In this article, we will discuss: 12 Best Growth Stocks To Buy According To Hedge Funds.
Analysts and investors are becoming more interested in the market’s performance as the third half of 2024 draws near. The 500 largest-cap US equities ended the second quarter of this year with a gain of over 3%, on average, after growing by an average of 24% the year before. Overall, the frenzied AI boom and the surprisingly strong U.S. economy have driven equities to previously unheard-of heights.
A series of strong economic statistics from the United States has allayed fears that the Federal Reserve may quickly slash interest rates to prevent a slowdown. Weekly unemployment claims declined more than expected, indicating a stable labor market, while the latest measurement of GDP indicated that the economy expanded by 3% in the second quarter of 2024. The Labor Department reported that initial claims for state unemployment benefits fell by 4,000 last week to a seasonally adjusted 218,000 for the week ending September 21, the lowest amount since mid-May. Reuters polled economists, who predicted 225,000 claims. Two weeks before, unadjusted claims dropped from 5,957 to 180,878.
Robust profit expansion ought to provide support for both the labor market and investment. The resiliency of the economy may make it more difficult for the Federal Reserve to implement the additional 50 basis point interest rate decrease that some investors are expecting in November.
Christopher Rupkey, chief economist at FWDBONDS stated:
“The economy remains strong and the need for additional large rate cuts are questionable if the economy continues to move forward at a brisk pace.”
However, the recent volatility in August and September 2024 may have soured your outlook on the stock market; a closer look reveals a more positive picture, with the U.S. large-cap stocks on track to gain almost 20% for the year. Will this pattern hold up through 2025 and beyond, though?
Many experts’ forecasts are a little bit more modest. Charles Schwab, for instance, estimates that, on average, U.S. large-cap stocks will yield 6.2% compounding returns for 2024-2033, U.S. small firm stocks will yield 6.3%, and international large-caps will yield 7.6%. By contrast, Schwab projects a 3.6% yearly return on cash equivalents and a 5.7% annual return on US investment-grade bonds.
Other long-term estimates published by Morningstar show that U.S. equities will return 4-7% on average over the next 10-15 years, with stronger expectations for international markets. In most cases, these predictions still show that US stocks outperform US corporate bonds.
Numerous factors, including inflation, interest rates, economic policy, and the resolution of ongoing geopolitical crises, will determine how things turn out. However, historical evidence indicates that, despite occasional difficulties, the stock market typically yields favorable returns in the long run. The average annual return for the 500 largest-cap companies has been more than 10%. This offers investors confidence to invest in the stock market rather than more conservative options such as bonds or fixed-income securities.
As per Jordan Gilberti, CFP and senior lead planner at Facet:
“Investing can be a good way to grow wealth over the long term and offers the potential for higher returns compared to a typical checking or savings account.”
With that said, here are the 12 Best Growth Stocks To Buy According To Hedge Funds.
A businessman holding up a chart displaying business growth for a middle market company.
Methodology:
We sifted through holdings of large-cap growth Core S&P US Growth ETF to form an initial list of 20 highest-weighted stocks over 1% in the ETF. Then we selected the 12 stocks that were the most popular among institutional investors. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q2 2024.
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)
12. Tesla, Inc. (NASDAQ:TSLA)
Number of Hedge Fund Investors: 85
Tesla, Inc. (NASDAQ:TSLA) is a globally recognized battery-electric vehicle manufacturer that integrates vertically and creates software for autonomous driving. The company transformed from a start-up to a well-known luxury carmaker with its Model S and Model X automobiles in less than ten years. The Model 3 and Model Y vehicles are part of the company’s lineup that competes in the entry-level luxury automobile and midsize crossover SUV segments. The fleet of the company consists of a variety of cars, including light trucks, semi-trucks, crossover SUVs, and luxury and medium sedans. In addition, it intends to start selling sports cars and more reasonably priced cars. A little over 1.8 million cars were delivered worldwide in 2023.
Along with solar panels and solar roofs for energy generation, the company also provides batteries for stationary storage on residential and commercial premises, including utilities. Tesla also has a fast charging network.
Tesla’s EV, AV, battery, and solar generation technologies have the potential to revolutionize the automobile and power generation industries.
