and its average annual increase in dividends over this period is 14.31%.
With its strong operational base, growth potential, and solid financial standing relative to its peers, it is anticipated that this dividend increase will continue in the short term as occupancy in its properties remains at 96%. As of the end of June, debt as a percentage of total market capitalization was 23.7%, relatively low. As of June 30, Prologis, Inc. (NYSE:PLD) was held by 56 hedge funds.
Carillon Eagle Growth & Income Fund mentioned the following about Prologis, Inc. (NYSE:PLD) in its Q2 2024 investor letter:
“Prologis, Inc. (NYSE:PLD) detracted from performance as the company tempered its guidance outlook for 2024. More specifically, management noted that some clients have chosen to defer investment decisions given the uncertain economic environment. However, the company noted that proposal numbers have not declined, so client activity could reaccelerate in the near term.”
10. Costco Wholesale Corporation (NASDAQ:COST)
Number of Hedge Funds Holding Stakes as of Q2: 71
Market Cap as of September 18, 2024: $397.79 Billion
Costco Wholesale Corporation (NASDAQ:COST) is a consumer defensive investment play that operates a membership warehouse in the US. It sells high volumes of foods and general merchandise at discounted prices through a membership warehouse. Its product line includes sundries, dry groceries, candies, coolers, freezers, deli, liquor, tobacco, appliances, electronics, health and beauty aids, and hardware.
Costco’s competitive edge stems from regularly adjusting to new trends, aiding its ability to draw in customers and investors. It has successfully capitalized on the increasing trend towards purchasing goods online. The store anticipates its extensive range of reasonably priced items will continue to draw in shoppers, whether they buy online or come to its brick-and-mortar locations.
Costco delivered a 7.1% rise in its monthly net sales, hitting $19.83 billion in August, up from $18.51 billion in the previous year’s August. This impressive growth continues a wider pattern, as the firm has consistently upheld strong fundamentals. Revenues in its fiscal fourth quarter increased 1% year over year to $78.2 billion, while full-year sales increased 5% to $249 billion.
E-commerce remained a powerful force behind Costco’s success, experiencing a 16.1% rise in sales comparable to the previous year. This shows Costco’s ability to withstand competition in the retail world and highlights the company’s ongoing attractiveness to shoppers around the globe.
The company remains in a solid financial position with a free cash flow of $7.4 billion while offering a 0.46% dividend yield. By the end of the second quarter, 71 hedge funds had invested in Costco Wholesale Corporation (NASDAQ:COST). Fisher Asset Management was the largest shareholder, holding a position valued at $2.51 billion as of June 30.
ClearBridge Investments’ ClearBridge Sustainability Leaders Strategy mentioned the following about Costco Wholesale Corporation (NASDAQ:COST) in its Q2 2024 investor letter:
“Consumer staples holdings were also standouts in the quarter, such as Costco Wholesale Corporation (NASDAQ:COST), which continues to execute well and delivered better than expected earnings, helped by strong traffic driving better expense leverage. Customers also looked to be shifting toward more discretionary purchases.”
9. ConocoPhillips (NYSE:COP)
Number of Hedge Funds Holding Stakes as of Q2: 72
Market Cap as of September 18, 2024: $125.75 Billion
ConocoPhillips (NYSE:COP) is one of the best forever stocks to buy to diversify an investment portfolio into the energy sector. The company explores for, produces, transports, and markets crude oil, bitumen, natural gas, liquefied natural gas (LNG), and natural gas liquids.
Consequently, ConocoPhillips remains well positioned to receive a significant boost as the interest rate environment improves with the cutting by various global central banks. Lower interest rates should significantly boost consumer purchasing power, resulting in strong demand for oil and gas.
ConocoPhillips (NYSE:COP) is the most valuable US-based independent oil and gas company and is well poised to benefit from a booming economy. The company boasts an impressive track record of acquisitions that generate significant value, including Concho resources.
Given that the company’s strategy is based on a break-even strategy of oil trading at just $35 a barrel, it is well positioned to generate significant revenues with oil stabilizing above $75 a barrel. Additionally, it boasts of a long-lasting financial slate, having kept its balance sheet with low net long-term debt and solid debt in its capital.
ConocoPhillips (NYSE:COP) provides returns to its investors through multiple methods. Its ultimate aim is to allocate at least 30% of its operating cash flow to investors throughout the period. Its ordinary dividend sits at $0.58 per share per quarter or a 2.96% yield on its own.
