This article will discuss the 12 best large-cap stocks to buy now.
Is the Next Bull Cycle Picking Up?
Analysts’ anticipation about the Fed initiating three rate cuts of 25 basis points each, starting in September, has become a hot topic in the current market. While some economic indicators show resilience, recent market fluctuations have raised concerns about deeper rate cuts being overestimated. Yet, a recession appears unlikely, and the steady economic growth suggests a cautious but positive outlook for the markets.
But the question is: why is a recession even being talked about? We discussed this earlier in another one of our articles, 12 Best Small Cap Tech Stocks to Buy, here’s an excerpt from it:
“Inflation in the US may have reached a 3-year low of 2.6% in August, the lowest rate since March 2021, according to a survey of economists by FactSet. Core inflation, excluding food and energy prices, is believed to have remained at 3.2%.
Inflation peaked at a 4-decade high of 9.1% in June 2022 as the economy rebounded rapidly from the pandemic recession. The Fed responded with 11 rate hikes in 2022 and 2023, raising its key rate to a 23-year high and significantly increasing borrowing costs across the economy. The easing of inflation may pave the way for the Fed to start cutting interest rates next week.”
Binky Chadha, Deutsche Bank’s chief global strategist, joined CNBC last week to discuss what’s next for stocks, given the US elections — particularly the typical pullback seen in the month leading up to closely contested races, where markets often decline by 4% to 5%.
Chadha thinks that this trend, driven by uncertainty, prompts investors to seek protection against volatility, leading to a dip in stock prices. This decline usually hits its lowest point on election day, followed by a substantial rally if the election outcome is clear and resolves uncertainty. Historical instances, such as the Bush/Gore election, show that unresolved outcomes can exacerbate volatility, as seen with further market declines during that period.
Understanding market trends about elections is crucial, as delays can significantly impact investor confidence and overall market behavior. The current market is led by a significant rally in the S&P 500, reaching record highs despite challenges like high interest rates and geopolitical tensions. While election years typically see market weakness, the incumbency of both major party nominees may reduce uncertainty this cycle. However, potential volatility remains as the election approaches and corporate earnings are closely examined against high expectations, according to Chadha.
Chadha further talked about the Bush/Gore election and when a Supreme Court resolution seemed imminent, the market rallied. However, this was followed by a continued market decline. While relying on a single instance for broader conclusions is not ideal, this case reflects general market behavior. It’s important to recognize the prevailing positive trend, despite experiencing two pullbacks.
Chadha said that while the S&P 500 has shown unusual recovery dynamics, peaking with 26% year-on-year sales growth, this growth has slowed unsustainably over the past 2 years. As sales growth decelerates, concerns about potential downturns rise, leading to increased inquiries about negative sales growth in the S&P 500.
While Chadha acknowledges that S&P 500 sales growth has returned to pre-pandemic levels, implying stability, there’s also a decline in the labor market, particularly in private payrolls over the past 7 months. Such a mixed sentiment should be given into and used as a buying opportunity. With that, we’re bringing you a list of the 12 best large-cap stocks to buy now.
Methodology
For this article, we have defined large cap stocks as those trading between $20 billion and $200 billion. We sorted our screen by market cap and looked through the top 25 stocks that matched our criteria. We then selected 12 stocks that were the most popular among elite hedge funds and that analysts were bullish on. 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 Best Large Cap Stocks To Buy Now
12. S&P Global Inc. (NYSE:SPGI)
Market Capitalization as of September 13: $162.82 billion
Number of Hedge Fund Holders: 90
S&P Global Inc. (NYSE:SPGI) is a leading provider of independent credit ratings, market intelligence, and risk analytics services, offering a range of products and services that help investors, businesses, and governments make informed decisions. Its primary areas of business are financial information and analytics.
The company reported strong earnings in Q2 2024, with a revenue of $3.55 billion, up 14.45% year-over-year. Vitality’s newly enhanced products accounted for 11% of the total revenue, up 10% from the previous quarter. Transaction revenue grew 60%. Subscription products revenue rose by 8% year-over-year. The earnings per share were $4.04, recording a 30% increase.
The company raised its guidance on various fronts for the full year 2024. The cash flow outlook for the year is particularly well-received by investors. S&P Global Inc. (NYSE:SPGI) intends to uphold its commitment to shareholders, expecting to return approximately 85% of its adjusted free cash flow to them in 2024 through dividends and share repurchases.
