In this article we discuss the 5 best augmented reality stocks to buy now. If you want to read our detailed analysis of these companies, go directly to the 10 Best Augmented Reality Stocks to Buy Now.
5. NVIDIA Corporation (NASDAQ: NVDA)
Market Cap: $371.28 billion
Number of Hedge Fund Holders: 88
NVIDIA Corporation (NASDAQ: NVDA) operates as a visual computing company worldwide and has already proven itself capable of handling the big visual data loads associated with virtual reality which makes augmented reality technologies relatively easy by comparison for the company. One area where the company is using AR is in the automotive segment. NVIDIA Corporation (NASDAQ: NVDA) is working on improving the driving experience by melding AR with artificial intelligence. Two improvements on Nvidia’s radar are varifocal displays, which improve the clarity of an object for a user, and the integration of tactile/haptic information with visually augmented reality which makes it one of the best augmented stocks to buy now. With a market cap of $371.28 billion, the company recorded a quarterly revenue of $5.00 billion, up 61 percent year on year in the first quarter of 2021. GAAP earnings per diluted share for the quarter were a record $2.31, up 51 percent from $1.53 a year ago, and up 9 percent from $2.12 in the previous quarter according to Nvidia’s press release.
At the end of the fourth quarter of 2020, 88 hedge funds in the database of Insider Monkey held stakes worth $8.6 billion in NVIDIA Corporation (NASDAQ: NVDA) worth $8.6 billion. This was an increase from 82 hedge funds in the preceding quarter which held stakes worth $7.6 billion.
4. Facebook, Inc. (NASDAQ: FB)
Market Cap: 918.366 billion
Number of Hedge Fund Holders: 242
Facebook, Inc. (NASDAQ: FB) is no stranger to the realm of artificial intelligence and AR. Since it acquired Oculus in 2014, the company is working on the latest AR technology and has already rolled out features like camera filters and video calls. It is expected that Facebook is recreating Oculus to combine the latest AR tech with full-service social media features. According to Venture Beat, more than a billion people interacted with Facebook’s Spark AR augmented reality platform. Facebook, Inc. is also one of the companies like Google, Apple, and Snap that believe that AR-enabled smart glasses will eventually replace the functionality of smart phones. The company recently announced that it is also developing a wristband that will control its augmented reality glasses which are set to be launched this year. This wristband will be a simple AR-supporting wearable device which will be capable of detecting nerve signals to interpret complex hand gestures and moves. These exciting prospects in the world of AR makes Facebook, Inc. one of the best augmented reality stocks to buy now. In the first quarter of 2021, the company recorded major earnings and revenues beyond expectations. Facebook logged diluted per-share earnings of $3.30 on total revenue of $26.17 billion, well ahead of Wall Street’s expected earnings of $2.37 per share on revenue of $23.67 billion for the quarter. Facebook shares surged in market trading after this news with a spike of more than 5%.
According to the company’s CEO Mark Zuckerberg, the company is focused towards newer areas like augmented and virtual reality.
As of the fourth quarter of 2020, 242 hedge funds in Insider Monkey’s database held stakes in Facebook with SB Management being the biggest stakeholder with 12 million shares, worth $3.8 billion.
Our calculations show that Facebook, Inc. (NASDAQ: FB) ranks 3rd in our list of the 30 Most Popular Stocks Among Hedge Funds.
3. Alphabet Inc. (NASDAQ: GOOG)
Market Cap: $1.588 trillion
Number of Hedge Fund Holders: 157
Alphabet Inc. (NASDAQ: GOOG) has landed on number 3 in the 10 best augmented reality stocks to buy now list. The company is playing a leading role in the AR revolution and has been deeply involved in augmented reality development. Google launched its own platform for Android called the ARCore which has incorporated AR features in its products like Google Maps. Unlike its competitors, Alphabet Inc. has already released its augmented reality glasses called the Google Glass in 2013, although it failed to capture the market. Soon after, Google also launched an Enterprise version of the glasses. The growing momentum of Google Glass Enterprise Edition 2, the company’s AR headset, remains a major positive. Furthermore, the company developed the Google Lens which is an image recognition technology featuring AR which is used in translation, and shopping etc.
