In a recent episode of Mad Money, Jim Cramer advised investors to hold off on selling stocks, anticipating a rebound once the market’s downturn ended. This strategy proved effective as the average investor saw gains, with the Dow rising by 484 points or 1.16%, and the NASDAQ also climbing by 1.16%. This performance suggests that selling during Friday’s decline was not the best move.
“Last week, I advised you to hold off on selling everything and just wait, as I believed that once the pain ended, we would see a rebound. The average investor saw gains, with the Dow up 484 points, or 1.16%, and the NASDAQ also climbing 1.16%. While it might not be a full recovery, it shows that selling into Friday’s downturn wasn’t the best strategy.”
The previous week was challenging for economically sensitive stocks and tech stocks, despite the August employment report showing modest growth and a downward revision for July. The recent report seemed favorable for those hoping for Federal Reserve rate cuts, as it presented a balanced scenario of neither too strong nor too weak. Nonetheless, Wall Street reacted negatively, with investors moving away from cyclical stocks in favor of recession-proof sectors like consumer goods and pharmaceuticals. Industrials and semiconductors were particularly affected.
Jim Cramer observed that on Monday, recession-proof stocks such as pharmaceuticals, drug wholesalers, and medical devices continued to perform strongly. However, this trend is concerning as these stocks have surged significantly and might be due for a correction.
“Recession-proof stocks like pharmaceuticals, drug wholesalers, and medical devices continued to perform well, which is dangerous as these stocks have seen parabolic gains and could be due for a correction.”
According to Cramer, historically, when the Federal Reserve is about to cut rates, it’s a signal to shift investment strategies. With the Fed moving towards easing and a rate cut expected next week, Cramer suggests it’s time to reconsider holding recession-proof stocks. Instead, investors should look at more cyclical companies that could benefit from economic stimulation. While investing in cyclical stocks during a downturn can be challenging, anticipating a positive impact from the Fed’s rate cuts could make these stocks attractive.
“Historically, when the Fed is about to start cutting rates, we know that it’s time to shift focus. With the Fed leaning towards easing and an expected rate cut next week, it’s time to consider moving away from recession-proof stocks and investing in more cyclical companies. While it’s challenging to buy cyclical stocks during a slowdown, anticipating that the Fed will boost the economy can make them strong investment opportunities. It’s important to maintain diversification but be ready to adjust as needed.”
Our Methodology
In this article, we discuss a recent post of Jim Cramer’s Morning Thoughts, where he recommended several stocks, highlighting ten companies in particular. This article reviews the companies included in the list and explores how hedge funds view these stocks. We then rank these companies from the least owned to the most owned by hedge funds.
At Insider Monkey we are obsessed with 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).
Jim Cramer Thinks These 10 Stocks Deserve Your Attention
10. KB Home (NYSE:KBH)
Number of Hedge Fund Investors: 23
Jim Cramer noted that Wells Fargo raised its price target for KB Home (NYSE:KBH) to $80 from $70, which is close to where the stock ended last week. While analysts kept a neutral rating on KB Home (NYSE:KBH), which has already risen 27% this year, Cramer emphasized the significance of the summer surge.
“Wells Fargo upped its price target on KB Home to $80 a share from $70, right around where the stock closed Friday. Analysts maintained their neutral rating on shares, which have climbed 27% so far this year. The summer was an especially strong period for the stock as interest rate cuts, which should spur more activity in the housing sector, moved closer into view.”
A positive outlook for KB Home (NYSE:KBH) is supported by its strong financial performance and favorable market conditions. In Q2 2024, KB Home (NYSE:KBH) reported earnings per share (EPS) of $2.15, well above the expected $1.78, and revenue of $1.71 billion, exceeding predictions. KB Home (NYSE:KBH)’s growth is driven by solid performance in core markets, a 14% increase in book value per share, and a healthy gross profit margin of 21.1%-21.5%.
For 2024, KB Home (NYSE:KBH) forecasts housing revenues between $6.7 billion and $6.9 billion, with average home prices expected to be between $485,000 and $495,000. Despite challenges like rising interest rates, KB Home (NYSE:KBH) has managed higher material costs and market uncertainties effectively, maintaining steady revenue growth and expanding its communities. Analysts expect about 7% annual earnings growth over the next three years, indicating strong long-term potential. Overall, KB Home (NYSE:KBH)’s solid financials, market expansion, and positive housing demand trends support a bullish outlook for its stock.