As of June 30, 90 hedge funds hold a total of 10,400,077 shares in the company. The largest position amounts to $4.6 billion by TCI Fund Management.
The June update of S&P Capital IQ Pro introduced new benchmarks and commodity insights while accelerating GenAI features. The company completed the acquisition of Visible Alpha in Q2 and plans to divest Fincentric by Q3 2024.
It reported over $1 trillion in billed issuance this quarter, marking a year-over-year revenue increase of over 70% from its private market rating services. The company achieved nearly $200 million in annualized run rate revenue synergies and is on track to reach its target of $350 million in revenue synergies by 2026.
The company continues to enhance its internal tools, including adding new features to the S&P Spark Assist platform launched earlier this year. ~14,000 of its employees are utilizing Spark Assist internally.
S&P Global Inc. (NYSE:SPGI) is well-positioned for sustained growth and success in the financial information and analytics sector. As it continues adapting to market demands, it remains a compelling choice for investors seeking long-term value.
Artisan Global Discovery Fund stated the following regarding S&P Global Inc. (NYSE:SPGI) in its Q1 2024 investor letter:
“We ended our investment campaigns in BJ’s Wholesale Club, Moncler and S&P Global Inc. (NYSE:SPGI) during the quarter. We assumed shares of S&P Global when it merged with IHS Markit. S&P Global is one of the largest credit rating agencies globally and a provider of benchmarks, data and analytics for the global capital and commodities markets. The company has gone through a free cash flow expansion period due to cost-cutting exercises driven by the merger. However, we believe that opportunity is maturing. Furthermore, recent earnings results displayed disappointing forward guidance, including lower rating revenue growth. Given the slowdown in the profit cycle, we decided to exit our position.”
11. Alibaba Group Holding Ltd. (NYSE:BABA)
Market Capitalization as of September 13: $183.89 billion
Number of Hedge Fund Holders: 91
Alibaba Group Holding Ltd. (NYSE:BABA) is one of the world’s largest e-commerce companies specializing in retail, Internet, technology, and AI, operating a variety of online marketplaces, including Taobao, Tmall, and AliExpress. It also provides cloud computing services through Alibaba Cloud, and controls 46% of China’s internet retail space. It has about 150 million users across 190 countries.
In FQ1 2025, its e-commerce business generated $4.7 billion in revenues, up 4% from the prior fiscal year. Global e-commerce ventures, like Lazada and Aliexpress, experienced a 32% increase in sales compared to the previous year in the international online shopping sector. Quarterly revenues from its cloud division reached $3.7 billion, marking a 6% increase. Moreover, revenue from AI-related products experienced a year-over-year growth of over 100%.
The company delivered solid fiscal first quarter results for 2025. The revenue was $33.94 billion, up 4.59% year-over-year. The earnings per share were $2.29. Wall Street analysts expect the company’s earnings to grow at a CAGR of 1.7% over the next 5 years.
Alibaba Group Holding Ltd. (NYSE:BABA) is strategically positioning itself for significant growth in the competitive e-commerce landscape through its innovative AliExpress Choice service. This premium offering enhances the shopping experience by connecting customers directly with factories, resulting in lower prices and improved product selection.
Despite external challenges, analysts remain optimistic. 91 hedge funds are long in the company, with the largest stake valued at $756 million by Appaloosa Management LP. It has seen a positive shift in sentiment following the announcement of its plans to increase service fees for merchants. The company intends to implement a basic software service fee of 0.6% on confirmed transactions for vendors on its Tmall and Taobao platforms.
With a rapidly expanding market that’s projected to reach $18.81 trillion by 2029, the company is well-equipped to grow thanks to its long-term durable competitive advantage and strong brand.
O’keefe Stevens Advisory stated the following regarding Alibaba Group Holding Limited (NYSE:BABA) in its Q2 2024 investor letter:
“We initiated two new positions during the quarter: Alibaba Group Holding Limited (NYSE:BABA) and Perrigo (PRGO). Both have seen their stocks decline over 70%+ from their all-time highs.
Alibaba is the largest e-commerce player in China, with 40% gross merchandise volume (GMV) market share through its Taobao and T-mall businesses. While the cloud computing business is relatively small, its 37% market share in China positions it well to capitalize on the increasing demand for AI-related products. In the most recent quarter, AI-related cloud revenue recorded triple-digit growth y/y, with the expectation that total cloud revenue will accelerate to double-digit growth in 2H 2025.