By the end of June, 72 hedge funds were optimistic about ConocoPhillips (NYSE:COP), up from 62 in the previous quarter, according to Insider Monkey’s database. Eagle Capital Management emerged as the largest stakeholder in the second quarter, holding over 14.52 million shares.
Here is what Invesco Distributors, Inc. said about ConocoPhillips (NYSE:COP) in its Q2 2024 investor letter:
“Stock selection in the industrials and health care sectors detracted from relative performance during the quarter. Selection and an underweight in consumer staples also hurt relative return as the sector was one of just two index sectors with a positive return for the quarter. ConocoPhillips (NYSE:COP): The company announced its acquisition of Marathon Oil in May. The deal is expected to increase earnings and will increase the scale of Conoco’s production assets. However, the stock traded lower on the news.”
8. Eli Lilly and Company (NYSE:LLY)
Number of Hedge Funds Holding Stakes as of Q2: 100
Market Cap as of September 18, 2024: $861.24 Billion
Eli Lilly and Company (NYSE:LLY) is a healthcare powerhouse and one of the best forever stocks to buy now for exposure to the development of game-changing pharmaceuticals. The company is best known for its diabetes and weight loss drugs that sell billions of dollars.
The company’s edge as one of the best healthcare stocks stems from the fact that new drugs are hitting the market, investments in production are yielding returns, and more clinical studies suggest the potential for increased earnings ahead.
Likewise, Eli Lilly and Company (NYSE:LLY)’s drugs Zepbound and Mounjaro have received approval for treating obesity and type 2 diabetes, respectively, and are expected to strengthen the current revenue base. Both treatments contain the same active component, known as tirzepatide. In the second quarter, Zepbound generated $1.2 billion in revenue, and Mounjaro nearly $3.1 billion, positioning them as top-selling drugs. Analysts expect the drugs to increase sales by $50 billion by 2029.
The company’s continuous research and development efforts to explore new uses for tripeptide suggest a strong likelihood of securing more approvals from health authorities. This could significantly broaden the market potential and lead to further revenue growth, thus allowing the company to generate more shareholder value.
While trading at a premium with a price-to-earnings multiple of 40, it is highly expected of a company of Eli Lilly and Company (NYSE:LLY) caliber with tremendous opportunities for growth backed by a robust pipeline of drugs. Additionally, the company’s ability to generate free cash flow has rewarded investors with a 0.56% dividend yield.
In Q2 2024, 100 hedge funds held stakes in Eli Lilly and Company (NYSE:LLY), with a total investment of $16 billion. Fisher Asset Management was the largest stakeholder, owning nearly 5 million shares.
Here is what Baron Funds, an investment management company, said about Eli Lilly and Company (NYSE:LLY) in its second-quarter 2024 investor letter. “Shares of global pharmaceutical company Eli Lilly and Company (NYSE:LLY) increased on continued investor enthusiasm around GLP-1 drugs for diabetes and obesity. We remain shareholders. Lilly’s Mounjaro/Zepbound not only offers superb blood sugar control for diabetics but can drive 20%-plus weight loss and likely improve cardiovascular outcomes in both diabetic and non-diabetic obese patients. Lilly is developing next generation drugs, including retatrutide, which drives approximately 25% weight loss, and orforglipron, a daily pill that produces approximately 15% weight loss. In the U.S. alone, there are 32 million Type 2 diabetics and an additional 105 million obese patients who we estimate would qualify for GLP-1 drugs. Although supply and access are limited near term, we think GLP-1 drugs will become standard of care for both diabetes and obesity and will become a $150 billion-plus category. We see Lilly setting a high efficacy bar and capturing significant long-term market share. We think the adoption of GLP-1s will drive Lilly to triple total revenue by 2030.”
7. UnitedHealth Group Incorporated (NYSE:UNH)
Number of Hedge Funds Holding Stakes as of Q2: 114
Market Cap as of September 18, 2024: $533.70 Billion
UnitedHealth Group Incorporated (NYSE:UNH) is a diversified healthcare company that offers consumer-oriented health benefit plans and services. It also provides care delivery, care management, wellness and consumer engagement, and health financial services to patients. It also offers pharmacy care services and programs.