Baron Partners Fund stated the following regarding Tesla, Inc. (NASDAQ:TSLA) in its Q2 2024 investor letter:
“Tesla, Inc. (NASDAQ:TSLA) manufactures electric vehicles, related software and components, and solar and energy storage products. The stock contributed as Tesla continued to drive vehicle manufacturing costs lower, accelerate the launch of new models, and invest heavily in its lucrative AI initiatives. Shareholders reaffirmed the CEO’s compensation plan, alleviating personnel and legal uncertainties. Despite material operational complexities resulting in significant shutdowns of key manufacturing facilities and lower sales volume, Tesla presented better-than-expected margins in the quarter. It expects to launch a lower cost model as soon as late 2024, which should result in accelerated revenue growth, reduced manufacturing costs, and increased factory utilization. The company continued to advance its autonomous driving capabilities, expanding its already significant data centers and developing its humanoid robot Optimus. These investments increased confidence in the attractive growth opportunities that remain ahead.”
Edison Yu keeps his Buy rating on Tesla, anticipating sales in Q3 2024 to reach or surpass 460,000 units due to robust growth in China despite difficulties in the U.S. and Europe. They are still upbeat about steady profit margins and future inventions like the “CyberCab” at Tesla’s Robotaxi Day event.
Alexander Potter, an analyst with Piper Sandler, increased the company’s price objective for Tesla shares from $300 to $310 and maintained an Overweight rating. After analyzing intra-quarter sales data, the company raised its expectations for Tesla’s delivery in Q3 and fiscal 2024. For Q3 of 2024, Piper now projects 459,000 deliveries, and for fiscal 2024, 1.75M units. The analyst tells investors in a research note that Q3 looks set to be Tesla’s greatest quarter ever and that despite dismal sales in Europe, Cybertruck deliveries are boosting demand in the United States. Higher estimates are given by the company for the target bump.
Ken Griffin’s Citadel Investment Group is the largest stakeholder in the company from among the funds in Insider Monkey’s database. It owns 41.70 million shares worth $8.25 billion as of Q2.
11. Eli Lilly and Company (NYSE:LLY)
Number of Hedge Fund Investors: 100
The pharmaceutical company Eli Lilly & Company (NYSE:LLY) focuses on immunology, neuroscience, cancer, and cardiometabolism. Some of Lilly’s most significant products are Verzenio for cancer, Mounjaro, Zepbound, Jardiance, Trulicity, Humalog, and Humulin for cardiometabolic conditions, and Taltz and Olumiant for immunology.
One of the leading producers of insulin and one of the ““Best GLP-1 and Weight Loss Stocks to Buy Now” LLY is a part of the pharmaceutical manufacturing industry. LLY’s stock has increased by more than 48% year-to-date (YTD) as a result of the popularity and high demand for its FDA-approved weight loss and diabetes drugs, tiripepatide (Zepbound and Mounjaro).
Baron Health Care Fund stated the following regarding Eli Lilly and Company (NYSE:LLY) in its first quarter 2024 investor letter:
“Eli Lilly and Company (NYSE:LLY) is a global pharmaceutical company that discovers, develops, manufactures, and sells medicines in the categories of diabetes, oncology, neuroscience, and immunology, among other areas. Stock performance was strong due to robust fourth quarter sales of Mounjaro/ Zepbound, better-than-anticipated initial guidance for fiscal year 2024, and ongoing enthusiasm surrounding the company’s obesity and diabetes franchises. We continue to think Lilly is well positioned to grow revenue and earnings at attractive rates through the end of the decade and beyond.”
The company’s financial performance has been excellent overall. The FDA-approved medications for obesity have seen significant growth in sales over time, which has led to a significant increase in annual revenue.
However, the company is currently facing a serious supply shortage as a result of its inability to construct enough facilities to produce enough dosages to meet the rapidly increasing demand. Kisunla, an Alzheimer’s drug, faces significant obstacles to success due to patient diagnosis backlogs, necessary scans and monitoring, and competitive pricing. Nonetheless, Lilly’s strong leadership in weight-loss drugs is expected to deliver industry-leading growth, with authorized drugs and well-positioned next-generation weight-loss drugs under development.
Morningstar analysts raised their estimate of Eli Lilly’s fair value from $540 to $580 in Q2 2024 due to strong performance from Mounjaro and Zepbound. They did, however, issue a warning, pointing out that the stock appears expensive given the possible obstacles and market confidence.