It’s rare to find a dominant market share business with significant tailwinds trading for ~10x adj. EPS. After accounting for their ~$60B net cash balance sheet, the stock is trading at 6-7x, which, we believe, is far too cheap. We understand this business would not trade at this price if it were a U.S. business. However, the valuation gap at a high single-digit P/E is pricing in a combination of the following risks – 1. China invading Taiwan. 2. Cash can never leave mainland China (disproven). 3. Increasing competition from Pinduoduo and Shien resulting in market share loss 4. China’s geopolitical tensions worsen. 5. Economic slowdown stemming from the recent housing market downturn. 6. VIE structure creates doubt over the actual ownership of the business. All risks have merit, with cash distribution restrictions at the lower end due to the recently announced dividend and special dividend. Cash returned to shareholders totaled $16.5B in FY24, up from $13.4B in FY23…” (Click here to read the full text)
10. Walt Disney Co. (NYSE:DIS)
Market Capitalization as of September 13: $164.30 billion
Number of Hedge Fund Holders: 92
Walt Disney Co. (NYSE:DIS) is a mass media and entertainment conglomerate known for its iconic characters, stories, and experiences. It produces movies, television shows, theme parks, and consumer products and also owns Disney+, a popular streaming service that offers a vast library of Disney content.
In July, NBA signed an 11-year media agreement with Walt Disney Co. (NYSE:DIS), granting the company exclusive rights to stream all NBA and WNBA live events and programming on its upcoming ESPN consumer platform, set to launch in 2025. The company’s commitment to producing high-quality content is evident from its 183 Emmy nominations for shows like Shotgun and The Bear.
Its cruise ships remain popular and provide family-themed voyages. In August, Disney Cruise Line announced an order for 5 new ships, which are expected to be delivered between 2027 and 2031, on top of 4 other vessels already scheduled to debut. Over the next 7 years, these 8 ships are projected to be over 2x the company’s existing fleet of 5 ships.
In the FQ3 2024, revenue was $24.5 billion, recording an improvement of 7% year-over-year. The company is poised for significant growth with its strategic $5 billion investment in film and television production across the UK and Europe over the next 5 years.
With recent successes at the box office and a profitable streaming segment, Disney is well-positioned to capitalize on its market leadership. 92 hedge funds stakes in the company, with the highest stake at $787.8 million by Fisher Asset Management.
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.”
9. GE Vernova Inc. (NYSE:GEV)
Market Capitalization as of September 13: $62.33 billion
Number of Hedge Fund Holders: 92
GE Vernova Inc. (NYSE:GEV) is an energy equipment manufacturing and services company that helps customers meet their energy needs and specializes in renewable energy technologies, power generation, and grid solutions.
The company has a legacy of over 130 years in the manufacturing of electrical equipment, natural gas turbines, wind turbines, hydropower turbines, and high-voltage electrical transmission products. It plays a significant role in the green energy sector, with its technology being utilized in ~55,000 wind turbines and ~7,000 gas turbines across ~100 countries, collectively generating ~25% of the world’s electricity.
In Q2 2024, GE Vernova Inc. (NYSE:GEV) generated a revenue of $8.20 billion, which was less than Street estimates by $55.00 million. Revenue grew 2% with continued strength in electrification and power, partially offset by Wind. Services revenue increased 9% with growth across all segments.
The company is set to capitalize on the growing energy demand from the electrification of transportation and AI-driven electricity demand. The IEA forecasts a 4% rise in global electricity demand for 2024 and 2025, up from 2.5% in 2023.
All this growth potential positions the company for success, and makes it one of the top large-cap stocks that investors should consider. As of the second quarter, 92 hedge funds hold long positions in the company.
The company is expanding its portfolio of onshore and offshore wind projects (in the clean energy sector). It’s not limited to wind energy and participates in the broader transition towards lower carbon energy solutions. Its innovative application of AI for efficient power management and autonomous inspections further strengthens its competitive advantage in the market.
Carillon Eagle Mid Cap Growth Fund stated the following regarding GE Vernova Inc. (NYSE:GEV) in its Q2 2024 investor letter:
“GE Vernova Inc. (NYSE:GEV) is a global electric power company that was recently spun out of a much larger industrial conglomerate. The company’s shares performed well in their first quarter as a standalone company, primarily as a result of the increasing outlook for power demand growth, both domestically and abroad. We believe GE Vernova is well positioned to capitalize on this growing trend across its various products and services, but most notably within its large-scale gas turbine equipment and related services, as well as in its high-voltage electrical transmission products.”