With the stock trading near all-time highs, UnitedHealth Group Incorporated (NYSE:UNH) is a leading player in the healthcare sector owing to its diversified insurance and care delivery services portfolio. The company has consistently delivered solid financial results even when the broader market faces headwinds. It also benefits from continued innovation in expanding its footprint in the healthcare sector.
In the recent quarter, revenues totaled $98.9 billion, marking a 6% rise compared to the same period last year. A significant portion of this growth was attributed to the company’s extensive Optus healthcare services division, which accounts for most of its income. The company’s revenue growth remains strong, with a 10.59% increase over the last twelve months.
UnitedHealth Group Incorporated (NYSE:UNH) reported net income of over $6.3 billion, or $6.80 per share. This figure surpassed the $5.8 billion earnings from the same quarter the previous year. While the stock trades at a P/E ratio of 37.78, it reflects a premium valuation compared to the industry average, suggesting high investor expectations for future earnings growth.
By the end of Q2 2024, 114 investors were optimistic about the stock, with total stakes amounting to $12.54 billion. As of June 30, Fisher Asset Management held the largest position, valued at $1.57 billion.
Invesco Distributors, Inc. commented on UnitedHealth Group Incorporated (NYSE:UNH) in its Q2 2024 investor letter. Here is what it said:
“UnitedHealth Group Incorporated (NYSE:UNH): Like many managed care providers, United Health has come under pressure from rising medical costs and higher-than-expected utilization. The stock is currently undervalued based on our analysis. We view the company as a high-quality compounder with secular growth opportunities in the managed care segment. The US Presidential election may cause additional near-term uncertainty, but we believe United Health will be able to rebound once pricing and utilization issues normalize.”
6. Visa Inc. (NYSE:V)
Number of Hedge Funds Holding Stakes as of Q2: 163
Market Cap as of September 18, 2024: $576.44 Billion
Visa Inc. (NYSE:V) is a financial services company offering a transaction processing network for clearing and settling payment transactions. The company also offers credit, debit, and prepaid card products and digital wallets.
It is one of the best forever stocks to buy now as it is well positioned to benefit as the US Federal Reserve cuts interest rates. The reduction is expected to bolster consumer purchasing power and should result in increased speeding on Visa cards, allowing the company to generate more revenues on transaction fees.
Given that Visa Inc. (NYSE:V) is a leading figure in an expanding sector, it is well-positioned to benefit from increased payment processing as people shift from using cash. With proven technology, a reputable and recognized brand, and the capacity to keep investing in technology and expanding its market presence, it would be challenging for a newcomer to replace Visa.
In the last ten years, Visa Inc. (NYSE:V) has grown its revenue by 10% on a yearly basis, which led to an impressive 15% yearly growth in earnings over that period. These numbers are truly remarkable. Additionally, Visa has consistently rewarded its shareholders with dividend hikes. The company has maintained this practice for 16 years, with an average annual increase of 18% over the last 10 years. This rate of dividend hikes is extraordinary for such a long duration.
The company remains in a solid financial position, with $18.9 billion in free cash flow as of the end of June. This explains its ability to continue rewarding investors with a 0.72% dividend yield while trading at a great discount with a price-to-earnings multiple of 26.
In the second quarter, 163 hedge funds held stakes in Visa Inc. (NYSE:V), totaling $24.9 billion. As of June 30, TCI Fund Management was the largest shareholder, with stakes worth $4.41 billion.
Wedgewood Partners stated the following regarding Visa Inc. (NYSE:V) in its Q2 2024 investor letter:
“Visa Inc. (NYSE:V) detracted from performance despite healthy corporate results. The company grew earnings per share +12% as payment volume growth was up +8% and cross-border payment grew +16%, adjusted for currency. There are over 4.4 billion Visa debit and credit cards in circulation generating over $15 trillion in volume over the past 12 months. There is another estimated $10 trillion in cash and check volume, globally, which we think Visa can continue to move over to its electronic payment rails. In addition, the company has spent the past several years extending its payment capabilities into new flows of commerce, particularly for business-to-business transactions. This is another, extremely large (+$200 trillion) long-term growth opportunity for Visa that we believe investors are ignoring.”
5. Alphabet Inc (NASDAQ:GOOG)
Number of Hedge Funds Holding Stakes as of Q2: 165
Market Cap as of September 18, 2024: $1.97 Trillion
Alphabet Inc. (NASDAQ:GOOG) is a tech giant that operates through Google Services, Google Cloud, and Other Bets segments. It provides products and services, including ads, Android, Chrome, Search, and YouTube.