The innovative culture and unwavering financial commitment of Eli Lilly & Company (NYSE:LLY) to developing the next generation of drugs set the company apart from its rivals and promoted long-term growth. Due to the release of several blockbusters and a decline in patent losses, Lilly can expand at the rapid pace in the market.
Among hedge funds tracked by Insider Monkey, Ken Fisher’s Fisher Asset Management is the largest stakeholder in the company, with 4,888,710 shares worth $4.43 billion.
10. Netflix, Inc. (NASDAQ:NFLX)
Number of Hedge Fund Investors: 103
Netflix, Inc. (NASDAQ:NFLX) business model is relatively straightforward, with only one business: its streaming service. At more than 275 million customers worldwide, it boasts the largest television entertainment subscriber base in both the US and the entire foreign market. Except for China, nearly every country on the entire globe can access it. The company has never offered live programming or sports content; instead, it has concentrated on providing on-demand access to documentaries, movies, and episodic television.
Recently, it started offering ad-supported membership options, which exposes it to the advertising industry in addition to subscription fees, which have historically generated almost all of its revenue. In the most recent quarter, 45% of new signups chose the ad-supported version.
Netflix, Inc. (NASDAQ:NFLX) added 17.4 million net new users in the first half of 2024 alone, bringing its total number of subscribers to 277.7 million across 190 countries. Hence, the stock has grown 50% YTD.
Several popular series that Netflix has produced are only available on its platform and have drawn a sizable viewership. The streaming provider’s cash generation edge over competitors raises the likelihood that this virtuous cycle will continue, with the company creating more content to attract and retain users.
RiverPark Large Growth Fund stated the following regarding Netflix, Inc. (NASDAQ:NFLX) in its first quarter 2024 investor letter:
“Netflix, Inc. (NASDAQ:NFLX): NFLX was a top contributor in 1Q24 following strong fourth quarter earnings and 2024 guidance driven by better-than-expected subscriber adds (+13.1 million versus estimates of +8.9 million). The company’s subscriber growth continued to accelerate following the company’s crack down on password sharing and the rollout of the lower cost, advertising supported subscriber offering known as the Ad Tier. ARPU came in below expectations, but recently announced price increases in the US, UK and France showed signs of moving ARPU higher. NFLX guided 2024 operating margins to 24%, ahead of prior guidance of 22-23%, and guided to 2024 free cash flow of $6 billion.
The recent re-acceleration of subscriber growth, plus price increases on premium memberships and a stabilization of content investments, should position the company for low double digit annual revenue growth over the next few years while driving improved operating margin to more than 25%. We also believe that the stabilization of content spend should allow the company to continue to scale its FCF.”
As the top streaming TV service in the world, Netflix today reaps the financial rewards of having a dominant market share.
Among the funds tracked by us, Ken Fisher’s Fisher Asset Management is the largest shareholder in the company, with 4,357,952 shares worth $2.941 billion.
9. Broadcom Inc. (NASDAQ:AVGO)
Number of Hedge Fund Investors: 130
The sixth-largest semiconductor firm in the world, Broadcom Inc. (NASDAQ:AVGO) has grown into several software companies, generating over $42 billion in revenue overall. It has 17 core semiconductor product lines that serve the wireless, networking, internet, storage, and industrial industries. Even though fabless design is its main focus, it also engages in some internal production, such as creating the best-of-breed FBAR filters for the iPhone. It supplies governments, banks, and large enterprises with virtualization software, infrastructure, and security.
Its operations consist of the consolidation of former businesses, including the chip divisions of Broadcom and Avago Technologies as well as software firms Symantec, CA Technologies, and Brocade.
The US-based IT business is the result of the merger of multiple prosperous, high-end software and chip startups. Broadcom is a great platform for merging small and large businesses. Its acquisition and streamlining abilities generate strong profitability and cash flow, which help sustain its hefty dividend. Notable are the company’s execution and operational efficiency, which enable it to beat its end markets organically and fund its significant organic investment.
Parnassus Value Equity Fund stated the following regarding Broadcom Inc. (NASDAQ:AVGO) in its Q2 2024 investor letter:
“During the second quarter, the Fund’s overweight position in the Information Technology sector decreased slightly as we sold our position in Cisco Systems and used most of the proceeds to buy Broadcom Inc. (NASDAQ:AVGO), a leading semiconductor company and provider of custom silicon products. Both stocks provide similar exposure to networking technology, but we believe Broadcom offers more upside from AI infrastructure spend and defensiveness due to its software assets.