8. Vertiv Holdings Co. (NYSE:VRT)
Market Capitalization as of September 13: $32.51 billion
Number of Hedge Fund Holders: 92
Vertiv Holdings Co. (NYSE:VRT) is a global provider of critical infrastructure and services for data centers, communication networks, and commercial and industrial environments. It offers a range of products and services, including power distribution units, cooling systems, and software solutions, enabling businesses to operate efficiently and effectively.
The company generated a revenue of $1.95 billion, in the second quarter this year, up 12.61% year-over-year. The growth was led by the Americas, with a strong contribution from EMEA as well. The earnings per share were $0.67.
The company is experiencing significant growth in AI deployment as it serves as a crucial link between IT and facilities within data centers. It is just beginning to tap into the potential of its unique position in the industry. By using a wide range of important digital infrastructure solutions across different power technologies, and backed by a global team of ~3,750 service engineers, it is well-equipped to help customers manage the growing complexities of today’s environment.
While enterprise markets are stable and telecom remains subdued, commercial and industrial sectors are thriving due to significant spending. The outlook is positive, especially for data centers, which account for 75% of its market exposure.
Vertiv Holdings Co. (NYSE:VRT) is well-positioned for growth as it strengthens its market leadership through increased R&D and capacity expansions. It’s gaining market share with new products and improved operations, making it an attractive investment opportunity for the future. As of now, 92 hedge funds are long in the company, with the highest stake valued at $782.8 million by Coatue Management.
Baron Small Cap Fund stated the following regarding Vertiv Holdings Co (NYSE:VRT) in its Q2 2024 investor letter:
“Vertiv Holdings Co (NYSE:VRT) a leading provider of critical digital infrastructure for data centers, contributed during the quarter. As an industry leader in data center cooling and power management, Vertiv is poised to benefit from AI-driven growth in data center spend. The NVIDIA partner network, strong industry relationships, and broad product portfolio that Vertiv maintains enables its participation in the creation of the technology roadmap for the future of the data center. In addition, Vertiv is investing in its capacity to serve this growing end market more effectively. The company also has an extensive global service network to aid customers as they grow. We believe the company has durable competitive advantages and a flexible balance sheet to benefit from the expected significant capital investment in data centers for years to come. Vertiv reported very strong results for the March quarter, with orders up 60%, which highlighted the strong demand it is seeing for its products. We sold some of our position into strength after the runup from the positive report, but still hold a major position in the Fund as we see considerable upside in the shares over time.”
7. Vistra Corp. (NYSE:VST)
Market Capitalization as of September 13: $29.28 billion
Number of Hedge Fund Holders: 92
Vistra Corp. (NYSE:VST) is a Fortune 500 integrated retail electricity and power generation company that owns and operates diverse power plants, including coal, natural gas, nuclear, and renewable energy sources. It also provides energy delivery services, including transmission and distribution to deliver reliable and affordable energy to its customers while reducing environmental impact.
Earlier this year, it finalized the acquisition of Energy Harbor, enhancing its presence in the nuclear energy sector. With nuclear assets, the company can take advantage of the increasing demand for electricity driven by AI, as major hyperscalers enter into contracts with nuclear energy providers for low-cost alternative fuels.
It also commenced the construction of 2 new solar projects: a 200 MW facility backed by Amazon in Texas and a 405 MW site supported by Microsoft in Illinois. Now it’s planning to develop up to 2,000 MW of gas-fired electric generation capacity in Texas, pending the successful implementation of key market reforms, appropriate market signals, and other conditions.
These strategic investments in renewable and gas-fired generation, coupled with Vistra’s robust earnings, demonstrate the company’s commitment to providing reliable, affordable, and sustainable power to its clients while driving growth and shareholder value.
92 hedge funds hold long positions in the company, with a total stake value of $4.03 billion. The highest stake is held by Lone Pine Capital. Investors are becoming more interested in this company because of the way it plans to benefit from the growing popularity of GenAI since rising AI use is directly related to rising energy needs.