9. The Boeing Company (NYSE:BA)
Number of Hedge Fund Investors: 42
Jim Cramer pointed out that The Boeing Company (NYSE:BA)’s stock climbed after the company reached a tentative labor agreement with a union representing about 33,000 workers. Cramer emphasized the significance of this deal, which analysts at JPMorgan said “seems like a good outcome,” as it helps The Boeing Company (NYSE:BA) avoid a potentially costly strike. Cramer views this development as a positive step for The Boeing Company (NYSE:BA), reducing uncertainty and stabilizing operations, which could have otherwise been impacted by labor disruptions.
“Boeing shares rose after the plane maker and a union representing around 33,000 of its workers reached a tentative labor agreement. The deal “seems like a good outcome” to help avoid a costly strike, JPMorgan analysts said.”
A positive outlook for The Boeing Company (NYSE:BA) is supported by its improving performance in 2024, following earlier supply chain disruptions and reduced expectations. As production of the 737 MAX and 787 aircraft increases, The Boeing Company (NYSE:BA)’s financial performance is expected to stabilize and improve significantly. Analysts at RBC Capital Markets have upgraded The Boeing Company (NYSE:BA) to “Outperform,” raising their price target from $200 to $275 due to strong demand in the commercial aerospace sector and higher delivery rates for the 737 in 2024.
The Boeing Company (NYSE:BA)’s free cash flow is projected to grow, with the 737 MAX expected to generate $2.8 billion and the 787 $1.7 billion by 2025, indicating a stronger financial position. Although there are some uncertainties around the 777X program, The Boeing Company (NYSE:BA) has reported steady revenue growth in its Global Services segment and secured major contracts with Hainan Airlines and Ryanair. Despite ongoing challenges, The Boeing Company (NYSE:BA)’s long-term outlook is increasingly positive, presenting a compelling investment opportunity.
8. Norfolk Southern Corp. (NYSE:NSC)
Number of Hedge Fund Investors: 50
Jim Cramer highlighted that Norfolk Southern Corp. (NYSE:NSC) is investigating CEO Alan Shaw over claims of an inappropriate workplace relationship, as reported by CNBC. Norfolk Southern Corp. (NYSE:NSC) confirmed the investigation into Shaw, who has played a key role in leading the turnaround of the railroad. While Shaw has been credited for effectively managing the company’s response to the toxic train derailment in Ohio, Cramer expressed uncertainty about whether Norfolk Southern Corp. (NYSE:NSC) remains a buy given the ongoing probe.
“Norfolk Southern is investigating CEO Alan Shaw over allegations of an inappropriate workplace relationship, CNBC reported Sunday. The company later confirmed the probe into Shaw, who has been behind the turnaround at the great railroad. It’s not clear whether the stock can still be bought here. Shaw has done a very strong job after the toxic train derailment in Ohio.”
A positive outlook on Norfolk Southern Corp. (NYSE:NSC) is supported by its strong financial performance, strategic operational improvements, and consistent shareholder returns. In Q2 2024, Norfolk Southern Corp. (NYSE:NSC) exceeded earnings expectations with an EPS of $3.06, surpassing the forecast of $2.86, and generated $3.04 billion in revenue, showing resilience in a challenging freight market.
Norfolk Southern Corp. (NYSE:NSC) is focused on improving efficiency, targeting an operating ratio of 64%-65% for the second half of 2024, and expanding its rail services to connect Mexican manufacturing with the Southeastern U.S. Norfolk Southern Corp. (NYSE:NSC)’s long-term strategy includes investing in service quality and productivity, and the recent resolution of a major $600 million lawsuit enhances its growth prospects.
Norfolk Southern Corp. (NYSE:NSC)’s strong dividend history—having increased payments for seven consecutive years with a yield of around 2.42%—demonstrates financial stability and appeals to income-focused investors.
The London Company Large Cap Strategy stated the following regarding Norfolk Southern Corporation (NYSE:NSC) in its Q2 2024 investor letter:
“Norfolk Southern Corporation (NYSE:NSC) – NSC pre-announced weaker results in early April. Revenue declined in its latest quarter driven by lower fuel surcharges, an unfavorable product mix, and lower intermodal ancillary fees. Costs continued to rise. Activist involvement may lead to lower costs in the future. Added to the position following recent weakness in the shares. We believe the competitive advantages are intact and valuation is attractive.”