Alphabet is one of the best forever stocks to buy now as its cloud business is in a phase of robust growth, given that the cloud market is nascent. The enhancement of cloud solutions with AI is increasingly strengthening their competitive edge. Cloud revenues in the second quarter rose to $10.3 billion from $8 billion a year ago.
The company dominates the search world and has been integrating artificial intelligence features to enhance user experience. Likewise, the search business remains the company’s core, generating billions of dollars in advertising revenues.
During the second quarter, total revenues were up 14% to $84.74 billion as YouTube earned $8.7 billion from advertising alone, marking a 13% increase compared to the same period last year. Meanwhile, Google Cloud experienced a significant rise in earnings, growing by 29% to surpass $10 billion in the same timeframe, illustrating the company’s rapid expansion.
Alphabet Inc. (NASDAQ:GOOG) holds more cash than debt on its balance sheet, which may provide a degree of financial stability. In the second quarter, it generated $23.6 billion in net income and $18.37 million as of last year’s same quarter.
Backed by a solid balance sheet with significant free cash flow, Alphabet has already started returning value to shareholders through dividend payments. The company has already confirmed a $0.20 dividend with a yield of 0.50%. Alphabet Inc. (NASDAQ:GOOG) looks incredibly cheap while trading at a price-to-earnings multiple of 18.
A total of 165 hedge funds were long Alphabet Inc. (NASDAQ:GOOG) in the second quarter.
Baron Fifth Avenue Growth Fund stated the following regarding Alphabet Inc. (NASDAQ:GOOG) in its Q2 2024 investor letter:
“We also added to Alphabet Inc. (NASDAQ:GOOG). The company reported solid financial results with first quarter revenue growth of 15% year-over-year, driven by 14% growth in search, 21% growth in YouTube, and 28% growth in cloud (which accelerated from 26% growth in the fourth quarter). The company has also increased its cost discipline efforts, which drove operating margins to 31.6% (compared to 25% in the first quarter of 2023). With regards to GenAI, while we are cognizant of the potential risks to the dominance of search, we believe that on the range of outcomes, Alphabet remains well positioned through its massive user distribution (9 products with over 1 billion users each), long-standing AI research labs (DeepMind and Google Brain), top AI talent, a solid cloud computing division in Google Cloud, and deep pockets for investing in AI. During the quarter, Alphabet also held its annual I/O conference, where it provided an update on its efforts in AI including: Gemini is now used by 1.5 million developers; model quality is expanding rapidly (e.g., context window is now 2 million tokens of length); the new genomics model, Alphafold 3 can predict structures of molecules and potentially accelerate drug discovery; new TPU6 AI chips has shown a 4.7 times improvement in compute performance compared to the prior generation; and Gemini for workspace is showing early data on a 30% increase in user productivity. Alphabet also has real value in assets such as Waymo, which are not factored into valuation today (and are potentially included at a negative valuation as they currently generate losses, hurting EPS). We continue to believe that the current valuation of Alphabet presents an attractive risk/reward for long-term owners of the business and have therefore increased our position.”
4. NVIDIA Corp (NASDAQ:NVDA)
Number of Hedge Funds Holding Stakes as of Q2: 179
Market Cap as of September 18, 2024: $2.84 Trillion
NVIDIA Corporation (NASDAQ:NVDA) is the best forever stock to buy now for anyone eyeing exposure in the burgeoning artificial intelligence space. The company provides graphics computing and networking solutions. Nevertheless, the strong demand for its graphics processing units (GPU) for gaming and AI models has propelled it into a trillion-dollar company.
NVIDIA Corporation (NASDAQ:NVDA) has emerged as one of the best-performing stocks, rallying by over 2,000% over the past five years. Despite the blockbuster gains, the company is still in the early years of growth given that the AI race is just but starting.
The fact that the semiconductor powerhouse remains the go-to company for chips to power artificial intelligence models and data centers affirms the tremendous opportunities for growth. To date, the need for its graphics processing units (GPUs) and various semiconductors has been overwhelming as cloud computing firms and other tech giants increase their investments in artificial intelligence (AI), aiming to maintain a lead in the market demand.
NVIDIA Corporation (NASDAQ:NVDA)’s clientele base for GPUs and other semiconductors includes some of the biggest tech giants, including Alphabet and Amazon Meta Platforms, among others. The solid clientele list has been the catalyst behind the company’s record-breaking financial results.
