We recently compiled a list of the 8 Most Profitable Large Cap Stocks To Invest In. In this article, we are going to take a look at where Booking Holdings Inc. (NASDAQ:BKNG) stands against the other profitable large cap stocks.
US Stocks Surge as Economic Outlook Brightens
In the second half of 2024, the financial markets are navigating a complex landscape marked by volatility and cautious optimism. Recent reports indicate that the US economy has shown resilience, with growth rates remaining solid despite concerns about inflation and potential recession. Analysts from JPMorgan Asset Management highlight that the US economy has shown strong momentum in recent months, fueled by resilient consumer spending. Analysts suggest that with few excesses in cyclical sectors, the likelihood of a recession triggered by internal factors remains low. Moderate consumer spending is expected to support steady growth into 2025. However, with the upcoming US election, shifting monetary policies, and ongoing geopolitical tensions, there are external risks that could impact this expansion.
On October 9, 2024, US stocks rose for the second consecutive session, with the S&P 500 and Dow Jones Industrial Average closing at record highs. The S&P 500 climbed 0.71% to finish at 5,792.04, while the Nasdaq Composite gained 0.6%, closing at 18,291.62. The Dow surged by 431.63 points, or 1.03%, to settle at 42,512.00 and at a record close. Technology stocks led the rally, reflecting strong investor sentiment despite ongoing geopolitical concerns.
The market’s positive momentum followed the release of minutes from the Federal Reserve’s September meeting, which disclosed a preference among many participants for a larger rate cut. Mike Bailey, director of research at FBB Capital Partners, noted that the Fed’s actions are a key driver behind the market’s performance.
Overall, Wall Street is showing resilience, supported by optimism regarding the Fed’s ability to manage a soft landing for the economy, especially after the September jobs report showed strong growth in the labor market.
In a recent interview on CNBC’s “Closing Bell,” Malcolm Ethridge, managing partner at Capital Area Planning Group, shared his insights on the current state of the markets, particularly regarding mega-cap stocks and the impact of artificial intelligence (AI). Ethridge emphasized that the ongoing bull market, which has seen a remarkable 60% increase over the past two years, is likely to continue, driven primarily by advancements in AI technology. He noted that AI has demonstrated significant staying power, with companies like Microsoft and NVIDIA leading the charge. Ethridge posed an intriguing question: which stock will emerge as the next major player in the ongoing AI arms race?
Ethridge pointed out that mega-cap companies have not relied heavily on borrowing for growth. As the Federal Reserve begins to cut rates, he believes this will enable more companies to issue debt or borrow and invest in AI, potentially fueling further market expansion. He cautioned, however, that historical norms may not apply in this unique economic environment shaped by the COVID-19 pandemic. Overall, Ethridge remains optimistic about mega-cap stocks leading the way.
Methodology
To compile our list of the 8 most profitable large-cap stocks to invest in, we used stock screeners from Finviz and Yahoo Finance. First, we defined large-cap stocks as those with a market capitalization between $20 billion and $200 billion. Next, we focused on profitability by filtering for stocks that had an estimated 5-year EPS growth rate of over 10%. We sorted our results based on market capitalization and picked the top 20 stocks.
From this initial list of 20 profitable large-cap stocks, we further narrowed our choices to stocks that had positive trailing twelve-month (TTM) net income and stocks that have grown their net income positively over the past 5 years. To ensure the reliability of our findings, we consulted reputable sources such as SeekingAlpha, which provided insights into the net income compound annual growth rate (CAGR) over the past five years, and Macrotrends, which offered information on TTM net income.
Finally, from this list of large-cap stocks that met our criteria, we focused on the top 8 stocks most favored by institutional investors. Data for the hedge fund sentiment surrounding each stock was taken from Insider Monkey’s database of 912 elite hedge funds. The 8 most profitable large-cap stocks to invest in are ranked below in ascending order based on the number of hedge funds holding stakes in them as of Q2 2024.
Why do we care about what hedge funds do? 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 fast-paced travel agent making a bookings for a family vacation package.
Booking Holdings Inc. (NASDAQ:BKNG)
TTM Net Income: $5.03 Billion
5-Year Net Income CAGR: 3.89%
Number of Hedge Fund Holders: 96
Booking Holdings Inc. (NASDAQ:BKNG) is a leading online travel technology company that operates several well-known platforms, including Booking.com, Priceline, Agoda, KAYAK, and OpenTable. The company offers a wide range of travel services, allowing customers to book accommodations, rental cars, flights, vacation packages, and other travel-related services. With operations in over 200 countries and websites available in about 40 languages, the company caters to a global audience seeking convenient travel solutions.
Booking Holdings Inc. (NASDAQ:BKNG) is focused on enhancing the travel experience through several initiatives. These include advancing the company’s “Connected Trip” vision, expanding offerings, developing AI capabilities, and growing alternative accommodations.
The company’s alternative accommodation offerings at Booking.com are thriving as it benefits from an increase in available listings for travelers. By the end of Q2 2024, Booking Holdings Inc. (NASDAQ:BKNG) had around 7.8 million global alternative accommodation listings, which is about 11% higher than the same time last year.
Booking Holdings Inc. (NASDAQ:BKNG) has significantly increased its flight offerings. As a result, air tickets booked on its platforms rose by 28% compared to the previous year. This growth is largely due to the growth of Booking.com’s flight offering and strong performance in Agoda’s flight business.
By leveraging technology, such as generative AI for trip planning, the company is committed to improving customer engagement and satisfaction while also capitalizing on the expanding travel industry.
The company reported strong financial performance for Q2 2024, with room nights booked increasing by 7% compared to the same quarter last year. Booking Holdings Inc. (NASDAQ:BKNG) achieved a net income of $1.5 billion, reflecting an 18% rise from the prior-year quarter. Gross travel bookings reached $41.4 billion, a 4% increase, while total revenues grew by 7% to $5.9 billion. Additionally, the earnings per diluted share rose by 27% to $44.38.
Booking Holdings Inc. (NASDAQ:BKNG) also saw a positive cash flow situation, ending the quarter with $16.8 billion in cash and investments, up from $16.4 billion in the previous quarter. This increase was driven by approximately $2.4 billion in free cash flow generated during the quarter, despite returning about $1.9 billion to shareholders through share repurchases and dividends. Overall, the company demonstrates solid growth and financial stability.
As of the second quarter of 2024, BKNG was held by 96 hedge funds, according to Insider Monkey’s database. It ranks among the most profitable stocks.
Wedgewood Partners stated the following regarding Booking Holdings Inc. (NASDAQ:BKNG) in its second-quarter 2024 investor letter:
“Booking Holdings Inc. (NASDAQ:BKNG) contributed to performance as travel spending across the U.S. and Europe remains quite healthy, whereas the Company took share in alternative accommodations, and looks set to expand margins after a few years of reinvestment. The Company has also been aggressively reducing its share count at reasonably attractive valuation multiples. Booking should be able to compound earnings at an attractive, double-digit rate for the next few years given these various initiatives.”
Overall BKNG ranks 2nd on our list of the most profitable large cap stocks to invest in. While we acknowledge the potential of BKNG 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 time frame. If you are looking for an AI stock that is more promising than BKNG 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.