7. United States Steel Corporation (NYSE:X)
Number of Hedge Fund Investors: 58
Jim Cramer noted that JPMorgan has upgraded United States Steel Corporation (NYSE:X) to a buy-equivalent rating, highlighting that the risk and reward for steel stocks are becoming more favorable after a period of weaker fundamentals. According to analysts, the recent sharp decline in United States Steel Corporation (NYSE:X)’s stock due to uncertainty about its potential takeover by Japan’s Nippon Steel has created a compelling buying opportunity.
“JPMorgan upgraded U.S. Steel to buy-equivalent ratings, arguing the risk/reward for steel stocks is improving after a period of weakening fundamentals. Analysts said that U.S. Steel’s steep pullback on uncertainty over its takeover by Japan’s Nippon Steel has created an attractive entry point.”
A positive outlook on United States Steel Corporation (NYSE:X) is supported by its strategic focus on efficiency and growth. United States Steel Corporation (NYSE:X) is significantly expanding its Electric Arc Furnace (EAF) capabilities, with the Big River 2 (BR2) mini-mill set to nearly double its production capacity. This shift to more efficient and eco-friendly steelmaking is expected to increase EBITDA from $2.2 billion in 2023 to $2.8 billion by 2025.
Investments in downstream products like galvanizing and electrical steel are also likely to boost future revenue. Despite some challenges, United States Steel Corporation (NYSE:X) reported $4.1 billion in net sales and $183 million in net earnings for Q2 2024 and is expected to see free cash flow rise to $1.6 billion by 2025. These factors, along with ongoing capital investments, support a positive long-term outlook for United States Steel Corporation (NYSE:X)’s profitability and stock performance.
6. CrowdStrike Holdings Inc. (NASDAQ:CRWD)
Number of Hedge Fund Investors: 69
Jim Cramer pointed out that Morgan Stanley has expressed concerns about CrowdStrike Holdings Inc. (NASDAQ:CRWD)’s stock in the short term as the cybersecurity firm approaches its investor day on September 18. Analysts believe that Wall Street’s expectations for CrowdStrike Holdings Inc. (NASDAQ:CRWD) remain too high, despite the company recently lowering its full-year guidance due to the global IT outage in July. Nonetheless, Morgan Stanley has kept its buy-equivalent rating on the stock.
“Morgan Stanley is worried in the short term about CrowdStrike’s stock ahead of the cybersecurity firm’s investor day set for Sept. 18. Analysts said Wall Street estimates are still too high, even after CrowdStrike lowered full-year guidance late last month to reflect the impact of the global IT outage in July. Still, the firm maintained its buy-equivalent rating on the stock.”
In Q3 2023, CrowdStrike Holdings Inc. (NASDAQ:CRWD) exceeded expectations, showing strong demand for its cloud security and identity protection products. Despite a challenging macroeconomic environment, CrowdStrike Holdings Inc. (NASDAQ:CRWD) achieved notable profitability gains. CrowdStrike Holdings Inc. (NASDAQ:CRWD) is expected to grow its earnings by 28.14% annually over the next few years, surpassing industry averages. Revenue is projected to rise at an 18.12% annual growth rate, driven by increasing adoption of its cloud security, identity protection, and AI-driven solutions.
As a leader in endpoint security, CrowdStrike Holdings Inc. (NASDAQ:CRWD) is also expanding into areas like SIEM, CNAPP, and identity security, supported by its innovative AI and cloud technologies. Analysts are very positive, with price targets between $222 and $334.80, reflecting strong confidence in CrowdStrike Holdings Inc. (NASDAQ:CRWD)’s growth despite broader economic challenges.
Baron Fifth Avenue Growth Fund stated the following regarding CrowdStrike Holdings, Inc. (NASDAQ:CRWD) in its Q2 2024 investor letter:
“CrowdStrike Holdings, Inc. (NASDAQ:CRWD) is a cloud-architected SaaS cybersecurity vendor offering endpoint security, threat intelligence, and cyberattack response services. Shares continued their strong performance from the first quarter and were again a top contributor, rising 19.5% in the second quarter on better execution than peers in the broader security space.
The company reported strong quarterly results with 33% year-over-year revenue growth, driven by customers consolidating their cybersecurity spend on CrowdStrike with free cash flow margins reaching 35%. With accelerating market share gains in its core endpoint detection and response offering, emerging products including Cloud, Identity, and SIEM reaching material scale, and newer products in data protection and AI ramping quickly, net new annual recurring revenue and total revenue look to sustain a long duration of growth.
