5 Best Stocks To Buy For Grandchildren

In this article, we discuss the 5 best stocks to buy for grandchildren. To read the detailed analysis of financial markets and analysts’ outlook, go directly to the 10 Best Stocks To Buy For Grandchildren.

5. NVIDIA Corporation (NASDAQ:NVDA)

Number of Hedge Fund Holders: 173

With 173 hedge fund investors in the fourth quarter of 2023, NVIDIA Corporation (NASDAQ:NVDA) ranks 5th on our list of best stocks for grandchildren. It is a California-based company known for designing and manufacturing computer graphics processors, chipsets, and more.

On January 19, Meta Platforms, Inc. (NASDAQ:META)’s Mark Zuckerberg commented that the tech giant is planning on spending billions on NVIDIA Corporation (NASDAQ:NVDA)’s chips, including 350K H100 chips.

On January 23, Cantor Fitzgerald initiated coverage of NVIDIA Corporation (NASDAQ:NVDA)’s stock with an Overweight rating and a $775 price target.

NVIDIA Corporation (NASDAQ:NVDA) was mentioned in Polen Capital’s fourth quarter 2023 investor letter. Here is what it said:

“Apple and NVIDIA Corporation (NASDAQ:NVDA) alone drove over 1,100 basis points of the Russell 1000 Growth Index’s 42% return, so not owning them was a meaningful headwind to our relative return in 2023. NVIDIA shares rocketed higher by well over 200% in 2023 although they slightly underperformed our Portfolio and the Russell 1000 Growth in the fourth quarter. Generative AI has been a huge boon for NVIDIA as the use of LLMs like ChatGPT and others requires tremendous processing power that, today, is mostly provided by NVIDIA’s GPUs. All large cloud service providers, AI factories, and many large consumer internet companies are laying the foundation for generative AI by deploying NVIDIA GPUs and other parallel processing chips to be able to do large scale generative AI either for internal use (i.e., Meta) or as a service for others (i.e., AI factories) or both (cloud service providers such as Amazon, Microsoft, and Google).

Given many of NVIDIA’s customers or its end customers are still very much in the experimentation phase with generative AI, it is unclear how sustainable the current demand for GPUs truly is. At the same time, it is known that NVIDIA has historically been highly cyclical. By the end of 2024, we believe NVIDIA will already account for roughly half the market for datacenter chips, servers, and networking equipment, which is unprecedented. Even though the valuation at 25x forward earnings doesn’t look very demanding at first glance, it assumes NVIDIA will own virtually the entire datacenter chip market in just the next few years and will sustain year-on-year growth despite being a cyclical business that is currently experiencing much higher new peaks.

We believe NVIDIA is a highly advantaged business, but we also believe the long-term growth outcomes are currently too variable, and the expectations built into the company’s $1.2 trillion valuation as of this writing assume the most optimistic of those scenarios.”

4. Alphabet Inc. (NASDAQ:GOOGL)

Number of Hedge Fund Holders: 214

Alphabet Inc. (NASDAQ:GOOGL) is a California-based tech holding conglomerate that operates through various subsidiaries, including Google, Waymo, Verily, and more.

37 Wall Street analysts covered Alphabet Inc. (NASDAQ:GOOGL) in the last three months, and 29 maintained a Buy rating on the stock. The average analyst price target of the company stood at $164.59, representing an upside of 20.68% as of the February 28 market close.

In the fourth quarter, hedge fund sentiment was positive toward Alphabet Inc. (NASDAQ:GOOGL), as 214 hedge funds held a stake in the stock at a combined value of $28.8 billion.

Tsai Capital Corporation mentioned Alphabet Inc. (NASDAQ:GOOGL) in its fourth quarter 2023 investor letter. Here is what it said:

“Alphabet Inc. (NASDAQ:GOOG) ($140.93 – up 58.8% for the year. Recent high $143.95) Alphabet, led by Sundar Pichai, has a near monopolistic position in online search, with more than 90% of the global market and greater than 80% of the U.S. market. The company also owns YouTube, which it purchased in 2006, and is now the second most popular website globally, followed by Google Search. While there are valid concerns about disruption from Artificial Intelligence (AI) and large language models (LLM), and competition for YouTube, we believe the economic moats for both businesses remain intact. We also think the Google ecosystem, which benefits from strong network effects, will drive advertising revenue at a high single-digit rate for at least the next five years. Alphabet also owns one of the three major cloud companies (Google Cloud Platform) and has a number of private businesses that, while not profitable today, have the potential to become more valuable to shareholders over time. The company’s balance sheet is strong, with approximately $106 billion of net cash ($8.48/share), and free cash flow conversion remains excellent.”

