On November 13, Morgan Stanley published an analysis highlighting potential risks to the “Trump trade,” which refers to market optimism following Donald Trump’s decisive victory in the 2024 U.S. presidential election.
The investors poured into small-cap stocks, financials, and cryptocurrencies, expecting lower taxes and deregulation. However, bond markets signaled caution, with 10-year Treasury yields rising sharply. Concerns about unfunded tax cuts and swelling U.S. debt weighed on sentiment in fixed-income markets, and the stronger U.S. dollar put pressure on emerging market currencies.
Despite the current market momentum, the bank’s Global Investment Committee advises investors to approach these trends cautiously as 2025 approaches. They cite three primary risks to the sustainability of this rally.
First, equity valuations are highly stretched. The report points out that higher interest rates are increasing borrowing costs and could weigh on corporate profitability. Inflation-adjusted 10-year Treasury yields have risen to about 2%, historically associated with lower stock price-to-earnings ratios. Currently, this multiple sits at 23x, far above historical norms.
Second, corporate earnings targets for 2025 are ambitious and may be difficult to achieve. Forecasts project profit growth of 15%, which seems overly optimistic given current single-digit earnings growth and weak productivity improvements. While some sectors, such as traditional energy and financials, might benefit from regulatory clarity under Trump’s leadership, headwinds such as rising borrowing costs and the stronger dollar could challenge multinational corporations. Moreover, potential tariffs might increase production costs, putting additional pressure on manufacturers.
Finally, policy timing poses significant risks. The Trump administration’s policy sequencing will be critical. While measures such as deregulation and tax cuts could stimulate growth, inflationary policies such as tariffs or immigration restrictions could offset these benefits. Such actions may raise consumer prices, slow labor-force growth, and disrupt key industries, including agribusiness and services.
Given these risks, the bank advises investors to consider taking profits in high-performing stocks and offsetting tax liabilities by selling underperforming securities. They see potential opportunities in large-cap value, mid-cap growth, and emerging markets, where currency volatility has created attractive entry points.
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Oaktree Capital’s Howard Marks on Investing Amid Chaos
In an interview with Bloomberg on November 20, Howard Marks, Co-Chair of Oaktree Capital Management, shared his insights on navigating the uncertainties of the global market and investment strategies amidst geopolitical and economic turmoil.
Marks emphasized the inherent unpredictability of markets, cautioning against overreacting to short-term events such as geopolitical tensions, shifts in U.S. policy, or macroeconomic changes. Instead, he advocated for a disciplined, bottom-up approach to investing that focuses on intrinsic value and the fundamental performance of individual companies.
Marks addressed the high valuations in U.S. equity markets, noting that while prices might be elevated relative to historical norms, he does not view them as prohibitively overpriced but rather highly priced.
On geopolitical developments, including former President Trump’s rhetoric and potential policy impacts, Marks stressed the difficulty of predicting how events might unfold or how markets might respond. He highlighted the importance of maintaining a long-term perspective rather than attempting to time markets based on speculation. He pointed to historical instances where predictions of major global events could have led to costly investment mistakes.
The financial landscape is currently being shaped by shifting policies, evolving market trends, and global uncertainties. Investors should proceed with caution, focus on long-term strategies, and adopt disciplined decision-making to navigate potential risks. With that in context, let’s take a look at the 12 best stocks to invest in for the next 3 months.
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Our Methodology
To compile our list of the 12 best stocks to invest in for the next 3 months, we used Insider Monkey’s Hedge Fund database to rank the 12 stocks that are the most popular among elite money managers, as of Q3 2024. The list is sorted in ascending order of their hedge fund sentiment.
Why do we care about what hedge funds do? 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 Stocks to Invest in for the Next 3 Months
12. Adobe Inc. (NASDAQ:ADBE)
No. of Hedge Funds: 123
Adobe Inc. (NASDAQ:ADBE) is a leading global software company known for its innovative digital media solutions. The company is known for products like Photoshop, Acrobat, and Adobe Creative Cloud, which are widely used in creative industries and businesses worldwide.
On October 14, Adobe Inc. (NASDAQ:ADBE) announced the beta availability of new features in Premiere Pro, a video editing software, at the Adobe MAX conference in Miami Beach. The new features are powered by the Firefly Video Model, a generative AI technology designed to help video professionals with their work. According to Ashley Still, senior vice president of digital media at Adobe Inc. (NASDAQ:ADBE), the Firefly Video Model is expected to revolutionize video editing and empower professionals to work more efficiently and creatively.