The company remains in a solid financial position, exiting the second quarter with a net income of $16.5 billion, up from $6.2 billion as of last year. Consequently, it had announced plans to return $50 billion through buybacks, affirming why it is one of the best forever stocks to buy now. Additionally, it rewards investors with a 0.03% dividend yield.
Buying Nvidia’s stock at a forward P/E of approximately 41 and a PEG ratio slightly over 0.7 remains a good deal for a firm experiencing triple-digit revenue increases. In total, 179 hedge funds were long NVIDIA Corporation (NASDAQ:NVDA) in the second quarter.
Ithaka Group’s Ithaka US Growth Strategy mentioned the following about 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, artificial intelligence (AI), machine learning, and autonomous driving. The reason for the stock’s appreciation in the quarter was twofold: First, the stock benefited 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 Funds Holding Stakes as of Q2: 184
Market Cap as of September 18, 2024: $3.30 Trillion
Apple Inc. (NASDAQ:AAPL) is the go-to company for any investor eyeing exposure to developing and selling high-profile devices at the heart of the digital revolution. One of the reasons it remains one of the best forever stocks to buy now has to do with the iPhone product line. While the iPhone business has come under pressure in recent years, it has found a new lease of growth with the integration of AI in the iPhone 16, which is expected to fuel demand and drive sales.
While the focus has always been on the hardware business, Apple Inc. (NASDAQ:AAPL) long-term prospects remain intact as the services business is increasingly becoming an important part of underlying growth. The segment grew by 11% in the first quarter of the year, up from 3% growth last year.
With more than 2.2 billion active Apple Inc. (NASDAQ:AAPL) devices in circulation, Apple is well positioned to generate significant revenues by selling various services through App Store sales, advertising revenue, AppleCare+, subscription services like Apple TV+, and more.
The company remains in a solid financial position, having exited the first quarter with $39.895 billion in operating cash flow and a free cash flow of about $37.5 billion. With a market cap of over $3 trillion, a debt portfolio of $101 billion is insignificant for a company that generates a free cash flow of upwards of $30 billion. Likewise, the company returns value to shareholders with a dividend yield of 0.46% while offering buybacks.
By June 2024 end, 184 out of the 912 hedge funds profiled by Insider Monkey were the firm’s investors. Warren Buffett’s Berkshire Hathaway is the largest shareholder of Apple Inc. (NASDAQ:AAPL), with a stake valued at $84.25 billion, making it the biggest holding in Berkshire’s portfolio.
Here is what Mar Vista Focus strategy said about Apple Inc. (NASDAQ:AAPL) in its Q2 2024 investor letter:
“Investors were reminded of the strength of Apple Inc. (NASDAQ:AAPL) ecosystem as management demonstrated how generative AI solutions would be integrated into Apple’s 1.2 billion iPhone installed base. Apple plans to integrate generative AI features into its iOS 18, which will be broadly released in the fall with the iPhone 16. We believe Apple should benefit from generative AI as it will spur a meaningful iPhone upgrade cycle and create new avenues of monetization through its app store and advertising offerings. We believe this will support intrinsic value growth that will range between high-single-digits and low-double-digits over our investment horizon.”
2. Meta Platforms Inc (NASDAQ:META)
Number of Hedge Funds Holding Stakes as of Q2: 219
Market Cap as of September 18, 2024: $1.36 Trillion
Meta Platforms, Inc. (NASDAQ:META) is a communication services company that develops products to connect people and share among friends and family. It is best known for its flagship Facebook app, Instagram and WhatsApp. It also offers augmented and virtual reality products.
It is one of the best forever stocks to buy now as it controls 18% of the global digital advertising market. The company generates billions of dollars in advertising revenues through its flagship apps, Facebook and Instagram. Over the past five years, its revenue has increased at a compound annual growth rate of 18.3%, allowing it to generate significant shareholder value.
Meta Platforms, Inc. (NASDAQ:META)’s online advertising market supremacy resulted in its second-quarter revenues soaring by 22% year-on-year to $39.1 billion. Its total assets reached $230.2 billion, while its total liabilities stood at $73.5 billion.