Broadcom, a leader in semiconductor and infrastructure software, offers promising AI upside via data center ethernet and custom ASICs and can benefit if the iPhone’s new AI features gain traction this year. Additionally, the strength of its enterprise software assets in VMware, Symantec and CA Technologies could provide defensiveness if enterprise IT spending continues to be muted.”
Susquehanna’s Christopher Rolland updated his buy rating on AVGO to $200 and noted the company’s progress in artificial intelligence and VMware optimization. The revenue forecast for Broadcom’s networking division for FY24 has been updated, and it is expected to expand strongly, with AI contributing more than 40% YoY. The analyst also sees the move in VMware customers’ usage toward subscriptions as a good development.
Rajiv Jain’s GQG Partners is the largest shareholder in the company from amongst the hedge funds tracked by Insider Monkey, with 32,349,800 shares worth $5.193 billion.
8. Mastercard Incorporated (NYSE:MA)
Number of Hedge Fund Investors: 142
In 2023, Mastercard Incorporated (NYSE:MA), the second-largest credit card payment network globally, processed close to $9 trillion in volume. More than 200 countries and 150 currencies are supported by Mastercard for payment processing.
The company provides a range of payment choices, including credit, debit, and prepaid cards, in addition to payment gateway services.
Several qualities of Mastercard should interest investors. Firstly, Morningstar analysts believe a wide moat surrounds the company and see Mastercard’s position in the existing global electronic payment infrastructure as practically impenetrable, despite the development in the payment market. Second, Mastercard gains from the continued transition to electronic payments, which should present many chances to take advantage of its broad moat and generate value in the long run. Just a few years ago, digital payments overtook cash payments globally, indicating that there is still plenty of space for expansion in this trend. Analysts believe emerging markets could provide a further spurt of growth even as growth in developed markets begins to decline. Lastly, Mastercard functions somewhat like a tollbooth and is mostly unaffected by smaller changes in the electronic payment landscape because it still collects fees whenever credit, debit, or mobile payments are made.
In Q2 2024, the giant credit card payment network reported solid financial results, increasing its earnings to $3.3 billion on a YoY basis by 17%. Excluding one-time costs, earnings per share came in at $3.59, surpassing $3.51 in market expectations. Apart from surpassing market expectations, revenue rose 13% YoY to $6.96 billion. The remarkable outcomes were aided by expansion into important overseas markets such as Europe and Latin America in addition to a strong client base in the United States.
In Q2 2024, Mastercard Incorporated (NYSE:MA) disclosed that the quantity and value of transactions executed on its credit card network increased by 11% YoY. Cross-border payment volume growth of 17% and solid consumer spending were credited for the positive result.
Logan Purk, technology analyst for Edward Jones, stated, “Mastercard’s results, while not perfect, should give reassurance that the spending environment remains solid,”
L1 Capital International Fund stated the following regarding Mastercard Incorporated (NYSE:MA) in its Q2 2024 investor letter:
“The share prices of Mastercard Incorporated (NYSE:MA) and Visa, both long term Fund investments, have both drifted down over recent months. There have been no dramatic developments, but there has been a general slight softening in the rate of growth of consumer spending in the U.S. and globally, a court decision rejecting Mastercard and Visa’s proposed settlement of a long-lasting dispute with U.S. merchants as well as other modest adverse regulatory developments. We continue to view Mastercard and Visa as two of the highest quality businesses in the world, and both are well placed to continue to deliver attractive, risk adjusted returns to shareholders over time.”
Out of the hedge funds we tracked at the end of Q2, Charles Akre’s Akre Capital Management is the largest shareholder in the company, with 4,039,349 shares worth $1.78 billion.
7. Visa Inc. (NYSE:V)
Number of Hedge Fund Investors: 163
Visa is the world’s largest payment processor. It handled about $15 trillion in total volume in the fiscal year 2023. The company Visa is present in over 200 different countries and accepts payments in more than 160 currencies. Over 65,000 transactions can be processed by its systems in a second.
Operating in a duopoly, Visa Inc. (NYSE:V), being the Best Credit Card Stocks to Buy Now, maintains a cost advantage over its competitors due to the strength of its payment network, which makes it extremely hard to replicate.
In fact, the company has ties to more than 15,000 financial institutions across the globe and has issued more than 3.8 billion Visa cards that are recognized at more than 100 million retail establishments. As a result, the business is extremely profitable.