Adobe Inc.’s (NASDAQ:ADBE) AI advancements, such as AI Assistant in Acrobat and Reader, are transforming user experiences and driving significant engagement and growth. Furthermore, the company’s focus on AI-driven growth has led to the development of new products and services, such as Adobe Firefly, which allows creators to generate images and videos from text. Adobe Inc.’s (NASDAQ:ADBE) AI-powered tools are also being used to edit visuals, extend the length of videos or scenes, and provide users with more creative freedom.
11. Broadcom Inc. (NASDAQ:AVGO)
No. of Hedge Funds: 128
Broadcom Inc. (NASDAQ:AVGO) is a leading designer, developer, and supplier of semiconductors and infrastructure software solutions. The company’s diverse product portfolio spans sectors like data centers, networking, broadband, and wireless communication. Broadcom Inc.’s (NASDAQ:AVGO) cybersecurity offerings include the Symantec Enterprise Cloud platform and a suite of solutions for payment, mainframe, network, endpoint, and identity security.
On September 5, Broadcom Inc. (NASDAQ:AVGO) reported financial results for its third quarter which ended August 4. The company reported a 47% year-over-year increase in revenue to $13.1 billion. This growth was driven by strong AI-related revenue, VMware bookings, and robust performance in non-AI semiconductor segments. Looking ahead to Q4, Broadcom Inc. (NASDAQ:AVGO) anticipates revenue of approximately $14.0 billion
On November 5, Broadcom Inc. (NASDAQ:AVGO) announced significant advancements in its VeloCloud product portfolio, aimed at supporting the growing adoption of AI and non-AI workloads in enterprises. The company unveiled VeloRAIN, a robust AI networking architecture that leverages AI and machine learning to enhance the performance and security of distributed AI workloads.
As part of this announcement, Broadcom Inc. (NASDAQ:AVGO) also introduced the VeloCloud Edge 4100 and 5100 appliances, high-end AI-ready edge devices that can scale up to 100Gbps for large enterprises and complex use cases. These appliances are designed to support the increasing demand for AI-driven applications and workloads in various industries, including manufacturing, retail, and telecommunication.
The company also launched the Titan program, a new partner program for VeloCloud Managed Service Providers (MSPs). The Titan program aims to help MSPs grow their businesses as their enterprise customers increasingly adopt AI solutions. The program is part of the company’s effort to support the growing demand for AI-driven applications and workloads.
10. Mastercard Incorporated (NYSE:MA)
No. of Hedge Funds: 131
Mastercard Incorporated (NYSE:MA) is a global leader in payment technology, facilitating secure and seamless transactions in over 200 countries. With its extensive network, the company enables businesses, financial institutions, and consumers to connect through its innovative payment solutions.
Mastercard Incorporated (NYSE:MA) is well-positioned to capture market share in emerging markets and new payment technologies, benefiting from the global shift to digital payments. Furthermore, the company is expanding value-added services (VAS), which encompasses cybersecurity, fraud prevention, data analytics, and consulting. These solutions are subscription-based and recurring, supporting the company to reduce its reliance on core payment processing revenue.
On September 12, Mastercard Incorporated (NYSE:MA) announced that it is expanding its cybersecurity services through the acquisition of global threat intelligence company Recorded Future for $2.65 billion. Recorded Future is a leading threat intelligence company, serving over 1,900 clients across 75 countries, including governments and major corporations. With the acquisition, Mastercard Incorporated (NYSE:MA) will integrate Recorded Future’s capabilities into its existing suite of services, delivering enhanced cyber resilience and trust to its network of merchants and financial institutions.
The acquisition will also enable the development of new products and services that leverage AI and other best-in-class technologies. Recorded Future’s use of AI-powered analytics will be integrated into Mastercard Incorporated’s (NYSE:MA) services, providing customers with more accurate and efficient insights to inform their risk management strategies. The acquisition is expected to close by the first quarter of 2025, subject to regulatory review and customary closing conditions.
9. Uber Technologies, Inc. (NYSE:UBER)
No. of Hedge Funds: 136
Uber Technologies, Inc. (NYSE:UBER) is a pioneering platform for ride-hailing, food delivery, and freight services, operating in over 70 countries. The company has revolutionized urban mobility, offering convenient and affordable solutions for millions of users. The company’s diversified revenue streams, including Uber Eats and Uber Freight, make it a key player in the future of transportation and delivery services.
On October 31, Uber Technologies, Inc. (NYSE:UBER) announced financial results for the third quarter, which ended on September 30. The company’s revenue increased 20% year-over-year to $11.2 billion. Whereas, Gross Bookings increased 16% year-over-year to $41.0 billion, with trips during the quarter growing 17% year-over-year to 2.9 billion, or approximately 31 million trips per day on average.