As of 2020, Alphabet Inc. brought in $55.3 over the first quarter of 2021. The reported earnings per share was $22.3 and the market cap of the company rose to $1.588 trillion.
Our calculations show that Alphabet Inc. (NASDAQ: GOOG) ranks 6th in our list of the 30 Most Popular Stocks Among Hedge Funds.
1 Main Capital, in their Q1 2021 investor letter, mentioned Alphabet Inc. (NASDAQ: GOOG). Here is what 1 Main Capital has to say about Alphabet Inc. in their Q1 2021 investor letter:
“Alphabet Inc (GOOG), one of the largest and most talked about companies on earth, currently presents an incredibly attractive opportunity, especially relative to its risk. While some may be skeptical that an emerging fund such as ours could have any edge at all in owning GOOG, that is precisely our edge.
In other words, our ability to own GOOG without having to manufacture a variant view is one of the many competitive advantages we have compared to some larger, more institutionalized peers who may find it difficult to tell LPs that a vanilla company like GOOG is one of their favorite investments.
We are proudly running a relatively unconstrained strategy, and appreciative of our LP base that gives us the flexibility to look for the best risk / reward wherever it may lie. We also feel comfortable admitting that sometimes the most obvious bargains do hide in plain sight. In fact, despite nearly doubling since we first wrote it up in our Q2’18 letter, GOOG is just as exciting at current levels as it was back then.
Since pretty much everyone knows what GOOG does in its core business, there is no need to re-hash it here. However, I find it wild that we can own the most dominant advertising business on earth for less than 23x next year’s earnings (21x ex-cash). Typically, dominant, mature, global businesses that grow revenues in-line with GDP trade at higher multiples than this. Thus, given the relatively reasonable current multiple, I do not see much risk of long-term multiple compression here.
Yet, GOOG’s core advertising business, which drives all its profitability, actually grows much faster than global GDP. This is a business that has powerful secular tailwinds at its back, as advertising budgets continue to shift towards digital formats away from traditional ones. I expect this trend will continue for a long time and that current shareholders stand to benefit from the attractive growth.
Even better, GOOG’s earnings are not only growing faster than the average company, but they are also being weighed down significantly by its cloud business and various other bets. It is highly likely that these current drags on profitability will at some point generate significant earnings and be worth hundreds of billions of dollars.
Additionally, the company’s balance sheet is pristine. GOOG is sitting on over $100 billion of net cash. Many investors may argue that this is not a new dynamic. After all, the company has been building cash for a long time. However, the combination of GOOG’s new CEO (who effectively took the reins to start 2020) and well-regarded CFO (since 2015) are slowly instilling more focus and financial discipline on the company. Costs are being watched carefully, especially within other bets, and the pace of capital return has increased significantly of late. In fact, the pace of buybacks has more than tripled to greater than $30
billion in 2020, up from less than $10 billion in 2018. I expect this upward trend of buybacks to continue.Looking out to 2025, it is not difficult to imagine a core Google Services segment that generates close to $100 billion of annual net income, after corporate costs. If we add to that cloud, other bets and interim cash generation we could be looking at a company worth $3 trillion by the end of 2024, which would make GOOG more than a double from current levels. Not bad for a boring, well known mega-cap.”
2. Microsoft Corporation (NASDAQ: MSFT)
Market Cap: $1.893 trillion
Number of Hedge Fund Holders: 258
Microsoft Corporation (NASDAQ: MSFT) has stated itself as “the leader in mixed reality” which refers to the combined technologies of augmented and virtual reality that can be deployed in the real world. Their flagship AR device is the HoloLens which was launched in 2015. Although the product was not a commercial success, it offered high quality AR and put the company on the path of developing the technology. Microsoft Corporation also released a catalogue of mixed reality experiences with the Windows Mixed Reality platform which includes games, 360 degree videos, social media, and live events. The company is set to launch a newer version in 2021 which will feature a custom holographic processing unit embedded with an AI coprocessor. The company also won a contract of the US Army for over 120,000 HoloLens headsets worth $21.88 billion, as reported by CNBC. Microsoft’s shares moved higher after this announcement with its price moving up by 1.7% at the end of March. With this contract, Microsoft Corporation (NASDAQ: MSFT) has gained the attention of its AR rivals and has landed one of the top spots in the 10 best augmented reality stocks to buy now list. The company’s revenue increased from $125.83 billion in 2019 to $143 billion at the end of 2020 while the reported earnings per share was $2.03.