With its leading competitive positioning in cybersecurity, the growing threat landscape (which is also driven by the advancements in AI, making hackers more dangerous), its unique lightweight, single-agent, architecture, and its platform approach, we retain conviction in CrowdStrike, which is emerging as the security platform to beat in terms of scale, profitability, and free cash flow conversion.”
5. Dell Technologies Inc. (NYSE:DELL)
Number of Hedge Fund Investors: 88
Jim Cramer highlighted that Dell Technologies Inc. (NYSE:DELL) is seeing an increase in its stock price because it will be added to the S&P 500 later this month. Cramer suggested that investors should not sell their shares in Dell Technologies Inc. (NYSE:DELL) just because of this recent strength. Citi analysts also pointed out that Dell Technologies Inc. (NYSE:DELL) has several upcoming catalysts, including a PC refresh cycle expected to continue into next year.
“Shares of Dell Technologies is getting a lift Monday on news that the it will be added to the S&P 500 later this month. I don’t think you need to sell Dell into strength here. Citi analysts said Monday they see multiple catalysts ahead for Dell including the PC refresh cycle into next year.”
Dell Technologies Inc. (NYSE:DELL) is positioned for long-term growth, with strong performance in AI-related sectors driving its bullish outlook. In Q2 2024, Dell Technologies Inc. (NYSE:DELL) reported $22.9 billion in revenue, thanks largely to a 10% growth in its Infrastructure Solutions Group (ISG), which benefited from increasing demand for AI-optimized servers. This suggests Dell Technologies Inc. (NYSE:DELL) is well-placed to capitalize on the broader adoption of AI across industries. Looking forward, Dell Technologies Inc. (NYSE:DELL) forecasts revenue between $91 billion and $95 billion for FY 2025, with earnings per share expected to range from $7.25 to $7.75, signaling confidence in its future performance.
Dell Technologies Inc. (NYSE:DELL) ‘s partnerships, particularly with NVIDIA Corporation (NASDAQ:NVDA) on AI-optimized servers, are seen as key drivers for boosting margins. While its Client Solutions Group saw a 12% decline in year-over-year revenue, Dell Technologies Inc. (NYSE:DELL) expects AI-driven investments to fuel improvements moving forward. Analysts remain optimistic, maintaining strong “buy” ratings and raising price targets, underscoring Dell Technologies Inc. (NYSE:DELL) ‘s potential as a solid long-term investment opportunity in the tech sector.
4. The Walt Disney Company (NYSE:DIS)
Number of Hedge Fund Investors: 92
Jim Cramer wondered if the reason The Walt Disney Company (NYSE:DIS)’s stock has been stuck at around $90 a share has just been revealed. The New York Times recently published an in-depth article about the power struggle at The Walt Disney Company (NYSE:DIS) that began when CEO Bob Iger returned to lead the company nearly two years ago, replacing his chosen successor, Bob Chapek.
“Did we just find out why Club holding Disney ’s stock has been stuck at $90 a share? The New York Times published a deep dive into the power struggle at Disney that ensued as CEO Bob Iger returned to the top job almost two years ago, replacing his chosen successor Bob Chapek.”
A positive outlook on The Walt Disney Company (NYSE:DIS) is backed by its successful recovery efforts under CEO Bob Iger, effective cost-cutting, and strategic investments in streaming and theme parks. In Q3 2024, The Walt Disney Company (NYSE:DIS)’s streaming services—Disney+, ESPN+, and Hulu—became profitable, exceeding expectations due to actions like cracking down on password sharing and improving user experience.
Disney+ continues to grow despite higher subscription prices, now reaching 277 million subscribers and set for more expansion into fiscal 2025. The Walt Disney Company (NYSE:DIS)’s cost-cutting efforts have surpassed their $7.5 billion savings target, enhancing efficiency and allowing for share buybacks, which shows strong financial health and a commitment to shareholders.
Although domestic theme park attendance has decreased, international parks and cruise lines are performing well. The Walt Disney Company (NYSE:DIS)’s $60 billion investment in its Experiences segment over the next decade reflects confidence in long-term growth. Analysts are optimistic about The Walt Disney Company (NYSE:DIS)’s future, with price targets ranging from $104 to $130, driven by its strong intellectual property and strategic sports streaming moves.
