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 Microsoft Corporation (NASDAQ:MSFT) 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 development team working together to create the next version of Windows.
Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders: 279
Microsoft Corporation (NASDAQ:MSFT) is an American multinational company headquartered in Redmond, Washington, which is best known for its software products and operating systems. It has nearly tripled its valuation over the last three years and reached the $3 trillion mark. It is the second most valuable corporation in the world.
According to Insider Monkey’s database, 279 hedge funds held stakes in the company as of the second quarter of 2024. Microsoft Corporation (NASDAQ:MSFT) continues to garner immense investor confidence through its strong financial performance. During Q4 2024, the company generated a revenue of $64.7 billion, which took the annual revenue to $245 billion, representing a 15% increase year-over-year. EPS for the quarter registered a 10% growth to reach $2.95 per share, beating analysts’ expectations of $2.94.
These robust results were largely driven by Microsoft Cloud, which contributed $135 billion of the company’s overall revenue in FY2024, up 23% YoY. The company’s commercial bookings also registered a 17% increase, driven by millions of dollars of contracts for both Microsoft 365 and Azure, indicating strong customer commitment. Microsoft Corporation (NASDAQ:MSFT) anticipates the trends to continue in FY25 and has projected double-digit growth for both revenue and operating income for the year.
Another reason behind investor confidence is the company’s increased spending on AI and cloud infrastructure. Microsoft spent $19 billion in capital expenditure in Q4 alone, and investors believe that this increased spending will help the company stay at par with, if not outperform, competitors in the market. Mar Vista Focus strategy stated the following regarding Microsoft Corporation (NASDAQ:MSFT) in its Q2 2024 investor letter:
Microsoft Corporation (NASDAQ:MSFT) continues to occupy a strong position, poised to capture market share as businesses, both large and small, navigate the transition to a digital-first landscape and embrace generative AI-driven solutions. The company’s commanding presence in the enterprise arena, combined with its comprehensive product portfolio encompassing Infrastructure-as-a-Service (IaaS), Platform-as-a-Service (PaaS), and Software-as-a-Service (SaaS), establishes it as a crucial provider of IT solutions for companies of all scales. Microsoft is effectively executing its strategy in a sizable market by offering a roadmap for digital transformation and the adoption of innovative, AI-driven solutions, such as ChatGPT while enhancing productivity and reducing costs. Consequently, we anticipate that Microsoft’s solutions should exhibit resilience even in a more challenging macroeconomic environment, supporting low-double-digit growth in intrinsic value within our investment horizon.
There were some segments where revenue decreased. Xbox hardware sales declined 42% during the quarter and devices revenue also experienced an 11% dip. However, the company believes this was due to their focus being more on other premium products with a higher profit margin. On the whole, there is consensus among Street analysts about Microsoft being one of the best NASDAQ stocks to invest in right now. It has a Strong Buy rating and a 12.60% upward potential in share price.
Overall MSFT ranks 2nd our list of the best NASDAQ stocks to invest in right now. While we acknowledge the potential of MSFT 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 MSFT but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.
Disclosure: None. This article is originally published at Insider Monkey.