Legacy Ridge Capital stated the following regarding Vistra Corp. (NYSE:VST) in its Q2 2024 investor letter:
“One of the sectors we know well which had been out of favor for several years has quickly come into favor: Independent Power Producers (IPPs). We’ve written consistently about NRG and Vistra Corp. (NYSE:VST) since the 2019 letter, have owned each, or both, since 2018, and invested a meaningful amount of our assets in VST specifically the past few years. Nate and I intend on spending more time in the year-end letter on our updated views on the IPPs and our learnings from the on-going investment, but we were a bit surprised how quickly the narrative around these companies changed. Our Blue Sky 2030 estimates of intrinsic value converged with the share price 6-years before we thought probable. In the 2019 letter, with respect to VST, we wrote:
“Over the next decade management should have close to $15 Billion to deploy to share repurchases. If you assume they have to pay an average price for the stock that’s higher than the current one, and they can only repurchase 60% of shares outstanding instead of the 100% the math implies, FCF per share in 2030 would be $14. That’s a $70 stock at today’s valuation, but a $140 stock at a more reasonable FCF yield of 10%.” And… “The IPPs are un-investable for most money managers, so there we are. When they become investable we’ll probably be long gone.”
We’re not exactly long gone, but sentiment has certainly surpassed investable. After 5+ years of VST trading between $17 – $26 a share—and $26 exactly a year ago—it hit a high of $107 in May on the heels of the Artificial Intelligence (AI) narrative and the implications for electricity demand. While we agree with the prevailing consensus view that more Data Centers will be built, Data Centers require base load energy, and that the US will probably be short base load energy, predicting the rate of any technological advancement is not our area of expertise, and we feel the margin of safety has dissipated. Therefore, what had been our largest position entering 2023 and 2024, and has been our greatest contributor to performance, is now one of the smaller positions in the fund.”
6. Eaton Corporation (NYSE:ETN)
Market Capitalization as of September 13: $123.04 billion
Number of Hedge Fund Holders: 93
Eaton Corporation (NYSE:ETN) is a multinational power management company that offers a wide range of products and services, including power distribution, circuit protection, motor control, and energy storage, to improve energy efficiency, reduce costs, and enhance safety. It has ~ 85,000 employees and sells products to customers in 175 countries.
The backlog for the electrical segment of the business has surged to over $11 billion, a 4x increase from pre-COVID levels. It continues to impress investors with robust organic sales growth, expanding margins, and exceptional free cash flow generation. 93 hedge funds hold long positions in the company, as of June 30.
The data center and power generation/renewable projects take the lead in new project announcements, with these 2 project types representing ~40% of the announced projects in the last 12 months. The company now has 444 projects worth $1.4 trillion cumulatively. This is a 2x increase from last year, and the backlog for mega projects (announced value of $1 billion+) now stands at $1.6 trillion, up ~25%.
Revenue was $6.35 billion in the second quarter of 2024. This amount exhibited an 8.35% improvement from Q2 in the prior year. Electrical orders were up 9% and aerospace orders increased by 4%. The earnings per share were $2.73, an all-time record and up 24% year-over-year.
CEO Craig Arnold stated that the company anticipates significant growth in AI data centers, noting that currently only 5-10% of large businesses’ capital expenditures are allocated to AI data centers. Arnold emphasized that the backlog of data center construction, exceeding $140 billion, represents 8 years of business that Eaton Corporation (NYSE:ETN) is well-positioned to capitalize on in the near term. This makes it one of the top large-cap stocks to buy now.
Ave Maria World Equity Fund stated the following regarding Eaton Corporation plc (NYSE:ETN) in its first quarter 2024 investor letter:
“Eaton Corporation plc (NYSE:ETN) is an intelligent power management company. The company is a long-term beneficiary in the trend towards electrification, energy transition and digitalization. Eaton is also benefiting from unprecedented global stimuli such as the Inflation Reduction Act, Infrastructure Investment and Jobs Act, the Chips and Science Act and the EU recovery plan known as the NextGenerationEU.”
5. Booking Holdings Inc. (NASDAQ:BKNG)
Market Capitalization as of September 13: $131.67 billion
Number of Hedge Fund Holders: 96
Booking Holdings Inc. (NASDAQ:BKNG) is a travel technology company that owns and operates several travel fare aggregators. Its platform includes well-known brands such as Booking.com, Priceline, Agoda, Kayak, and OpenTable, helping travelers find and book hotels, flights, rental cars, vacation packages, and other travel-related services. It has a rather extensive user base that enables it to implement AI solutions such as Trip Planner and Penny, enhancing customer service.
