We recently compiled a list titled Starter Stock Portfolio: 10 Safe Stocks To Invest In Now. In this article, we are going to take a look at where Meta Platforms Inc (NASDAQ:META) stands against the other safe stocks to invest in.
The Market Outlook for the Rest of 2024
A probable rate cut has provided hope for the economy. Despite that, the impact on financial markets and stocks remains uncertain. On September 4, Adam Parker, Trivariate Research founder and CEO, appeared in an interview on CNBC. Parker was not surprised that tech stocks were down by close to 4% at the beginning of September, that too right before an impending rate cut. Parker highlights that the inconsistency in the market at the moment is not normal, and with multiple rate cuts over the next two years, he has no reason to hold a positive economic outlook. He suggests that eight probable rate cuts indicate that the economy is slowing, consumer spending is declining, and unemployment is rising, all of which are not good signs for the market. The interviewer counter questions that eight rate cuts with a 25 basis point reduction are not as disastrous to presume a faltering economy. Parker then highlights that rate cuts in the past have been supported by consistent data, an incremental fiscal, and an expansion of the balance sheet, all of which are currently out of the picture. You can also read our piece on the best battery stocks to buy according to short sellers.
The Possible Impact of Rate Cuts on Stocks
On September 2, CNBC published a detailed report on the impact of rate cuts on the stock market in the United States. The Fed, in the footsteps of countries in Europe and Asia, recently announced an easing cycle, after a long period of high interest rates. As per current pricing data, the Fed is expected to have three 25-basis point cuts by the end of this year. Speaking of the global economic outlook, 2025 will see a lower-rate environment followed by easing inflationary pressures. However, the fear of recession in the United States tells another story. Analysts believe that the last four months of 2024 will be considerably weak and choppy amid geopolitical factors, uncertainty from the AI sector, corporate earnings, and most importantly, an overdue consolidation correction.
On September 3, JP Morgan reported that investors must not expect the cutting cycle to provide a fresh start to stocks. Leading strategists at the firm suggested that the rate cut cycle is rather reactive and is in response to a wilting economy, having little to no impact on stocks. Paul Christopher, head of global investment strategy, on the other hand, suggested that the market environment today resembles the market in 1995, increasing hopes for a market upside amid stable GDP strength and forecasts.
Bear market or bull market, certain stocks deserve a place in every investor’s portfolio. These are long-term opportunities to hold and will continue to provide superior returns, as they have for decades.
Our Methodology
To come up with the 10 safe stocks to invest in now, we looked for well-established companies in the energy, finance, healthcare, technology, and fast-moving consumer goods (FMCG) industries. These stocks have a history of performing well and boasting consistent financial results, making them ideal and safe long term investments for beginners. We then picked the top 10 stocks that were the most widely held by money managers and ranked them in ascending order of the number of hedge funds that have stakes in them, as of Q2 2024.
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 team of developers working in unison to create the company’s messaging application.
Meta Platforms Inc (NASDAQ:META)
Number of Hedge Fund Holders: 219
Meta Platforms Inc (NASDAQ:META) ranks third on our list of the safest stocks to invest in. Meta Platforms Inc (NASDAQ:META), commonly referred to as Meta and formerly known as Facebook, is a technology conglomerate behind the leading social media platforms such as Facebook, Instagram, Threads, and WhatsApp. The company currently boasts a user base of 3.27 billion daily active users across all its social media platforms, up by 7% year-over-year.
Meta Platforms Inc (NASDAQ:META) is making incredible feats in artificial intelligence. During the second quarter, the company launched its AI Studio in the United States, a platform for people to create, share, and discover artificial intelligence models. Users can use the studio to create characters and reach a wider audience. The characters are customizable and can be used by creators as an extension of themselves, hereby enhancing direct interactions with viewers.
Meta Platforms Inc (NASDAQ:META) has a strong position in the market, making it one of the safest stocks in the market right now. By 2026, the company expects to own the best recommendation technology on its social media platforms. Meta Platforms Inc (NASDAQ:META) is achieving this by expanding its collection of open models and tools for generative artificial intelligence. As of today, Meta’s video-enhancing tools have increased private sharing across apps by more than 80% year-over-year, making it easier for people to find, explore, and consume media.
Overall, Meta Platforms Inc (NASDAQ:META) reported $39.1 billion in revenue, in the second quarter of 2024, up by 22% year-over-year. The company also generated $10.9 billion in free cash flow supporting its dividend payouts and stock repurchases. With strong expectations ahead of 2024, the company projects revenue to reach $38.5 billion in the third quarter of 2024.
META is currently trading at 25 times this year’s earnings estimate and the sector forward P/E is 13. While META is trading at a higher multiple, its earnings are expected to grow by 43% this year to $21.2.
Mar Vista Focus strategy stated the following regarding Meta Platforms, Inc. (NASDAQ:META) in its Q2 2024 investor letter:
“During the quarter, we established new investments in Broadcom and Meta Platforms, Inc. (NASDAQ:META). We previously divested from Meta during a period of stagnant advertising growth and the company’s initial, significant investment in the metaverse project. At that time, investors appeared complacent to the risks associated to an increasingly competitive landscape, and the Street’s robust financial expectations as the company transitioned towards monetizing short-format video (Reels). The subsequent decline in Meta’s stock price during 2022 reflected these concerns.
Since then, Meta has demonstrably shifted its strategic focus. The company has prioritized operational efficiency, implemented strategies to monetize Reels effectively, and initiated a robust artificial intelligence (AI) development program. We believe the focus on AI represents a more prudent capital allocation strategy compared to the earlier metaverse initiative. Meta AI holds significant potential to unlock substantial monetization opportunities and enhance user engagement, while maintaining tight controls on operating costs…”(Click here to read the full text)
Overall META ranks 3rd among the safe stocks to invest in. While we acknowledge the potential of META 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 META 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 on Insider Monkey.