Looking ahead to Q4, Uber Technologies, Inc. (NYSE:UBER) has issued an optimistic outlook, reflecting strong growth prospects. The company projects Gross Bookings to range between $42.75 billion and $44.25 billion, representing a year-over-year (YoY) increase of 16% to 20%. This growth is expected to be fueled by sustained momentum in both its Mobility and Delivery segments, with trip growth anticipated to mirror the performance observed in Q3.
8. Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)
No. of Hedge Funds: 158
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) is the world’s largest dedicated semiconductor foundry, producing chips for leading technology companies such as Apple, NVIDIA, and Qualcomm. The company plays a pivotal role in the global electronics manufacturing industry, and its advanced manufacturing processes and technological leadership have set it apart in the semiconductor industry.
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) is poised to dominate the semiconductor space with its cutting-edge 2nm chip technology, advanced node leadership, and strategic global expansion. The company’s dominance in advanced node technologies (3nm, 5nm, and 7nm) drives its leadership in the AI and high-performance computing (HPC) chip space. This dominance creates a significant entry barrier for competitors, as Taiwan Semiconductor Manufacturing Company Limited’s (NYSE:TSM) leadership in advanced node technology ensures it has a near-monopoly on high-demand chips.
Taiwan Semiconductor Manufacturing Company Limited’s (NYSE:TSM) upcoming 2nm (N2) chips will introduce the gate-all-around (GAA) transistor structure, a significant technological leap that will drive better power efficiency and performance compared to the current FinFET architecture. This innovation is essential as demand for high-performance chips continues to rise, especially in areas such as AI, HPC, and next-generation consumer electronics. The N2 node will offer 10% to 15% performance gains at the same power and complexity, while also cutting power consumption by 25% to 30% compared to N3E. The shift to N2 will enable a 15% improvement in transistor density, allowing chip designers to pack more computing power into smaller spaces.
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) is building several new fabrication plants which will increase its production capacity and solidify its position as the world’s leading semiconductor foundry. The company’s $11 billion investment in a new semiconductor fabrication plant in Dresden, Germany, represents a significant strategic shift toward regional diversification.
7. Apple Inc. (NASDAQ:AAPL)
No. of Hedge Funds: 158
Apple Inc. (NASDAQ:AAPL) is a globally renowned technology giant, known for its iconic products such as the iPhone, Mac, and Apple Watch. The company’s ecosystem, including services like iCloud and Apple Music, has built a loyal customer base.
On October 31, Apple Inc. (NASDAQ:AAPL) reported its fiscal 2024 fourth-quarter results ended September 28. The company reported a record-breaking quarter revenue, with revenue increasing 6% year over year to $94.9 billion. According to CEO Tim Cook, the strong revenue growth was driven by the success of the company’s latest product lineup, including the iPhone 16 series, Apple Watch Series 10, and AirPods 4. Cook also highlighted the company’s commitment to innovation, citing the recent release of Apple Intelligence features that prioritize user privacy and enhance the overall user experience.
On October 30, Apple introduced two new chips, the M4 Pro and M4 Max, which join the M4 to form the most advanced family of chips ever built for a personal computer. The M4 family of chips is designed to bring far more power-efficient performance and advanced capabilities to the Mac. All three chips are built using industry-leading, second-generation 3-nanometer technology, which improves performance and power efficiency.
In their third quarter 2024 investor letter, Madison Investments said the following regarding Apple Inc. (NASDAQ:AAPL):
“Alphabet Inc., Eli Lilly and Company, Qualcomm Incorporated, Microsoft Corporation, and Apple Inc. (NASDAQ:AAPL) were the largest detractors. Apple has been volatile in the last quarter but ended on strength. Early in the quarter, Apple benefited from the introduction of their AI strategy, Apple Intelligence. They followed in September with the new iPhone 16, which also created some excitement. We are underweight to Apple, which has resulted in a headwind for performance.”
6. Visa Inc. (NYSE:V)
No. of Hedge Funds: 165
Visa Inc. (NYSE:V) is a global leader in payment processing that enables electronic payments in over 200 countries and territories. The company’s VisaNet processing network enables the authorization, clearing, and settlement of payment transactions. Visa Inc. (NYSE:V) has also embraced digital wallets, contactless payments, and fraud prevention technologies.
