1. Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders: 279
5-Year Average Annual Revenue Growth Rate: 14.26%
5-Year Average Payout Ratio: 28.30%
Microsoft Corporation (NASDAQ:MSFT) tops our list of the best stocks to buy for medium term. The Washington-based multinational technology company is best known for its wide range of innovative software products. The stock has surged by over 18% in 2024 so far because of its strong business momentum. In fiscal Q4 2024, the company generated $64.7 billion in revenues, up 15% from the same period last year. Its net income also showed a 10% YoY growth at $22 billion. The company’s strong performance this fiscal year highlights its innovation and the continued confidence of its customers. As a platform-focused organization, it is committed to meeting critical customer needs through its extensive platforms, while positioning itself as a leader in the AI era.
The company’s AI segment was also appreciated by Fred Alger Management in its Q2 2024 investor letter. Here is what the firm said:
“Microsoft Corporation (NASDAQ:MSFT) is a beneficiary of corporate America’s transformative digitization. The company operates through three segments: Productivity and Business Processes (Office, LinkedIn, and Dynamics), Intelligent Cloud (Server Products and Cloud Services, Azure, and Enterprise Services), and More Personal Computing (Windows, Devices, Gaming, and Search). During the quarter, shares contributed to performance after the company reported strong fiscal third quarter results, underscoring its leadership position in the cloud and highlighted its role as a primary facilitator and beneficiary of AI adoption. Company revenue growth, operating margin, and earnings growth surpassed consensus expectations. The utility scale Azure cloud business grew 31% in constant currency of which 7% was AI related versus 3% two quarters ago. Further, management noted most of the AI revenue continues to stem from inference rather than training indicating high quality AI applications by Microsoft’s clients. Management also indicated that the significant cost-cutting programs in corporate America are done, suggesting that the cost optimization headwinds previously impacting Azure’s growth are over. Separately, management provided color on their new AI-productivity tool, Copilot, noting that approximately 60% of Fortune 500 companies are already using Copilot, and that the quarter witnessed a 50% increase in Copilot assistance integration within Teams. We continue to believe that Microsoft has the potential to hold a leading position in AI, given its innovative approach and demonstrated high unit volume growth opportunity.”
Microsoft Corporation (NASDAQ:MSFT) declared a 10.7% hike in its quarterly dividend on September 17 to $0.83 per share. This was the company’s 19th consecutive year of dividend growth, which makes it one of the best stocks to buy. As of September 19, the stock supports a dividend yield of 0.68%.
Microsoft Corporation (NASDAQ:MSFT) was one of the most popular stocks among hedge funds tracked by Insider Monkey at the end of Q2 2024. Of the 912 elite money makers in our database, 279 hedge funds owned stakes in the company, worth over $89 billion in total. With nearly 35 million shares, Bill & Melinda Gates Foundation Trust was the company’s leading stakeholder in Q2.
Overall, Microsoft Corporation (NASDAQ:MSFT) ranks first on our list. While we acknowledge the potential for MSFT to grow, our conviction lies in the belief that some 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 MSFT but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
