We recently published a list of Jim Cramer’s Latest Mad Money Episode: Top 10 Stocks to Watch. In this article, we are going to take a look at where Microsoft Corp (NASDAQ:MSFT) stands against other stocks on Jim Cramer’s top stocks to watch list.
Jim Cramer in a latest program on CNBC made the case for investing in individual stocks to enjoy bigger gains when compared to investing in just the broader market index funds. Cramer said that while it’s “easy” to just park your money in index funds and let the market do the work, investing in individual stocks can give you some “serious gains.”
“I think you should own more than just an index fund because buying individual stocks with special characteristics is how you can rack up some really serious gains. That includes often scoring speculative stocks. Far too often, we become snobs when we talk stocks. So many experts think that if you venture past the index, you could fall off some sort of intellectual cliff that makes any gains null and void. It’s as if the huge swath of points you could have gained simply don’t count. But that, people, is nonsense.”
Cramer said banks do not “care” where the money comes from and neither should investors. He urged investors to not always avoid speculation.
“I come tonight to praise speculation. Here, I’m the only one on TV who actually does this, believe it or not, and to show you how well you could have done if you picked some high flyers for your portfolio and simply held them for the long ride, along with your prosaic, precious index funds.”
READ ALSO: Jim Cramer’s Latest Lightning Round: 11 Stocks to Watch and Jim Cramer on AMD and Other Stocks.
For this article we watched the latest programs of Jim Cramer aired on CNBC and picked 10 stocks he’s talking about. With each company we have mentioned the 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).
A development team working together to create the next version of Windows.
Microsoft Corp (NASDAQ:MSFT)
Number of Hedge Fund Investors: 279
Answering a question about Microsoft Corp (NASDAQ:MSFT) and the declines it faced after its latest quarterly results, Cramer said:
“It should not take a beating. I thought they did a good job, the sellers were bullheaded. You know what, the stock is starting to make you and me look good.”
Microsoft Corp (NASDAQ:MSFT) shares recently fell after the company reported its latest quarterly results. Analysts believe most of the revenue beat came from PC segment, while investors were paying more attention to AI and Azure. Azure’s 34% growth met expectations, though guidance for next quarter fell short, projecting between 31% and 32% growth—1 percentage point below forecasts. This dip is attributed to delays in data center capacity from third-party providers, though Azure’s consumption trends remained steady.
Investors hoping for a rebound in IT spending were likely disappointed, as stable Azure consumption suggests no significant uptick in the second half of the year. In addition, the lower-than-expected Q2 guidance underscored tempered growth expectations.
AI services, however, contributed a robust 12 points to Azure’s growth, a steady continuation from the previous quarter. Microsoft’s management confirmed strong demand for AI services, although supply constraints are limiting further expansion. Microsoft Corp (NASDAQ:MSFT) anticipates AI-related revenues, including M365 Copilot and Azure AI, could reach $10 billion annually by next quarter—making it one of the fastest-growing segments in Microsoft Corp (NASDAQ:MSFT)’s history.
Baron Opportunity Fund stated the following regarding Microsoft Corporation (NASDAQ:MSFT) in its Q3 2024 investor letter:
“Microsoft Corporation (NASDAQ:MSFT) is the world’s largest software and cloud computing company. Microsoft was traditionally known for its Windows and Office products, but over the last five years it has built a $147 billion run-rate cloud business, including its Azure cloud infrastructure service and its Office 365 and Dynamics 365 cloud-delivered applications. Shares gave back some gains from strong performance over the first half of this year. For the fourth quarter of fiscal year 2024, Microsoft reported a strong quarter with total revenue growing 16%, in line with the Street; Microsoft Cloud up 22%; Azure up 30%; 43% operating income margins; and 36% free cash flow margins. Core Azure growth came in one point shy of expectations, however, due to a soft European market and continued constraints on AI compute capacity. In the same vein, while Microsoft reiterated its fiscal 2025 targets of double-digit top-line and operating income growth, quarterly guidance called for Azure growth to slow a bit before accelerating in the back half of the fiscal year, as capital expenditures increase, yielding an expansion of AI compute capacity. We believe this investment is a leading indicator for growth, with more than half of the spend related to durable land and data center build outs, which should monetize over the next 15-plus years. We remain confident that Microsoft is one of the best-positioned companies across the overlapping software, cloud computing, and AI landscapes, and we remain investors.”
Overall, MSFT ranks 2nd on our list of Jim Cramer’s top stocks to watch. While we acknowledge the potential of MSFT, our conviction lies in the belief that under-the-radar 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 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.