Visa Inc. (NYSE:V) is well positioned to capitalize on the global transition to a cashless society, a shift accelerated by digital transformation trends. While electronic payments have made significant advances, cash remains the dominant transaction method in many emerging markets, offering a considerable avenue for growth. The Federal Reserve reports that in 2024, cash usage accounted for just 16% of transactions, highlighting the growing preference for digital payments, particularly among younger generations. These demographics, notably Gen Z and Millennials, are driving the adoption of mobile and contactless payment solutions, supporting the broader movement toward digital payment systems.
Visa Inc.’s (NYSE:V) Consumer Payments segment is working on increasing turnover in the direction of tap-to-pay and click-to-pay services, as well as tokenization. The company is also working on additional revenue growth drivers, such as Visa Direct, commercial solutions for small and medium businesses, and Cross-Border solutions.
5. NVIDIA Corporation (NASDAQ:NVDA)
No. of Hedge Funds: 193
NVIDIA Corporation (NASDAQ:NVDA) is a global leader in graphics processing technology, powering innovations in gaming, AI, data centers, and autonomous vehicles. The company’s GPUs are the gold standard for performance in applications requiring high computational power.
NVIDIA Corporation’s (NASDAQ:NVDA) journey from a gaming-centric GPU manufacturer to a leader in the artificial intelligence (AI) market has culminated in its inclusion in the Dow Jones Industrial Average (DJI). On November 6, the company was added to the DJI, replacing Intel. This milestone, combined with the upcoming launch of its highly anticipated Blackwell processors, positions the company for sustained growth.
The imminent release of NVIDIA’s Blackwell processors is poised to further solidify the company’s dominance in the AI chip market. The Blackwell GPUs are in high demand among companies like OpenAI, Microsoft, and Meta, which are constructing AI data centers to support their offerings. Priced between $30,000 and $40,000 each, these GPUs are already being delivered to data centers and industrial clients for AI applications, with consumer availability expected in 2025. In an interview with CNBC, CEO Jensen Huang stated, “Blackwell is in full production and demand for Blackwell is insane,” emphasizing, “Everybody wants to have the most and everybody wants to be first.”
4. Alphabet Inc. (NASDAQ:GOOGL)
No. of Hedge Funds: 202
Alphabet Inc. (NASDAQ:GOOGL), the parent company of Google, is a global leader in digital services and technology innovation. The company’s vast ecosystem includes search, YouTube, Android, and Google Cloud. Alphabet Inc.’s (NASDAQ:GOOGL) investments in AI, autonomous vehicles (through Waymo), and other disruptive technologies underscore its forward-thinking strategy.
On October 29, Alphabet Inc. (NASDAQ:GOOGL) announced financial results for the quarter ended September 30. The company’s Q3 revenues increased 15% year over year to $88.3 billion, driven by strong momentum across all business segments. Alphabet Inc.’s (NASDAQ:GOOGL) Services revenues increased 13% to $76.5 billion, driven by Google Search, Google subscriptions, platforms, and devices, and YouTube ads. The company’s Cloud segment’s revenue increased 35% to $11.4 billion, due to accelerated growth in Google Cloud Platform (GCP), AI Infrastructure, Generative AI Solutions, and core GCP products. Alphabet Inc.’s (NASDAQ:GOOGL) net income increased 34% to $26.30 billion. The company’s YouTube segment revenues increased from $7.95 billion to $8.92 billion, which provides a valuable diversification from its traditional Google Search ad revenue.
While Waymo, Alphabet Inc.’s (NASDAQ:GOOGL) autonomous driving segment, may not be the company’s strongest growth driver, Waymo is well-positioned to capitalize on the growing demand for autonomous vehicles. On November 12, CNBC reported that Waymo opened its robotaxi service to the general public in Los Angeles, marking its largest expansion yet. The service, which was previously available to a limited number of users, is now accessible to anyone in LA through the Waymo One app, covering nearly 80 square miles of Los Angeles County.
This expansion follows the company’s previous launches in Phoenix and San Francisco and brings the total number of cities with fully available robotaxi services to three. With over 3.8 million people, LA is the largest city to offer Waymo’s robotaxi service, providing a significant opportunity for growth and adoption.
Waymo has been rapidly expanding its operations over the past year. In October, the company closed a $5.6 billion funding round to expand its robotaxi service across the United States. As a result, Waymo has seen a significant increase in paid rides across its three markets, with over 150,000 paid rides per week via the Waymo One app, up from 100,000 in August. Additionally, Waymo has partnered with Uber to launch its robotaxi service in Austin, Texas, in 2025, and has agreed to a multiyear strategic partnership with Hyundai to add the Ioniq 5 electric vehicle to its robotaxi fleet.