As the industry leader for a considerable amount of time, Visa continues to have promising development potential. Analysts believe that Visa’s place in the worldwide electronic payment infrastructure is practically unbreakable, notwithstanding the constant evolution of the payments industry.
Visa outperformed Wall Street estimates in the second quarter of 2024 despite concerns about the economy because of strong consumer spending on dining out and tourism. The company’s shares rose by 2.7% following its earnings. Visa’s payment volume increased by 8% YoY, excluding transactions made within Europe. This suggests that there is a high demand for travel abroad, especially from the US and Europe. However, the comeback in travel in the Asia-Pacific area was not as rapid as expected. The growth of e-commerce helped offset the weakening of the regions.
The biggest payment processor had adjusted EPS of $2.51, exceeding estimates of $2.44, and its net revenue of $8.8 billion exceeded forecasts of $8.62 billion in Q2 2024. Despite industry concerns, analysts see Visa’s reaffirmation of its 2024 revenue and profit expectations as positive.
Dan Dolev, senior analyst at Mizuho, stated:
“There were a lot of investors who thought that they would have to cut the guidance, and the fact that they did not, is a positive for Visa,”
Aristotle Atlantic Focus Growth Strategy stated the following regarding Visa Inc. (NYSE:V) in its Q2 2024 investor letter:
“Visa Inc. (NYSE:V) detracted from portfolio performance in the second quarter despite a solid earnings report early in the quarter that highlighted continued growth in payment volumes and value-added services. However, shares declined late in the quarter due to a court denying a proposed settlement that would have ended interchange fee-related litigation between Visa, Mastercard and merchant plaintiffs. As a result, uncertainty surrounding the possible outcomes of the litigation has created an overhang for Visa’s shares, even though interchange fees are charged by card-issuing financial institutions, not networks like Visa and Mastercard.”
Analysts believe that the company’s recent $30 billion settlement with Mastercard to limit card charges won’t have a significant effect on its financial performance.
Among the hedge funds we tracked, Chris Hohn’s TCI Fund Management is the largest shareholder in the company, with 16,797,187 shares worth $4.408 billion.
6. NVIDIA Corporation (NASDAQ:NVDA)
Number of Hedge Fund Holders: 179
Nvidia is one of the top producers of graphics processing units. GPUs have historically been utilized to improve user experiences on computing platforms, particularly in PC gaming applications. Since then, GPU application cases have grown in importance as crucial chips for artificial intelligence. In addition to AI GPUs, Nvidia also provides the Cuda software platform, which is used to create and train AI models. Additionally, Nvidia is growing the range of networking options for data centers, which enables GPUs to be connected for complicated tasks.
The company’s dominant position in the market for graphics processing units, or GPUs, and the hardware and software tools required to support the rapidly expanding artificial intelligence business gives it a competitive advantage. Eventually, analysts predict that the largest tech companies will work to identify alternatives to NVDA or internal resources to broaden their AI offerings. However, these initiatives will probably erode rather than completely replace Nvidia’s leadership in this field, as it is the leading AI chip vendor.
The US tech company has announced NIM Agent Blueprints, an AI workflow catalog that enterprise developers can utilize to create and operate generative AI systems.
Nvidia showed that it is still running at full capacity when it released second-quarter 2025 profits and third-quarter guidance that is above FactSet consensus projections. Morningstar analysts are upbeat about Nvidia due to the endless need for graphics processing units, or GPUs, and related products used in data centers to enable artificial intelligence. The company’s beat on earnings, nevertheless, was not as impressive as it had been in prior quarters, which is why the shares fell after hours.
Philip Woo of Phillip Securities reiterated a Buy rating on NVIDIA Corporation (NASDAQ:NVDA) with a $155 target, citing strong Q2 2025 performance and continuous strong demand from significant areas like Hyperscalers, Enterprises, and Sovereign countries. His optimism is supported by Nvidia’s dominance in AI GPUs and its bright future for 2025 and 2026.
