We recently published a list of 10 Best Fundamental Stocks to Buy According to Billionaires. In this article, we are going to take a look at whereMicrosoft Corporation (NASDAQ: MSFT) stands against other best fundamental stocks to buy according to billionaires.
As per Fitch Ratings, the US tariffs are now at levels that continue to transform the global economic outlook, meaningfully increasing the US recession risks as well as constraining the US Fed’s ability to reduce the interest rates further. The ratings agency believes that tariff hikes are expected to result in increased consumer prices and reduced corporate profits in the US. The increased prices can squeeze real wages, impacting consumer spending, with reduced profits and policy uncertainty weighing over business investments. Notably, upward pressure on goods prices due to tariffs would mean that the US Fed is likely to become more cautious when it comes to further rate cuts.
Tariffs Can Be Reduced, Says UBS
In the base case (to which UBS assigns a 50% probability), the firm anticipates tariffs to be reduced from the levels that have been announced. That being said, the process is expected to take some time. UBS anticipates that there can be a tariff-related slowdown in growth in Q2 and Q3. Even if tariffs get reduced by the end of the year, the shock and related uncertainty can result in a near-term slowdown in the broader US economy, impacting FY 2025 growth.
UBS believes that market uncertainty is expected to remain elevated, with investors focusing on potential downgrades to consensus US economic and earnings growth projections, the risk related to the tit-for-tat escalation, among others. Therefore, there can be an extended period of volatility for the broader US equities.
READ ALSO: 7 Best Stocks to Buy For Long-Term and 8 Cheap Jim Cramer Stocks to Invest In.
What Should Investors Do?
Despite the uncertainties, UBS expects that the market will end the year higher. Apart from themes of AI and Power and resources, the firm has identified longevity and companies benefiting from the megatrend as the third Transformational Innovation Opportunity. The investors can also consider using yield-generating strategies so that they can benefit from current increased levels of volatility. UBS says that since the tariffs have been announced, negotiations to soften can now start.
Furthermore, the tariff revenue can be utilised to offset the cost of extending tax cuts. Additionally, the Fed may respond to weakening growth by cutting interest rates. Morningstar believes that some of the leading mega-cap stocks rated as “wide moat” have experienced a decline this year. The firm believes that wide-moat stocks are the most attractively valued, and it sees value throughout the entire range of such stocks.
Our Methodology
To list the 10 Best Fundamental Stocks to Buy According to Billionaires, we sifted through Vanguard S&P 500 ETF and Insider Monkey’s exclusive database of billionaire stock holdings to shortlist the companies that have at least ~8% revenue and net income growth over the past 5 years. For the stocks with the same number of billionaire holdings, we have used the number of hedge fund investors as a secondary metric to rank the stocks, as of Q4 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 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
A development team working together to create the next version of Windows.
Microsoft Corporation (NASDAQ:MSFT)
5-year Revenue Growth: 14.2%
5-year Net Income Growth: 15.9%
Number of Billionaire Investors: 39
Number of Hedge Fund Holders: 317
RBC Capital Markets analyst Rishi Jaluria provided a price objective of $500 on Microsoft Corporation (NASDAQ: MSFT)’s stock, giving it an “Outperform” rating. The analyst mentioned that the investors might be underestimating its strength in generative AI. Furthermore, the company’s Azure cloud business can accelerate again due to AI demand and a healthy reputation as a leader in enterprise software and cloud infrastructure, says Jaluria. The analyst also highlighted that Microsoft Corporation (NASDAQ:MSFT) has plans to enter new areas of growth, such as hyperautomation, while also continuing to enhance Office software users.
The company’s Azure platform has been gaining market share against competitors. Microsoft Corporation (NASDAQ:MSFT)’s robust position in the public cloud market, together with the integration of AI models, offers a strong competitive advantage. The company’s ability to leverage existing customer relationships as well as cross-sell AI and cloud services throughout the diverse product portfolio further bolsters its market position. Generation Investment Management, an investment management firm, released its Q4 2024 investor letter. Here is what the fund said:
“Microsoft Corporation (NASDAQ:MSFT), the world’s largest software company, has been in the portfolio for over a decade. We like the firm because its products align closely with society’s evolving needs. As the world digitises, demand for Microsoft’s tools will continue to grow. The company enjoys a wide economic moat – built on its unique market position, deep customer understanding and extensive global footprint.
Microsoft’s management team has a long-term vision. It makes bold investments in future growth, most recently in AI. We forecast that the IT intensity of the economy will double over the next 15 years. Microsoft is a rare company with USD 250 billion in revenues, projected to grow at 16% annually over the next five years.14 Earnings-per share could grow faster. Despite its near-term valuation appearing high, we believe Microsoft is well positioned to lead in the AI era, potentially doubling or tripling its market share. Additionally, we expect returns on capital (ROC) for its AI related investments to match historical levels, despite market scepticism.
There are risks. Demand for AI systems may not materialise as expected, and increasing pricing power among suppliers like Nvidia could pressure margins. Still, from our analysis we see substantial long-term value in this name.”
Overall, MSFT ranks 2nd on our list of best fundamental stocks to buy according to billionaires. While we acknowledge the potential of MSFT as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for a deeply undervalued AI stock that is more promising than MSFT but that trades at less than 5 times its earnings, check out our report about this cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires.
Disclosure: None. This article is originally published at Insider Monkey.