We recently compiled a list of the 10 Best NASDAQ Stocks To Invest In Right Now. In this article, we are going to take a look at where Amazon.com, Inc. (NASDAQ:AMZN) stands against the other NASDAQ stocks.
This year has been a healthy year for the American stock market, fueled by a strong performance from technology stocks. Several indices capped their best week of the year in early September as stocks rose ahead of the Federal Reserve meeting where the central bank was expected to cut interest rates. NASDAQ has led the charge and registered a 20% growth during the first half.
While the index lists over 3,100 companies from various sectors, the rally has been led by its top seven holdings which account for 52% of the index. All of them being tech stocks. There is a mix of optimism and skepticism among investors on whether NASDAQ will be able to continue its good run over the second half of the year. Historical data over the past decade shows that in most instances, NASDAQ has finished stronger during the back half of the year. There have only been two years between 2014 and 2023 during which NASDAQ’s year-end returns were lower than first-half returns.
However, Fundstrat Global Advisors’ Tom Lee, who is generally bullish on the stock market, told CNBC earlier this month that investors need to be cautious, as stocks could fall 10% during the next eight weeks amid interest rate cuts and the nervousness around the upcoming presidential elections. The co-founder of the research firm also suggested that if the dip is too strong, it should be viewed as a buying opportunity for investors. Lee has largely been on the money and nailed most stock calls this year.
Other analysts also anticipate market volatility ahead of the presidential elections. Liz Young Thomas, the head of investment strategy at SoFi, while talking to Business Insider noted that stock activity lags between June and August while traders are on vacation. This results in strong market performance aided by thinner trade volumes. The activity jumps up significantly in September when they return to their desks, which often leads to stock price volatility. According to her, a two percent shift in share price in either direction has become the norm in September. However, during election years, the volatility is at its peak in mid-October instead of September, and the market returns to normalcy after the results are announced.
LPL Financial’s Adam Turnquist also expects seasonal shakiness in the months ahead, but pointed out, like Lee did, that the dip presents an opportunity to buy when the share is trading low and earn high returns when the market stabilizes.
Buying the September or October lows has been a very good trade. October, things start to improve, and then you have this November, December, year-end rally, typically very high average returns and high positivity rates for those months.
Both Turnquist and Young Thomas agreed that existing portfolios should not be readjusted because of seasonal volatility because it is short-term and hard to forecast.
With that said, let’s head over to see some of the best NASDAQ stocks to buy right now, given the current trends and future projections.
Methodology
We scanned Insider Monkey’s database of 912 hedge funds for the second quarter of 2024 to look for stocks listed on NASDAQ and picked the top 10 companies with the highest number of hedge funds having stakes in them. We ranked them in ascending order of hedge fund holders in each company.
Why are we interested in 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 customer entering an internet retail store, illustrating the convenience of online shopping.
Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Fund Holders: 308
Amazon.com, Inc. (NASDAQ:AMZN) is an American technology company that deals in e-commerce, online advertising, cloud computing, artificial intelligence, and digital streaming. It is the best NASDAQ stock to invest in right now with sales soaring, driven by advancements in artificial intelligence and accelerated growth in the company’s AWS division. Moreover, according to Insider Monkey, 308 hedge funds had investments in the tech giant as of Q2 2024, with the highest stake held by Fisher Asset Management, valued at $8.4 billion.
During Q2, the company’s revenue was worth $148 billion, registering an 11% increase year-over-year. Operating income surged 91% from the same period last year to a total of $14.7 billion. Revenue for AWS was recorded at $26.3 billion, up 18.8%. The segment now has an annualized revenue run rate of over $105 billion. Advertising revenue for the quarter also crossed the $2 billion mark, contributing to the more than $50 billion advertising revenue earned by Amazon.com, Inc. (NASDAQ:AMZN) in the last 12 months. Store sales grew 9% in North America and 10% in the international markets, fueled by fast delivery and lower prices.
The company has also been spending heavily on capital expenditure and incurred $30.5 billion in capital investments during the first half of 2024. The management expects the figure to be higher during the second half of the year, mainly driven by the need for AWS infrastructure as demand surges for both generative AI and our non-generative AI workloads. Amazon’s leadership is bullish about the long-term impact of artificial intelligence on the business.
Investors also remain confident about the company’s trajectory, especially given the strong performance of AWS, where backlog increased 19% year-over-year to reach a staggering $156.6 billion at the end of Q2, indicating strong future demand. The segment’s profitability is also improving and has jumped from the mid-20% range last year to over 30% this year due to strategic decisions made over the past year to eliminate inefficiencies and reduce costs.
Ithaka US Growth Strategy stated the following regarding Amazon.com, Inc. (NASDAQ:AMZN) in its Q2 2024 investor letter:
Founded in 1994, Amazon.com, Inc. (NASDAQ:AMZN) has evolved from its early roots as an online bookstore to become one of the world’s largest eCommerce retailers. At the end of 2023, Amazon stood poised to capture ~40% of all US e-commerce sales, representing five times more share than the next closest competitor. In addition to eCommerce, Amazon Web Services (“AWS”) has become the market leader in outsourced cloud infrastructure. Further, Amazon Advertising is garnering a significant share in digital advertising, particularly product placement ads, thanks to consumers beginning their product searches on Amazon’s site. Amazon’s stock appreciated on the back of stabilization of the company’s cloud computing segment and increased confidence management would be able to contain expenses and push operating margins above prior peaks in the near-to-medium term.
The only bearish concern at this point is around the fluctuating operating margins of AWS. However, one reason behind that is the investments Amazon is making to improve efficiency and in building new products. The overall outlook for the company is positive. There is consensus among Street analysts on the stock’s Strong Buy rating with forecasts of a 16% upside in its share price.
Overall AMZN ranks 1st our list of the best NASDAQ stocks to invest in right now. While we acknowledge the potential of AMZN as an investment, 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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Disclosure: None. This article is originally published at Insider Monkey.