Columbia Contrarian Core Fund stated the following regarding NVIDIA Corporation (NASDAQ:NVDA) in its Q2 2024 investor letter:
“NVIDIA Corporation (NASDAQ:NVDA) – Following the release of first-quarter earnings in May featuring record revenue growth of 262% year over year, NVIDIA continued its upward march. On June 10, shares of the company began trading on a split-adjusted basis following a 10-for-1 forward stock split, making stock ownership more accessible to employees and investors alike. Just one week later, the company officially surpassed Microsoft in market cap to become the most valuable publicly traded company (although it would relinquish the title not long after). While other companies have also stood to benefit from the artificial intelligence (AI) trend this year, NVIDIA stands out as the unquestionable leader in the space and that is unlikely to be challenged for many years ahead. NVIDIA continues to see extremely strong levels of demand and the recent introduction of the Blackwell system looks to be an exciting next phase of growth for the stock.”
Among Insider-Monkey-tracked hedge funds, Ken Griffin’s Citadel Investment Group is the largest shareholder in the company, with 148,546,600 shares worth $18.35 billion as of Q2.
5. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 184
By concentrating on a high-end, intricately linked ecosystem of goods, services, and software, Apple Inc. (NASDAQ:AAPL) has strengthened its long-term dominance in the consumer electronics sector. This ecosystem revolves around Apple’s flagship iPhone, which generates 46% of the company’s net sales. Giving it pricing power, switching costs, and network effect as a result. Retaining consumers inside this walled garden maximizes the benefits of all other Apple services and products. This approach gives the company room to flourish and sets it apart.
In fiscal Q3 2024, the California-based tech giant unveiled Apple Intelligence, an AI-powered personal system for its new iPhones, potentially igniting a supercycle of iPhone upgrades. The company’s $85.8 billion in revenue represented a 5% YoY improvement as iPhone sales hit $39.3 billion YoY and Mac revenue climbed 2% to $7 billion YoY. AAPL’s strong financial track record, which includes increases in net income and revenue over the previous ten years, supports the company’s economic moat.
A higher estimate of iPhone revenue led Morningstar analysts to raise their estimate of the company’s fair value from $170 to $185. Analysts anticipate significant growth in the iPhone market in 2025 and 2026, spurred by advancements in Apple’s artificial intelligence capabilities. They still think the company’s stock is pricey, though, given the current valuation takes into account an unsustainable 20% increase in iPhone revenue in fiscal 2025 due to challenges in China and sluggish upgrade cycles.
Baron Funds said the following about Apple Inc. (NASDAQ:AAPL) in its second-quarter 2024 investor letter:
“This quarter we re-initiated a position in Apple Inc. (NASDAQ:AAPL), a leading technology company known for its innovative consumer electronics products like the iPhone, MacBook, iPad, and Apple Watch. Apple is a leader across its categories and geographies, with a growing installed base that now exceeds 2 billion devices globally. The company’s attached services – including the App Store, iCloud, Apple TV+, Apple Music, and Apple Pay – provide a higher margin, recurring revenue stream that both enhances the value proposition for its hardware products and improves the financial profile. Apple now has well over 1 billion subscribers paying for these services, more than double the number it had just 4 years ago. The increasing services mix has led to healthy operating margin improvement, providing more free cash flow for Apple to reinvest in the business and to distribute to shareholders. Throughout its 48-year history, Apple has successfully navigated and capitalized on major technological shifts, from PCs to mobile to cloud computing. We believe the company’s leading brand and device ecosystem position it to do equally well in the AI age, and this was the driver of our decision to re-invest. “Apple Intelligence” – the AI strategy unveiled at Apple’s recent Worldwide Developer Conference – leverages on[1]device AI and integrations with tools like ChatGPT to enhance user experiences across its ecosystem. The AI suite enables users to create new images, summarize and generate text, and use Siri to perform actions across their mobile applications, all while maintaining user privacy and security. We think Apple Intelligence can drive accelerated product upgrade cycles and higher demand for Apple services. The combination of growth re-acceleration, increasing services contribution, and thoughtful capital allocation should continue driving long-term shareholder value.”
4. Alphabet Inc. (NASDAQ:GOOGL)
Number of Hedge Fund Holders: 216
Successful companies have come together to form Alphabet Inc. (NASDAQ:GOOGL). Featuring products spanning from advertising to cloud computing and self-driving cars, the company has evolved into a true technical behemoth, generating tens of billions of dollars in free cash flow annually. Investors remain optimistic about the firm’s overall strength and anticipate the US-based tech giant to maintain its leadership position in several areas, including search, artificial intelligence, cloud computing, and video, despite antitrust concerns surrounding its significant search business.
