We recently compiled a list of the 7 Best Fast Money Stocks To Buy According To Hedge Funds. In this article, we are going to take a look at where Alphabet Inc. (NASDAQ:GOOGL) stands against the other fast money stocks.
As the financial world grapples with shifting economic indicators and political uncertainty, insights from leading experts offer a crucial perspective on what lies ahead. With inflation showing signs of easing and the Federal Reserve signaling a likely rate cut, the focus now shifts to earnings performance and broader economic trends. Adding to this complexity are political developments, such as the possibility of a Republican sweep.
The latest June 2024 inflation report revealed a softer-than-expected outcome, causing varied reactions across major stock indices. Initially, futures surged in response, but have since fluctuated. Currently, the Dow is showing gains, the S&P is up slightly, and the NASDAQ is just below the flatline. Inflation dropped by a tenth of a percent month-over-month, contrary to economists’ forecasts of a rise.
Chris Harvey, Head of Equity Strategy at Wells Fargo Securities, and Mike Feroli, Chief U.S. Economist at JPMorgan, shared their perspectives on the current financial situation in an episode of CNBC’s Fast Money. Chris Harvey is cautious about the concept of market rotation due to ongoing uncertainties about earnings. While he doesn’t oppose rotation, he pointed out that investor confidence is still shaky.
“That’s right. We’re not against rotation; we’re just waiting for more clarity. Many investors are uncertain about earnings. Until we see a situation where companies don’t go down on bad news, we won’t be fully convinced about the rotation. We want people to believe that numbers will improve and that things will get better. However, right now, bad news is bad news, and that suggests the rotation may not be sustainable.”
In contrast, Mike Feroli discussed the anticipated rate cuts. He believes that the Fed is likely to lower rates soon due to its more aggressive stance. Feroli suggests that the economy is weaker than some might think, which supports the expectation of rate cuts. He noted that we have probably reached the peak for interest rates and that future attention will shift to earnings performance.
Feroli also explained why he updated his forecast to September. This change is based on recent CPI data showing significant inflation drops over the past year and a rise in unemployment. He expects the Fed to begin cutting rates in September, with additional cuts likely on a quarterly basis.
“Yes, the rate cuts are coming. The Fed has signaled their intention to cut rates more aggressively than they have in the past. We also believe the economy isn’t as strong as some might think, so we expect rates to come down. I think we’ve already hit the peak for rates. Right now, it’s really about earnings.”
However, if the labor market weakens further, the pace of these cuts could accelerate. Regarding the potential impact of a Donald Trump presidency and a possible Republican sweep, Feroli highlighted the uncertainties. A Republican sweep could lead to more tax cuts, possibly extending or expanding those from 2017, which might boost growth but also increase deficits.
Additionally, trade and immigration policies remain unpredictable. While deregulation might mitigate some negative effects, the overall policy environment is still uncertain. Finally, when asked about the implications of a Republican sweep for bond markets, Feroli expressed concern about the deficit trajectory. Extending all tax cuts, particularly in a more Republican-leaning scenario, could exacerbate the deficit problem.
In another episode of Fast Money, Chris Mman, Chief Investment Officer at Lafayette College, discussed the potential timing for Federal Reserve rate cuts, emphasizing that September appears to be a strong possibility. He notes, however, that the Fed will be influenced by upcoming economic reports. Mman also highlights concerns over equity valuations and the potential impact of delayed rate cuts on the labor market.
“I believe July should have been on the table based on today’s report. However, the Fed usually prefers to signal their plans in advance. My expectation was that they probably wouldn’t preemptively set up for September, but given today’s report, it seems quite likely they will. The Fed might use upcoming meetings and communications to guide the market’s expectations.”
As political uncertainties, including the Democratic ticket’s spotlight, add to the mix, Mman reassures that the Fed is likely to focus on economic data rather than political pressures. He stresses that while inflation remains a critical issue, the Fed’s priority will be managing employment trends to avoid a deeper economic downturn.
“Even if inflation accelerates temporarily, it’s unlikely to concern the Fed greatly. Currently, the focus has shifted more to employment reports rather than inflation. If employment were to unexpectedly strengthen, it could reduce the Fed’s incentive to cut rates. Ultimately, the goal is to avoid a severe economic slowdown that would force them into aggressive rate cuts.”
Our Methodology
In this article, we review recent episodes of CNBC’s Fast Money, where Fast Money traders highlighted stocks with high growth potential. We tracked each stock mentioned and ranked them based on frequency. From this, we identified the top 7 stocks that were mentioned a lot by Fast Money traders and were widely held by hedge funds. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q2 2024.
At Insider Monkey we are obsessed with 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).
A user’s hands typing a search query into a Google Search box, emphasizing the company’s search capabilities.
Alphabet Inc. (NASDAQ:GOOGL)
Number of Hedge Fund Investors: 165
Alphabet Inc. (NASDAQ:GOOGL)’s strong position in global search through Google provides a stable base for its advertising revenue, which continues to grow as more businesses shift to digital platforms. This foundation is strengthened by the success of YouTube and Google Ads, which consistently attract significant advertiser spending, solidifying Alphabet Inc. (NASDAQ:GOOGL)’s market leadership. In addition to advertising, Alphabet Inc. (NASDAQ:GOOGL)’s Google Cloud division plays a crucial role in the company’s growth, benefiting from the rapidly expanding cloud market. Google Cloud’s innovative services and increasing market share are diversifying Alphabet Inc. (NASDAQ:GOOGL)’s revenue streams.
Furthermore, Alphabet Inc. (NASDAQ:GOOGL)’s investments in AI, including advancements in machine learning and autonomous driving through Waymo, place the company at the forefront of technological innovation with the potential for substantial long-term value. Financially, Alphabet Inc. (NASDAQ:GOOGL) demonstrates consistent revenue growth and maintains healthy operating margins, thanks to its strong advertising business. Alphabet Inc. (NASDAQ:GOOGL) exceeded earnings expectations, reporting an EPS of $1.89 compared to the anticipated $1.85. Alphabet Inc. (NASDAQ:GOOGL)’s substantial cash reserves give it the flexibility to invest in new growth areas and return value to shareholders through share buybacks.
Mar Vista Focus strategy stated the following regarding Alphabet Inc. (NASDAQ:GOOG) in its Q2 2024 investor letter:
“Alphabet Inc. (NASDAQ:GOOG) reported robust quarterly financials, demonstrating accelerated revenue growth and improved margins from restructuring efforts. The company’s core advertising business is rebounding after a challenging 2022-2023 period, when advertisers curtailed spending due to economic concerns. While this quarter’s exceptional growth rate may not persist, Alphabet’s performance indicates it is likely to exceed our annual projections.
Following Meta’s lead, Alphabet is adopting a more stringent approach to expenses. The company continues to reduce headcount and consolidate teams, aiming to counterbalance the impact of infrastructure investments on profitability. Alphabet’s better-than-expected revenue and earnings underscore both the resilience of its core business and management’s early success in sustainably restructuring the cost base.
Notably, AI advancements are already showing promising results, enhancing consumer engagement, and improving advertiser performance. These developments position Alphabet favorably in an increasingly AI-driven digital landscape.”
Overall GOOGL ranks 4th on our list of the best fast money stocks to buy according to hedge funds. While we acknowledge the potential of GOOGL as an investment, our conviction lies in the belief that under the radar 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 GOOGL 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.