Our calculations show that Microsoft Corporation ranks 2nd in our list of the 30 Most Popular Stocks Among Hedge Funds.
Baron Opportunity Fund, in their Q1 2021 investor letter, mentioned Microsoft Corporation (NASDAQ: MSFT). Here is what Baron Opportunity Fund has to say about Microsoft Corporation in their letter:
“Microsoft Corporation is a cloud-software Titan, and also discussed further in the Review and Outlook section above and the Top Purchases section below. Microsoft was a top contributor in the period because it trades at reasonable FCF and earnings valuations, has cloud and digital transformation tailwinds at its back, and reported an excellent December quarter, beating Street expectations by a wide margin. Microsoft’s results were strong across the board, with accelerating trends in Azure cloud computing and solid growth in its overall commercial cloud businesses. Azure accelerated to 48% constant-currency (“cc”) revenue growth from 47% the quarter before, and commercial cloud grew 32% cc, ahead of Street estimates at 26%. Microsoft’s profitability was also a significant beat, with operating income coming it at $17.9 billion, almost $3 billion ahead of Street estimates. Microsoft’s March quarter guidance also outstripped Street projections, with revenue growth of 16.5% versus the Street at 10.6%, and operating income over $1 billion ahead. CEO Satya Nadella began the earnings call with this proclamation: “What we are witnessing is the dawn of a second wave of digital transformation sweeping every company and every industry. Digital capability is key to both resilience and growth … Microsoft is powering this shift with the world’s largest and most comprehensive cloud platform … I’m energized by our increasing momentum and the expanding opportunity fueled by the structural change brought about by the rapid adoption of digital technology.””
1. Apple Inc. (NASDAQ: AAPL)
Market Cap: $2.242 trillion
Number of Hedge Fund Holders: 146
Apple Inc. (NASDAQ: AAPL) has already made its mark on the smartphone industry and is now moving towards newer products. Along with products like the Apple Watch, AirPods, and Apple TV+, the company is betting big on augmented reality products and is on track to bring it to the mainstream market. Apple’s AR journey began with the release of the ARKit in 2017 which was an augmented reality platform for iOS and was compatible with the iPhone and the iPad. Apple Inc. (NASDAQ: AAPL) also included a LiDAR scanner it its iPhone12 Pro which is supposed to be leveraged for a more immersive AR experience. The company is working to introduce its AR glasses called “Apple Glasses” which could be ready for launch within the next 2 years. The CEO of Apple, Tim Cook, is publicly bullish on AR and says that it is the next big thing that will pervade our entire lives.
According to Apple’s earnings report for Q1 of 2021, the company recorded a revenue of $89.6 billion, up 54% year over year, and quarterly earnings per diluted share of $1.40. Moreover, a cash dividend of $0.22 per share of the company’s common stock was also announced showing a year-over-year increase of 7%. The current consensus among 42 polled investment analysts is to buy stock in Apple Inc, according to CNN Business making it the best augmented reality stock to buy now.
Warren Buffett’s Berkshire Hathaway Inc. mentioned Apple in its investor letter as its biggest common stock investment in 2020 even though the conglomerate sold 9.81 million shares of AAPL at the end of the fiscal year.
Based on our calculations, Apple Inc. (NASDAQ: AAPL) ranks 10th in our list of the 30 Most Popular Stocks Among Hedge Funds.
You can also take a peek at George Soros’ Top 10 Stock Picks and 15 Most Valuable Cloud Computing Companies.