Furthermore, Meta concluded the second quarter with a surplus of cash. Its cash, cash equivalents, and marketable securities amounted to $58.1 billion. Its second-quarter free cash flow (FCF) was $10.9 billion, which more than covered the $1.3 billion in dividends paid out, leaving ample funds for Meta to allocate towards its operations, reduce its debt, and buy back its own shares.
Meta Platforms, Inc. (NASDAQ:META) is completely dedicated to advancing its artificial intelligence (AI) initiatives as it looks to safeguard its future. It is investing significant resources to expand its network framework and processing capabilities, with a budget ranging from $37 billion to $40 billion for this fiscal year. Moreover, the substantial investments are expected to continue for an extended period.
While trading at a discount at a price-to-earnings multiple of 22, Meta Platforms stock yields 0.38% in dividends for income-focused investors.
In the second quarter, Meta Platforms, Inc. (NASDAQ:META) appeared in the portfolios of 219 hedge funds, with total stakes valued at $42.5 billion.
Rowan Street Capital mentioned Meta Platforms, Inc. (NASDAQ:META) in its second-quarter 2024 investor letter:
“We are pleased to report that Meta Platforms, Inc. (NASDAQ:META), our largest position in the fund, has delivered a remarkable performance, +450% since our November 2022 note. Our investment in Meta dates back to 2018, with an average cost basis of approximately $172 per share. Today, the stock trades around $535, reflecting a 3x return over the six-year holding period, equating to a 20% annualized return.
We would like to remind you that achieving these types of returns is never a straight path. From time to time, we might experience volatility — that’s simply part of the investment journey. In fact, wealth creation and volatility go hand in hand. There’s no escaping it; it’s the “price of admission” the market demands. If you take a look at the chart below, you’ll notice the drawdowns META stock has faced over the years, with 2022 standing out as a particularly challenging period, where the stock saw a 75% drop…” (Click here to read the full text).
1. Microsoft Corp (NASDAQ:MSFT)
Number of Hedge Funds Holding Stakes as of Q2: 279
Market Cap as of September 18, 2024: $3.24 Trillion
Microsoft Corp. (NASDAQ:MSFT) is a tech powerhouse best known for providing some of the most sought-after software, including Windows and Office, among others. It’s also a big player in cloud computing, with Microsoft Azure, while flexing its muscles in the multi-billion gaming business through the Xbox product line.
The company has also poured billions into OpenAI, the creator of ChatGPT, and has integrated AI into numerous of its products. Its AI investments have once again strengthened its productivity tools, including Azure Office and Xbox gaming, but it has also strengthened its growth metrics.
Microsoft Corp. (NASDAQ:MSFT) is one of the best forever stocks to buy now as it regularly achieves strong financial results, and its most recent quarter was no exception. Its income from sales and operating earnings both rose by 15% compared to the previous year, showing remarkable performance for a company of its stature. Its earnings per share (EPS) reached $2.95, surpassing analysts’ predictions. This figure is also more than twice as high as it was five years prior.
One of the catalysts behind Microsoft’s robust growth is its cloud unit, Azure, which has received a significant boost amid AI integrations. With a 31% market share, it remains well-positioned data to generate significant value amid strong demand for cloud solutions.
Additionally, Microsoft Corp. (NASDAQ:MSFT) has consistently returned value to investors through dividends. The stock currently yields 0.7% with a quarterly dividend of about $0.75 per share, one of the biggest among the tech giants.
The company’s P/E ratio stands at 32, indicating a high valuation, consistent with its status as a leading technology firm. The company also remains in a solid financial position, with $23.32 billion in total free cash flow as of the end of June.
279 hedge funds hold long positions in Microsoft Corp. (NASDAQ:MSFT) in the second quarter of 2024, down from 293 in the previous quarter. Bill & Melinda Gates Foundation Trust is the highest shareholder, with a stake worth $15.59 billion.
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.”
The best forever stocks to buy now are companies with solid underlying potential well poised to generate long-term value on share price gains, share buybacks, and dividend offerings. However, given that the artificial intelligence arms race is just but starting, there are under-the-radar AI stocks trading at highly discounted valuations that hold greater promise for anyone looking to diversify their portfolio. If you are looking for an AI stock that is more promising than MSFT, check out our report about the cheapest AI stock.
READ NEXT: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.
Disclosure: None. Insider Monkey focuses on uncovering the best investment ideas of hedge funds and insiders. Please subscribe to our free daily e-newsletter to get the latest investment ideas from hedge funds’ investor letters by entering your email address below.