3. Meta Platforms, Inc. (NASDAQ:META)

Number of Hedge Fund Holders: 242

Meta Platforms, Inc. (NASDAQ:META) is a California-based company that provides products and services for social networking, business insight solutions, and more.

On January 25, BofA raised the price target on Meta Platforms, Inc. (NASDAQ:META)’s stock to $425 from $405 and maintained a Buy rating. The analyst stated that the reasons behind the firm being constructive on the stock include reels contributing positively, growing revenue because of messaging, and more.

On January 25, Meta Platforms, Inc. (NASDAQ:META) reported that it will build an $800 million data center campus in Indiana and expects to start operations in 2026. The data center will be the 18th one in the company’s network of data centers in the US and is expected to connect its clients to the firm’s technologies.

Moon Capital Management commented on Meta Platforms, Inc. (NASDAQ:META) in its fourth-quarter 2023 investor letter. Here is what it said:

“Meta Platforms, Inc. (NASDAQ:META), holding company for Facebook, Instagram and other addictive social media properties) was another security that many deemed unownable in early 2023. Facebook earns massive amounts of advertising revenue, too much of which we believed the company was wasting on very expensive, non-core projects. Apparently, someone at Meta HQ finally agreed, as the company began exhibiting serious expense discipline, resulting in improved earnings – as well as a 194% return on the stock for the year.”

2. Amazon.com, Inc. (NASDAQ:AMZN)

Number of Hedge Fund Holders: 293

Amazon.com, Inc. (NASDAQ:AMZN) is a massive tech company that offers services and products related to e-commerce, cloud computing, digital streaming, and AI.

On January 25, Amazon.com, Inc. (NASDAQ:AMZN) announced that Amazon Web Services will invest $10 billion to construct two data center complexes in Mississippi. The company is looking to expand its operations in the state and boost the economy by creating new jobs.

According to Insider Monkey’s database, 293 hedge funds had investments in Amazon.com, Inc. (NASDAQ:AMZN)’s stock in Q4, up from 286 in the previous quarter. 

Amazon.com, Inc. (NASDAQ:AMZN) was mentioned in Polen Capital’s fourth quarter 2023 investor letter. Here is what it said:

“For the full year, the top relative and absolute contributors were Amazon.com, Inc. (NASDAQ:AMZN), Salesforce, and ServiceNow. Amazon shares appreciated 88% in 2023, driven primarily by rapidly expanding operating profit margins and free cash flow growth. After the pandemic, Amazon experienced a period of inefficiency and overinvestment in its distribution and logistics infrastructure. Amazon is now leveraging these investments as growth returned to its e-commerce business in 2023 after a highly unusual 2022. At the same time, Amazon’s rapidly growing and high-margin advertising business is contributing strongly to the entire company’s operating profit growth. The AWS (Amazon Web Services) cloud infrastructure and services business continued to slow in 2023 as customers anticipating a more difficult economic environment looked to save money on their cloud spend, but these cloud spending optimizations began to stabilize in the second half of 2023. We now expect customer interest in generative AI will begin to contribute to growth.”

1. Microsoft Corporation (NASDAQ:MSFT)

Number of Hedge Fund Holders: 302

Microsoft Corporation (NASDAQ:MSFT) is one of the world’s biggest tech companies; its well-known products include its signature operating systems, video games, and more.

On January 25, Microsoft Corporation (NASDAQ:MSFT) announced a five-year partnership with Eviden, an extension to the existing collaboration between the two companies, to further develop and distribute Data & AI, Copilot, and cloud transformation solutions.

Vulcan Value Partners mentioned Microsoft Corporation (NASDAQ:MSFT) in its fourth quarter 2023 investor letter. Here is what it said:

“Microsoft Corporation (NASDAQ:MSFT) is the world’s largest software company with a broad range of offerings including Microsoft Office, gaming, Azure cloud computing, LinkedIn, and more. The company experienced a good quarter with solid growth and strong margins. The company is benefiting from its investments in artificial intelligence. Microsoft is deeply entrenched within its customer base, has high switching costs, and is benefiting from growth tailwinds such as cloud computing and artificial intelligence. We think an underappreciated strength of Microsoft’s business model is that not only are its products designed to work together, but it is also more economical for the customer when multiple products are bundled together. This bundling approach positions Microsoft well to gain market share over time.”

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