In the second quarter of 2024, the stock was held by 96 hedge funds. The largest shareholder is Fisher Asset Management, with a position worth $1.6 billion.
The company generated $5.86 billion in Q2, a 7.27%% increase year-over-year. Merchant revenues experienced growth, offset by agency revenues, due to the ongoing transition from agency to merchant revenues at Booking.com. Advertising revenues also rose, driven by increased advertising income at Booking.com and growth at OpenTable. The earnings per share were $41.90.
Innovations such as GenAI-assisted trip planners and enhanced mobile applications have streamlined the booking process and enriched user experiences. The company has also diversified revenue streams through advancements in flights, ground transportation, and restaurant reservations via OpenTable.
Booking Holdings Inc. (NASDAQ:BKNG) is well-positioned for continued growth as more and more tourists (particularly Millennials and Gen Z) are shifting preferences to make their travels convenient through online platforms, like the one this company provides. Its adaptability to the changing market and the expansion of its diverse service offerings is what makes it a popular large-cap stock to look into.
Wedgewood Partners stated the following regarding Booking Holdings Inc. (NASDAQ:BKNG) in its Q2 2024 investor letter:
“Booking Holdings Inc. (NASDAQ:BKNG) contributed to performance as travel spending across the U.S. and Europe remains quite healthy, whereas the Company took share in alternative accommodations, and looks set to expand margins after a few years of reinvestment. The Company has also been aggressively reducing its share count at reasonably attractive valuation multiples. Booking should be able to compound earnings at an attractive, double-digit rate for the next few years given these various initiatives.”
4. ServiceNow Inc. (NYSE:NOW)
Market Capitalization as of September 13: $181.62 billion
Number of Hedge Fund Holders: 97
ServiceNow Inc. (NYSE:NOW) is a software company that operates a cloud computing platform to help companies manage digital workflows for enterprise operations. Its products are designed to improve efficiency, reduce costs, and enhance customer experience, and are widely used by businesses of all sizes, from small enterprises to large corporations.
The company impressed the market with a strong second quarter. The total revenue generated was up 22.19% year-over-year and reached $2.63 billion. Revenue generated from new Pro Plus edition contracts, which feature GenAI capabilities, doubled from the previous quarter. Subscription revenue increased by 23% year-over-year.
The company experienced a 26% year-over-year increase in deals exceeding $1 million, securing 6 net new logos. A federal customer that surpassed the $100 million annual contract value (ACV) threshold, and it also signed its third-largest net new ACV deal ever.
All workflow segments were represented in the top 20 deals, with Security, Risk, IT Service Management (ITSM), and IT Operations Management (ITOM) each having 8-10 deals valued over $1 million. Specifically, Customer Workflows had 14 deals, Employee Workflows had 12, and Creator Workflows had 10 deals exceeding $1 million. It secured 11 new contracts, each valued at over $1 million.
Analysts believe that the company’s strength lies in its NOW platform, which simplifies the integration of various tools and software, including Salesforce, Microsoft, and SAP. ServiceNow Inc. (NYSE:NOW) offers a portfolio of 168 digital workflow solutions, with a 98% renewal rate.
The company is positioned for impressive growth, driven by its strong Q2 performance and innovative AI capabilities. 97 hedge funds are long NOW, with the highest stake at $1.26 billion by Fisher Asset Management.
Lakehouse Global Growth Fund stated the following regarding ServiceNow, Inc. (NYSE:NOW) in its April 2024 investor letter:
“US-based software company, ServiceNow, Inc. (NYSE:NOW), provided another strong result, continuing its long and consistent track record of 20%-plus revenue growth combined with healthy profitability. Subscription revenues grew 25% year-on-year to $2.5 billion and free cash flow grew 47% year-on-year to $1.2 billion. The company’s core operating metrics were also impressive with remaining performance obligations growing 26% year-on-year to $17.7 billion (i.e. roughly 2x 2023 revenue) and renewal rates holding steady at 98%. Performance was evenly spread across segments, products, and geographies, with notable strength in the US federal government. The company now boasts 1,933 customers generating in excess of $1 million in Annual Contract Value (ACV), which is pleasing to see as it implies multiple solutions are involved and that the company’s platform model is increasingly resonating with customers. In our view, ServiceNow is one the highest quality software businesses globally as the combination of consistent growth at scale, robust free cash flow generation and a large addressable market make it a compelling opportunity.”