Mar Vista Focus strategy stated the following regarding The Walt Disney Company (NYSE:DIS) in its Q2 2024 investor letter:
“The Walt Disney Company’s (NYSE:DIS) shares declined after its earnings release, even though the company exceeded recently upgraded financial forecasts. While Disney+ and Hulu reached a milestone by turning their first quarterly profit, the company cautioned about theme park attendance returning to pre-pandemic norms. This signals a deceleration following a period of exceptional growth, impacting the stock as theme parks and experiences account for roughly 60% of Disney’s earnings. Despite broader consumer worries, Disney’s stock is still trading with a significant discount to fair value. We expect the gap between Disney’s market price and its intrinsic value to shrink as its streaming division evolves and increases profitability over time.”
3. Salesforce.com Inc. (NYSE:CRM)
Number of Hedge Fund Investors: 117
Jim Cramer noted that Citi analysts are not impressed with Salesforce.com Inc. (NYSE:CRM)’s $1.9 billion acquisition of the data security startup Own. While the analysts acknowledge that the all-cash deal appears sensible as it helps minimize dilution for existing shareholders, they also hint that it might suggest Salesforce.com Inc. (NYSE:CRM)’s data analytics application still needs improvement.
“Salesforce’s $1.9 billion acquisition of data security startup Own does not wow analysts at Citi. While they said the all-cash deal looks responsible given Salesforce’s efforts to reduce dilution to existing shareholders, they also suggested it could indicate its data analytics application is still “a work in progress.” Citi’s neutral view on the deal echoes the market’s view on enterprise software overall. Not a much-loved group right now.”
In Q2 FY2024, Salesforce.com Inc. (NYSE:CRM) reported earnings per share (EPS) of $2.12, exceeding the $1.90 estimate, and revenue rose 11% year-over-year to $8.6 billion. This growth is driven by its cloud services and new AI initiatives, including the Agentforce AI platform. Salesforce.com Inc. (NYSE:CRM) also achieved a record operating margin of 33.7% and raised its full-year guidance, strengthening its position as a leader in AI-driven CRM solutions.
Analysts have increased their price targets for Salesforce.com Inc. (NYSE:CRM), ranging from $265 to $350, indicating a potential upside of 20-40% from current levels. With ongoing investments in AI, including its integration of Einstein and Slack, and favorable market conditions, Salesforce.com Inc. (NYSE:CRM) offers an attractive long-term investment opportunity.
Ithaka US Growth Strategy stated the following regarding Salesforce, Inc. (NYSE:CRM) in its Q2 2024 investor letter:
“Salesforce, Inc. (NYSE:CRM) is the largest pure-play cloud software company, holding a leading market share in customer relationship management applications and a top-five market share position in the company’s other clouds (Marketing, Service, Platform, Analytics, Integration, and Commerce). The company’s software subscription term-license model differs from the traditional perpetual-license software model in two respects: (1) the software is hosted on centralized servers and delivered over the internet, as opposed to traditional enterprise software that is loaded directly onto customers’ hard drives or servers; and (2) the revenue model is subscription-based, typically charging monthly fees per user as opposed to charging one-time licensing fees. The stock’s weak relative performance followed its fiscal first quarter earnings announcement, where the company missed top-line and cRPO (current remaining performance obligations) estimates while also issuing weak forward guidance.”
2. NVIDIA Corporation (NASDAQ:NVDA)
Number of Hedge Fund Investors: 179
Jim Cramer questioned whether artificial intelligence is still a hot topic, given recent trading patterns. He pointed out that stocks associated with AI, including NVIDIA Corporation (NASDAQ:NVDA), a key player in the AI space and a name in his investment club—have dropped nearly 14% over the past five sessions. This decline raises doubts about current investor interest in AI-related investments.
“Does anyone care about artificial intelligence anymore? Seems fair to ask considering the recent trading in stocks lumped into the AI trade, including key enabler and fellow Club name Nvidia, which is down almost 14% in the past five sessions.”
A positive outlook on NVIDIA Corporation (NASDAQ:NVDA) is supported by its impressive financial performance and leadership in key areas like artificial intelligence (AI) and data centers. In Q2 FY2025, NVIDIA Corporation (NASDAQ:NVDA)’s revenue surged 122% year-over-year to $30 billion, with net income increasing 168% to $16.6 billion. This growth was driven mainly by a 154% rise in data center revenue, reaching $26.3 billion, due to high demand for NVIDIA Corporation (NASDAQ:NVDA)’s advanced Hopper GPUs used in AI applications.
NVIDIA Corporation (NASDAQ:NVDA)’s leadership in AI is further highlighted by its upcoming Blackwell architecture, expected to boost revenue even more. The gaming segment also performed well, with a 16% revenue increase to $2.9 billion, thanks to the versatility of its RTX GPUs, which are used for both gaming and AI tasks. NVIDIA Corporation (NASDAQ:NVDA)’s commitment to returning value to shareholders is clear with its $50 billion share repurchase program, showing strong confidence in future growth.