Tensor Processing Units (TPUs) and Google Cloud act as facilitators, while the Gemini project boosts intelligence, according to UBS research, which positions Alphabet Inc. as a significant player in AI. The company will therefore be well-positioned to benefit from the projected $1.2 trillion AI market by 2027.
GOOGL introduced the Google Renewable Energy Addendum to encourage suppliers to acquire all of their energy from renewable sources by 2029. This is in line with Google’s 2030 goal of net-zero emissions and a 50% reduction in emissions from Scope 1, 2, and 3 over 2019 levels.
In Q2 2024, Alphabet Inc. (NASDAQ:GOOGL) posted outstanding results, with revenue up 15% and diluted EPS jumping 31% YoY. Google Cloud Platform (GCP) continued to dominate the cloud industry with YoY growth of about 29%.
Patient Capital Opportunity Equity Strategy stated the following regarding Alphabet Inc. (NASDAQ:GOOGL) in its Q2 2024 investor letter:
“Alphabet Inc. (NASDAQ:GOOGL) was a top contributor in the second quarter, finally catching up to its peers in the Magnificent 7. The company gained 20.8% in the period following strong first quarter earnings, a new $70B repurchase program (3% of shares outstanding) and the initiation of a cash dividend ($0.20 per share; 0.42% yield). We continue to believe the market underappreciates Google’s exposure to AI with its Gemini model being integrated into search results, YouTube advertising and its cloud offering. We continue to think that the cloud players will be the AI winners in the long-term, with Google being well positioned to take advantage. While the company trades at 24x 2024 earnings, if you remove the money-losing and under-earning businesses, you realize that you are paying below a market multiple for the core Google business. We do not believe there are many other AI winners trading at such an attractive multiple.”
Out of around 900 hedge funds we tracked, Davide Erro’s Turiya Advisors is the largest shareholder in the firm, with 603,000 shares worth $109.84 million.
3. Meta Platforms, Inc. (NASDAQ:META)
Number of Hedge Fund Holders: 219
Meta Platforms, Inc. (NASDAQ:META)’s Facebook boasts over 3 billion monthly active members, making it the largest social network in the world. The platforms of American IT giants are attractive to advertisers because of their expanding user base and engagement, as well as the valuable data they generate. These precious assets should help the company’s top-line growth and cash flow, and Morningstar analysts anticipate that advertisers will keep spending more cash online.
META is heavily investing in the metaverse, virtual reality, and augmented reality space through its Reality Labs division. However, the company has faced criticism for making big payments to these new consumer channels.
BofA Securities maintains the company’s $550 price target, even though the company plans to cut Reality Labs’ hardware spending by 20% by 2026. Despite the continued high level of customer interest in AR glasses, the possible budget reduction is seen as a calculated response to the declining demand for VR products.
In Q2 2024, Meta Platforms Inc. (NASDAQ:META) reported a $13.5 billion profit, which exceeded expectations and increased the company’s stock price by more than 7%. Revenue for the most recent quarter was $39 billion, a 22% increase over the previous year and above market expectations. The California-based tech giant’s third-quarter revenue is predicted to reach between $38.5 billion and $41 billion.
Alger Focus Equity Fund stated the following regarding Meta Platforms, Inc. (NASDAQ:META) in its Q1 2024 investor letter:
“Meta Platforms, Inc. (NASDAQ:META) operates the world’s largest social network, with over 3 billion monthly active users across its platform. The company generates revenue predominantly from advertising. which accounts for over 95% of its total revenue, evenly split between North America and international markets. During the quarter, shares contributed to performance following the release of strong fiscal fourth quarter operating results, with revenues and earnings surpassing analyst estimates. The better-than- expected revenues were attributed to strong advertiser demand and Al-driven ad improvements. Moreover, the company materially raised its fiscal first quarter sales and earnings guidance above analysts’ estimates, buoyed by continued strong advertiser demand trends and enhancements to Reels. Advantage+. Click-to-message, and Shop Ads. Further, management noted that ongoing investment in Al is enhancing user engagement and advertiser returns through improved targeting and measurement. Separately, Meta authorized a new share repurchase plan representing approximately 5% of its market capitalization and announced the initiation of its first dividend, implying an approximate 0.4% yield.”
Among the hedge funds we tracked, Ken Griffin’s Citadel Investment Group is the largest shareholder in the company, with 12,428,700 shares worth $6.27 billion.
2. Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders: 279
Microsoft Corporation (NASDAQ:MSFT) creates and grants licenses for both commercial and consumer software. It is renowned for the Office productivity suite and Windows operating systems. The company is divided into three equally sized broad segments: intelligence cloud (which includes infrastructure and platform-as-a-service offerings like Azure, Windows Server OS, SQL Server), productivity and business processes (which includes legacy Microsoft Office, cloud-based Office 365, Exchange, SharePoint, Skype, LinkedIn, Dynamics), and more personal computing (which includes Windows Client, Xbox, Bing search, display advertising, and Surface laptops, tablets, and desktops).
The giant American tech company is one of two public cloud providers capable of delivering a broad range of PaaS/IaaS solutions at scale. The firm has become a leader in AI as well, mainly because of its investment in OpenAI. Notably, the American tech company has had remarkable success upselling customers on higher-priced Office 365 subscriptions that come with advanced phone functionality. These elements work together to create a more concentrated business that produces remarkable revenue growth, high and rising margins, and strengthens relationships with clients.
The company has revised its revenue estimate for the current quarter to between $63.8B and $64.8B from the $65.07B estimate. Azure revenue for MSFT is anticipated to grow by 28% and 29% annually.
Analysts believe that the company’s growth in a number of sectors during the most recent quarter can be attributed to the integration of Copilot AI. Dynamics software sales have climbed by 19% YoY, while office commercial sales have increased by 10% YoY to $48 billion. Because of its AI features, Bing Search saw a 3% YoY gain in users who were previously using Google Search.
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.”
Among the hedge funds tracked by us, Michael Larson’s Bill & Melinda Gates Foundation Trust was the largest shareholder in the company, with 34,889,597 shares worth $15.60 billion.
1. Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Fund Holders: 308
Amazon.com, Inc. (NASDAQ:AMZN) is the most prominent online retailer and marketplace for independent contractors. Around 75% of the total revenue comes from retail, with the remaining 15% coming from cloud computing, storage, databases, and other services provided by Amazon Web Services, and the remaining 5% to 10% coming from advertising services. Between 25% and 30% of Amazon’s non-AWS sales come from international markets, with Germany, the UK, and Japan leading the way.
Particularly in e-commerce and cloud services, Amazon is the market leader in the areas it serves. Due to its size and scope, it has become the undisputed leader in e-commerce and has a number of competitive advantages that provide customers with an unrivaled assortment of affordable products. The company is growing its market share despite its size, continuing the secular trend toward e-commerce. Customers who make more frequent purchases from Amazon’s properties provide a consistent flow of high-margin recurring revenue through Prime, which connects Amazon’s e-commerce endeavors. Customers receive unique video content, one-day shipping on millions of items, and other benefits in exchange, creating a powerful positive feedback loop that draws buyers and sellers together. The ecosystem is further strengthened by the Kindle and other devices, which help draw in new users and entice current ones to stick around.
Alger Spectra Fund stated the following regarding Amazon.com, Inc. (NASDAQ:AMZN) in its Q2 2024 investor letter:
“Amazon.com, Inc. (NASDAQ:AMZN) is a renowned online retailer and leader in cloud computing. The company’s Amazon Web Services (AWS) division offers utility-scale cloud solutions that support corporate America’s digital transition. During the quarter, Amazon’s shares contributed to performance as the company reported strong fiscal first-quarter results, with revenues and operating income beating analyst estimates. Notably, AWS revenue growth accelerated, driven by easing cloud cost optimizations, renewed workload migrations, and an increasing contribution from AI workloads. On their earnings call, management highlighted plans to increase capital expenditures to enhance their technology infrastructure, catering to the surging demand for AI-driven computing.”
It is also the “Large Cap Stock Jim Cramer Can’t Stop Talking About.” He says:
“We recently bought more Amazon shares because I believe the market was too harsh on their last quarter. Amazon is a buy, and I think it will continue to perform well.”
Evercore ISI lifted its price target for the firm from $225 to $240 and maintained an Outperform rating for the company’s shares, which are still regarded as the analyst’s “Number 1 Large Cap Long” on the Internet due to the growth of Prime Video content and more ad revenue. Amazon’s ad growth in 2025 might be bolstered by $3 billion to $5.9 billion in additional revenue from APV.
Among the hedge funds tracked by Insider Monkey, Ken Fisher’s Fisher Asset Management was the largest shareholder in the company, with 43,780,397 shares worth $8.46 billion.
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