We recently compiled a list of the 10 Most Widely Held Stocks by Hedge Funds. In this article, we are going to take a look at where Meta Platforms Inc (NASDAQ:META) stands against the other widely held stocks.

Two 25 Point Cuts May be the Most Likely Outcome

The last trading day of September is upon us and so are many questions about the market. On September 30, Dana D’Auria, Envestnet Solutions co-CIO and group president, appeared in an interview on Yahoo Finance to discuss the financial market.

D’Auria regards employment data to be a major concern at the moment. Since inflation rates are subsiding, employment data is something investors should be on the lookout for, along with other data points including GDP and consumer confidence. She suggests that to ensure a soft landing, the Fed must initiate larger rate cuts, and that recessionary conditions are out of the picture.

September is notoriously volatile along with October, and, with elections in another 35 days, the conditions may be slightly different or even more turbulent. According to D’Auria, the 50 basis point cut is a catch-up for July, and expecting a 50 basis point cut in November is borderline questionable.

Overall, she believes that the market has been overshooting and we may have to settle for two 25 basis point cuts before the end of 2024. She reiterates that the job market is crucial and investors must get out of their comfort zone to invest in non-cash opportunities. Investors concerned about low-risk options may consider equities in the defensive sectors that are innately low volatile.

The Market is Broadening

Wall Street is heading to close September and Q3 on a high note and stocks have experienced their best September in over a decade. On September 30, Kevin Gordon, harles Schwab’s Director and Senior Investment Strategist, appeared in an interview on Yahoo Finance to discuss his market thesis.

Gordon believes that stocks in the utilities and defensive sectors have caught up to tech stocks amid the AI boom, compared to their financials at the end of FY 2023. However, he does acknowledge that sectors like industrials, financials, and materials are performing relatively well, calling it a case of market broadening.

In terms of market breadth, most sectors are experiencing an upward trajectory. Almost 81% of the S&P 500 members are experiencing an uptrend, despite the quality bias investors may have towards certain stocks. According to Gordon, large-cap quality stocks will continue to perform well despite the volatility and the Fed’s decisions. Speaking of smaller-cap stocks, he believes that some stocks may struggle a bit especially when it comes to earnings growth.

Our Methodology

To come up with the 10 most widely held stocks by hedge funds, we sifted through Insider Monkey’s database that tracks over 900 hedge funds, as of Q2 2024. We ranked the top 10 stocks that were the most widely held by hedge funds in ascending order of their hedge fund sentiment.

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).

Meta Platforms Inc (NASDAQ:META)

Number of Hedge Fund Holders: 219

Meta Platforms Inc (NASDAQ:META), commonly referred to as Meta and formerly known as Facebook, is a technology conglomerate behind the leading social media platforms such as Facebook, Instagram, Threads, and WhatsApp. The company currently boasts a user base of 3.27 billion daily active users across all its social media platforms.

Meta Platforms Inc (NASDAQ:META) is making strides in artificial intelligence and augmented reality. During the second quarter, the company launched its AI Studio in the United States, a platform for people to create, share, and discover artificial intelligence models. In addition to that, on September 25, the company launched Orion, its first augmented reality glasses, the first most advanced pair of AR glasses ever made.

Meta Platforms Inc (NASDAQ:META) has a strong position in the market, making it one of the most widely held stocks by hedge funds. By 2026, the company expects to own the best recommendation technology on its social media platforms. Meta Platforms Inc (NASDAQ:META) is achieving this by expanding its collection of open models and tools for generative artificial intelligence.

Overall, Meta Platforms Inc (NASDAQ:META) reported $39.1 billion in revenue, in the second quarter of 2024, up by 22% year-over-year.  The company also generated $10.9 billion in free cash flow supporting its dividend payouts and stock repurchases. With strong expectations ahead of 2024, the company projects revenue to reach $38.5 billion in the third quarter of 2024.

Mar Vista Investment Partners’ Mar Vista Focus strategy stated the following regarding Meta Platforms, Inc. (NASDAQ:META) in its Q2 2024 investor letter:

“During the quarter, we established new investments in Broadcom and Meta Platforms, Inc. (NASDAQ:META). We previously divested from Meta during a period of stagnant advertising growth and the company’s initial, significant investment in the metaverse project. At that time, investors appeared complacent to the risks associated to an increasingly competitive landscape, and the Street’s robust financial expectations as the company transitioned towards monetizing short-format video (Reels). The subsequent decline in Meta’s stock price during 2022 reflected these concerns.

Since then, Meta has demonstrably shifted its strategic focus. The company has prioritized operational efficiency, implemented strategies to monetize Reels effectively, and initiated a robust artificial intelligence (AI) development program. We believe the focus on AI represents a more prudent capital allocation strategy compared to the earlier metaverse initiative. Meta AI holds significant potential to unlock substantial monetization opportunities and enhance user engagement, while maintaining tight controls on operating costs…” (Click here to read the full text)

Overall META ranks 3rd on our list of the most widely held stocks by hedge funds. While we acknowledge the potential of META 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 time frame. If you are looking for an AI stock that is more promising than META 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.