3. Qualcomm Inc. (NASDAQ:QCOM)
Market Capitalization as of September 13: $186.67 billion
Number of Hedge Fund Holders: 100
Qualcomm Inc. (NASDAQ:QCOM) is a multinational corporation that creates semiconductors, software, and services related to wireless technology and owns patents critical to the 5G, 4G, CDMA2000, TD-SCDMA, and WCDMA mobile communications standards, used in devices like smartphones, tablets, laptops, and IoT devices.
The company’s Snapdragon 8 Gen 3 Mobile Platform can power smartphones to process up to 10 billion parameters of GenAI models, making them great personal assistants. In June, Microsoft announced that its Surface Laptop and Surface Pro will be equipped with Qualcomm Inc. (NASDAQ:QCOM) chips, capable of performing various AI tasks without needing an internet connection.
The company is also a key partner for Microsoft in delivering Copilot+ PCs, available from major brands across 20 countries and 47 retailers. The retail presence will expand to over 60 retailers in 25 countries.
It maintains a strong position in the handset market, led by Snapdragon Gen 3. Revenues from Chinese OEMs surged by over 40% in the first half of fiscal 2024, indicating robust demand beyond its major customers. Microsoft is collaborating with OEMs on new Copilot+ PCs, including models priced as low as $700 without sacrificing performance, for 2025.
Overall, the company recorded $9.39 billion in revenues in FQ3 2024, up 11.24% year-over-year. The earnings per share were $2.33. Licensing business revenues were $1.3 billion. In automotive, it secured more than 10 new design wins.
Wall Street expects its revenue to grow by 10% in 2025 and earnings to rise by 13.10%. The company is strategically positioned for robust growth, driven by its cutting-edge AI technologies and expanding presence in the automotive and IoT sectors. It’s held by 100 hedge funds. The largest stake is held by Matrix Capital Management and is worth $1.99 billion.
O’keefe Stevens Advisory stated the following regarding QUALCOMM Incorporated (NASDAQ:QCOM) in its Q2 2024 investor letter:
“During the quarter, the A.I. rally broadened beyond the obvious players of Nvidia, AMD, and hyperscalers. QUALCOMM Incorporated (NASDAQ:QCOM), a long-standing investment, is gaining recognition for integrating artificial intelligence into mobile phones. Qualcomm’s A.I. on-device capabilities enable real-time language translation, improved voice recognition, and sophisticated imaging techniques as A.I. becomes more integral to mobile experiences. Qualcomm benefits by leading the market in providing robust, efficient, and versatile A.I. solutions. A.I. could be the first technology advancement in several years to accelerate the smartphone replacement cycle as users desire these advanced capabilities.”
2. Micron Technology Inc. (NASDAQ:MU)
Market Capitalization as of September 13: $100.41 billion
Number of Hedge Fund Holders: 120
Micron Technology Inc. (NASDAQ:MU) produces computer memory and computer data storage including dynamic random-access memory, flash memory, and USB flash drives. Its products are used in a range of devices, including smartphones, tablets, laptops, and servers. It is a major player in the memory market and is known for its technological advancements.
In the fiscal third quarter of 2024, the company generated revenue of $6.8 billion, versus the $3.7 billion figure from the same period a year ago, jumping by ~82% in a year. There’s robust AI demand, which is the primary factor for this revenue growth. Despite a strong FQ3 2024, the company may be struggling due to an inventory glut from last year, which is also why last year’s financials are significantly lower than this year’s.
The company is heavily investing in high bandwidth memory production that is expected to generate billions in sales by fiscal 2025 compared with just hundreds of millions in 2024.
Micron Technology Inc. (NASDAQ:MU) is well-positioned to benefit from favorable industry trends in the smartphone, personal computer, and data center sectors. That’s why 120 hedge funds hold stakes in the company as of June 30. The largest position is at $928.5 million by Citadel Investment Group.
Investors recognize that Micron’s current struggles stem from its significant capital expenditures aimed at expanding manufacturing capacity. In FQ3, the company invested $2.06 billion in capital expenditures. However, the company sees that these investments are expected to drive growth in the future, especially as it is making these investments at a strategic time with support from the US government to enhance its domestic semiconductor manufacturing capabilities.
