We recently published a list of the 10 Best Stock Picks of Billionaire Leon Cooperman in 2024. Since Microsoft Corp (NASDAQ:MSFT) ranks 1st on the list, it deserves a deeper look.
Billionaire Leon Cooperman predicted in April that the US is headed for a financial crisis. Cooperman said that the Federal Reserve kept interest rates near zero, but raised them dramatically in a period of 12 months. The Omega Family Office chairman and CEO expects “one or two” rate cuts this year. He emphasized that the market remains overvalued.
In February last year, the billionaire said that the market was headed for a recession, and noted that the S&P 500 high of about 4,800 recorded in 2022 could “stand for some time.” In July 2022, while talking to Bloomberg, Cooperman said that he was “shocked” that interest rates were so low.
“I am of the view that equities are the best house in the financial asset in the neighborhood, but I don’t like the neighborhood, for a lot of reasons.”
Cooperman in the Bloomberg interview in 2022 had categorically said that sooner or later the strong dollar, prices of oil and the Fed would “lead us into a recession.” He went on to add that recession would be a “2023 event” and predicted that the market would bottom somewhere near 35% to 45% below its peak of 4800.
The billionaire had said that he would be “very surprised” if we were to see another bull market anytime soon, given his view that we’ve had one of the biggest bull runs driven by FAANG, SPACs and speculation. The AI revolution that started in 2023 was indeed a shocker for Cooperman as his recession predictions were proven wrong.
For this article we scanned billionaire Leon Cooperman’s Q1 portfolio and picked 10 stocks with the highest number of hedge fund investors. 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).
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Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders: 302
While Microsoft Corporation (NASDAQ:MSFT) is the ninth biggest holding of Leon Cooperman, the stock tops our list of the best stocks in Leon Cooperman’s portfolio based on hedge fund sentiment. A total of 302 hedge funds tracked by Insider Monkey had stakes in Microsoft Corporation (NASDAQ:MSFT). Cooperman’s stake in Microsoft Corporation (NASDAQ:MSFT) is valued at $103 million.
New Street Research started covering the stock with a Buy rating. The firm said that Microsoft Corp (NASDAQ:MSFT) is well positioned to grow profit in the “low teens for years to come” even if the AI revolution fails to pan out. New Street Research has a $570 price target on Microsoft Corp (NASDAQ:MSFT).
Analysts believe Microsoft Corp’s (NASDAQ:MSFT) AI ecosystem around its products would strengthen its Cloud division thanks to Microsoft Corp’s (NASDAQ:MSFT) integration of AI into its Cloud products. Microsoft Corp’s (NASDAQ:MSFT) Intelligent Cloud segment’s profit in the latest quarter totaled $12.51 billion, a whopping 32% growth on a YoY basis.
Microsoft Corp’s (NASDAQ:MSFT) huge investments to revive its Search business are also working. Bing’s market share has jumped to 3.64% as of April 2024, a 0.88 points gain on a YoY basis.
Wall Street expects Microsoft Corp’s (NASDAQ:MSFT) earnings to grow 12.50% next year. The stock’s forward P/E of 31 based on 2025 EPS makes it look attractive at the current levels. Average analyst estimate for Microsoft Corp (NASDAQ:MSFT) is $483, which presents a 14% upside potential from the current levels.
Vulcan Value Partners appreciated Microsoft Corporation’s (NASDAQ:MSFT) execution in its Q1 2024 investor letter. Here is what the firm said:
“Microsoft Corporation (NASDAQ:MSFT) is the world’s largest software company with a broad range of offerings including Microsoft office, gaming, Azure cloud computing, LinkedIn, and more. It was a material contributor for the second consecutive quarter, and we discussed it at length in last quarter’s letter. The company continues to execute well.”
Overall, Microsoft Corp (NASDAQ:MSFT) ranks 1st on Insider Monkey’s list titled 10 Best Stock Picks of Billionaire Leon Cooperman in 2024. While we acknowledge the potential of Microsoft Corp (NASDAQ:MSFT), 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 Microsoft Corp (NASDAQ:MSFT) 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.