Ithaka US Growth Strategy stated the following regarding NVIDIA Corporation (NASDAQ:NVDA) in its Q2 2024 investor letter:
“NVIDIA Corporation (NASDAQ:NVDA) is the market leader in visual computing through the production of high-performance graphics processing units (GPUs). The company targets four large and growing markets: Gaming, Professional Visualization, Data Center, and Automotive. NVIDIA’s products have the potential to lead and disrupt some of the most exciting areas of computing, including: data center acceleration, artifi cial intelligence (AI), machine learning, and autonomous driving.
The reason for the stock’s appreciation in the quarter was twofold: First, the stock benefi ted from tremendous excitement surrounding the further development of generative AI and the likelihood this would necessitate the purchase of a large number of Nvidia’s products far into the future; Second, Nvidia posted another strong beat[1]and-raise quarter, where the company upped its F2Q25 revenue guidance above Street estimates, showcasing its dominant position in the buildout of today’s accelerated computing infrastructure.”
1. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Investors: 184
Jim Cramer noted that Apple Inc. (NASDAQ:AAPL)’s iPhone launch event starts at 1 p.m. ET on Monday. He questioned whether artificial intelligence still captures investor interest, especially in light of recent trading trends among AI-related stocks.
“Apple ’s iPhone launch event begins at 1 p.m. ET Monday. Does anyone care about artificial intelligence anymore? Seems fair to ask considering the recent trading in stocks lumped into the AI trade.”
A positive outlook on Apple Inc. (NASDAQ:AAPL) is backed by its strong financial performance and promising future. In the third quarter, Apple Inc. (NASDAQ:AAPL) reported impressive revenue of $85.8 billion, marking a 5% increase from the previous year despite foreign exchange issues. The Services segment saw record revenue of $24.2 billion, driven by more subscriptions and new services. Apple Inc. (NASDAQ:AAPL)’s profitability remains strong with a 46.3% gross margin and net income of $21.4 billion.
Although iPhone revenue slightly declined, other products like iPads and Macs performed well, with Mac sales boosted by new M3 devices and iPad sales rising 20% year-over-year. Apple Inc. (NASDAQ:AAPL)’s focus on emerging technologies, such as AI and augmented reality, especially with the upcoming Vision Pro AR headset, positions it well for future growth. Apple Inc. (NASDAQ:AAPL) also returned $32 billion to shareholders in Q3 2024 through dividends and share buybacks, reflecting confidence in its long-term financial health.
Baron Technology Fund stated the following regarding Apple Inc. (NASDAQ:AAPL) in its Q2 2024 investor letter:
“The Fund’s chief relative detractor was Apple Inc. (NASDAQ:AAPL), even though it was a meaningful contributor to absolute performance, as we added to our Apple position significantly during the period. We bought Apple well, but in 20/20 hindsight we didn’t buy enough. Because Apple has an oversized weight in the Benchmark (its average weight was 15.7% for the period), when Apple’s stock outperforms (it appreciated 23.0%), it has generally been a headwind to relative performance. Our Apple underweight accounted for 33% of our relative underperformance for the period.
This quarter we increased the size of our position in Apple Inc., a leading technology company known for its innovative consumer electronics products like the iPhone, MacBook, iPad, and Apple Watch. Apple is a leader across its categories and geographies, with a growing installed base that now exceeds 2 billion devices globally. The company’s attached services – including the App Store, iCloud, Apple TV+, Apple Music, and Apple Pay – provide a higher margin, recurring revenue stream that both enhances the value proposition for its hardware products and improves the financial profile.
Apple now has well over 1 billion subscribers paying for these services, more than double the number it had just 4 years ago. The increasing services mix has led to healthy operating margin improvement, providing more free cash flow for Apple to reinvest in the business and to distribute to shareholders. Throughout its 48-year history, Apple has successfully navigated and capitalized on major technological shifts, from PCs to mobile to cloud computing…” (Click here to read more)
While we acknowledge the potential of Apple Inc. (NASDAQ:AAPL), 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 timeframe. If you are looking for an AI stock that is more promising than the ones on our list 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. Insider Monkey focuses on uncovering the best investment ideas of hedge funds and insiders. Please subscribe to our free daily e-newsletter to get the latest investment ideas from hedge funds’ investor letters by entering your email address below.