Fueled by strong AI demand, the company is well-equipped to benefit from the rebound in memory prices and favorable inventory balances, making it a compelling large-cap stock to buy now.
ClearBridge Value Equity Strategy stated the following regarding Micron Technology, Inc. (NASDAQ:MU) in its Q2 2024 investor letter:
“Stock selection in the IT sector proved to be the largest contributor to performance, particularly driven by the strong performance of Micron Technology, Inc. (NASDAQ:MU) The company, which designs, develops, manufactures and sells memory and storage products, continued its strong performance alongside other AI beneficiaries as the anticipated demand for new and additional storage essential for housing and training large language AI models continues to grow.”
1. Uber Technologies Inc. (NYSE:UBER)
Market Capitalization as of September 13: $150.32 billion
Number of Hedge Fund Holders: 145
Uber Technologies Inc. (NYSE:UBER) is a multinational transportation company that provides ride-hailing services, courier services, food delivery (Uber Eats), and freight transportation. Its platform has disrupted the transportation industry and is now a widely used service in many cities globally.
In the delivery space, Uber Technologies Inc. (NYSE:UBER) maintains a leading position in 7 of its top 10 markets. The company’s ongoing market share rise and the projected 9% compound annual growth rate for the delivery industry indicate its potential to achieve double-digit growth in the near future.
In the global ride-hailing market, it is the clear leader with a significant 25% market share. This dominance is evident in its brand value of $30 billion, reflecting a 28% year-over-year increase, along with its expanding footprint in the global taxi network. Hence, the ride-hailing industry’s anticipated 13% compound annual growth rate is a tailwind for Uber.
The company’s revenue grew by 15.93% year-over-year in Q2 2024 and reached $10.70 billion. There was a 21% year-over-year increase in trips and a 19% rise in gross bookings, which reached $40 billion. Both the mobility and delivery segments demonstrated strong performance as well. The advertising business now contributes over $1 billion in revenue.
The company is growing well by partnering with autonomous vehicle (AV) companies. As AV manufacturers face high costs, Uber Technologies Inc. (NYSE: UBER) offers valuable passenger transportation solutions. It is actively engaging with multiple AV firms to integrate their technologies into its platform, enhancing its market presence in the high-growth AV sector.
This is a top large-cap stock to buy now and is held by 145 hedge funds as of Q2 2024. The largest position is held by Altimeter Capital Management and is worth $982.2 million.
RiverPark Large Growth Fund stated the following regarding Uber Technologies, Inc. (NYSE:UBER) in its first quarter 2024 investor letter:
“Uber Technologies, Inc. (NYSE:UBER): UBER was a top contributor in the quarter following better than expected 4Q23 earnings and 1Q24 guidance. Gross bookings of $37.6 billion were up 22% year over year. Mobility gross bookings of $19.3 billion grew 29% over last year driven by a combination of product innovation and driver availability. Delivery gross bookings of $17 billion were up 19% from last year and continued to be strong throughout the quarter. 4Q Adjusted EBITDA of $1.3 billion, up $618 million year over year, was better than management’s guidance of $1.2 billion, and the company generated $768 million of free cash flow, up from a cash loss of $303 million last year. Management guided to continuing growth in 1Q Gross Bookings (20% growth) and Adjusted EBITDA (of $1.3 billion). The company hosted a well-received analyst day in February during which it guided to three year compounded annual growth rates for gross bookings of mid-to-high single digits and EBITDA of 30-40%, both above investor expectations. The company also guided to free cash flow conversion of 90% of EBITDA.
UBER remains the undisputed global leader in ride sharing, with a greater than 50% share in every major region in which it operates. The company is also a leader in food delivery, where it is number one or two in the more than 25 countries in which it operates. Moreover, after a history of losses, the company is now profitable, delivering expanding margins and substantial free cash flow. We view UBER as more than a ride sharing and food delivery service; we also see it as a global mobility platform with 142 million users (by comparison, Amazon Prime has 200 million members) and the ability to penetrate new markets of on-demand services, such as package and grocery delivery, travel, and hourly worker staffing. Given its $5.4 billion of unrestricted cash and $4.8 billion of investments, the company today has an enterprise value of $165 billion, indicating that UBER trades at 21x our estimates of next year’s free cash flow.”
While we acknowledge the growth potential of Uber Technologies Inc. (NYSE:UBER), our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than UBER but that trades at less than 5 times its earnings, 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.