3. Meta Platforms, Inc. (NASDAQ:META)
No. of Hedge Funds: 235
Meta Platforms, Inc. (NASDAQ:META), formerly Facebook, is a leader in social media and virtual reality technologies. The company owns major platforms such as Facebook, Instagram, WhatsApp, and Oculus. Meta Platforms, Inc. (NASDAQ:META) is heavily investing in building the metaverse.
On October 30, Meta Platforms, Inc. (NASDAQ:META) reported financial results for the third quarter that ended on September 30. The tech giant generated $40.59 billion in revenue for the quarter, a 19% increase year-over-year. The company’s operating margin improved to 43%, up from 40% a year ago. Meta Platforms, Inc. (NASDAQ:META) focus on user engagement has driven notable growth, with Family Daily Active People (DAP) across its Family of Apps (FoA) reaching 3.29 billion, a 5% year-over-year increase. This growth demonstrates the effectiveness of AI-driven personalization, which enhances user experience and encourages greater interaction. Additionally, the company’s average price per ad increased by 11% year-over-year.
Meta Platforms, Inc.’s (NASDAQ:META) Reality Labs division, focused on virtual and augmented reality, reported a modest revenue of $270 million, representing a small portion of overall earnings. While this segment continues to incur losses in the near term, CEO Mark Zuckerberg emphasizes its long-term potential to redefine how people socialize, work, and transact in virtual environments. Meta Platforms, Inc. (NASDAQ:META) is significantly investing in hardware, software, and content development.
2. Microsoft Corporation (NASDAQ:MSFT)
No. of Hedge Funds: 279
Microsoft Corporation (NASDAQ:MSFT) is a global technology powerhouse offering software, cloud computing, hardware, and AI solutions. The company’s flagship products such as Windows, Office, and Azure dominate their respective markets.
On October 30, Microsoft Corporation (NASDAQ:MSFT) announced results for Q1 2025, which ended September 30. The company reported a 16% year-over-year revenue growth, reaching $65.6 billion. The company’s cloud revenue grew 22% year-over-year, with Azure’s revenue surging 33% year-over-year, fueled by high-value contracts and AI-driven services adoption.
Microsoft Corporation’s (NASDAQ:MSFT) Azure continues to lead the way, with Azure Arc adoption increasing by over 80% year-over-year to surpass 39,000 customers across industries such as telecommunications, consumer goods, and finance. During the quarter, the company also expanded its data center capacity with new investments in Brazil, Italy, Mexico, and Sweden to ensure alignment with long-term demand for cloud and AI services. Microsoft Corporation’s (NASDAQ:MSFT) data center infrastructure footprint now spans over 60 regions.
Microsoft Corporation’s (NASDAQ:MSFT) introduction of Cobalt 100 VMs, which delivered up to 50% better performance for general-purpose workloads, attracted customers such as Databricks, Snowflake, and Siemens. Microsoft Corporation (NASDAQ:MSFT) is also building an end-to-end AI application platform with Azure AI, which aims to empower customers to create custom copilots and agents. The adoption of Azure OpenAI services has more than doubled in six months, with enterprises like GE Aerospace leveraging these capabilities to drive operational efficiencies.
1. Amazon.com, Inc. (NASDAQ:AMZN)
No. of Hedge Funds: 286
Amazon.com, Inc. (NASDAQ:AMZN) is a global leader in e-commerce, cloud computing, and digital services. The company’s vast ecosystem includes online retail, AWS (Amazon Web Services), Prime Video, and AI-driven solutions. Amazon.com, Inc. (NASDAQ:AMZN) has revolutionized the retail industry and continues to expand its reach through innovative logistics and technology.
On October 31 Amazon.com, Inc. (NASDAQ:AMZN) announced financial results for its third quarter ended September 30. The company’s net sales increased 11% year-over-year to $158.9 billion and reported an impressive $15.3 billion in net profit, which is a 54.54% increase compared to $9.9 billion in the third quarter of 2023. AWS continues to be a cornerstone of Amazon’s business, delivering 19% year-over-year revenue growth to $27.5 billion in Q3. AWS also announced plans to invest $10.12 billion over five years in the United Kingdom.
During the third quarter, Amazon.com, Inc. (NASDAQ:AMZN) introduced several advancements in its AI and infrastructure capabilities, powered by the Graviton4 processor, which offers 75% more memory bandwidth and 30% better compute performance compared to its predecessor. AWS also announced a collaboration with Databricks to enhance custom AI model development using Databricks Mosaic AI for improved generative AI application performance and cost efficiency.
While we acknowledge the potential of Amazon.com, Inc. (NASDAQ:AMZN) to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than AMZN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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