We recently published a list of Ken Griffin Stock Portfolio: 10 Stocks to Buy. In this article, we are going to take a look at where Microsoft Corporation (NASDAQ:MSFT) stands against other Ken Griffin’s portfolio stocks to buy.

One of Wall Street’s Greatest

Ken Griffin, the visionary founder of Citadel Investment Group, launched his hedge fund in 1990 with $4.2 million, achieving unprecedented success. In 2022, Griffin’s fund delivered an extraordinary 153% return, driven by accurate bets on inflation and interest rates. With a portfolio now exceeding $518 billion, Citadel Investment Group is one of Wall Street’s most closely watched hedge funds, consistently achieving over 25% annual returns since 2016. Citadel employs a multi-strategy investment approach, combining long and short positions to capitalize on market opportunities. Its flagship fund, Wellington, anchors Citadel’s operations by investing across multiple asset classes and sectors, emphasizing diversification. In 2022, Wellington achieved an impressive 38% return, building on 26% in 2021 and 24% in 2020. Notably, the fund posted a 19.4% gain in 2019, more than double its 9.1% return in 2018.

While Griffin’s legacy is strongly tied to Citadel’s hedge fund, a significant portion of his Forbes-calculated net worth comes from Citadel Securities, valued at $22 billion after Sequoia and Paradigm acquired a small stake two years ago. Citadel Securities has redefined modern trading, challenging the traditional dominance of big banks. In just two decades, it has become the largest stock buyer and seller in the U.S.; in August, it facilitated more equity trading within its electronic network than the New York Stock Exchange’s main market. In 2023, Citadel Securities generated $2.8 billion in profit from $6.3 billion in net revenue, with an impressive $4.9 billion in net revenue achieved in the first half of 2024 alone.

READ ALSO: Cathie Wood’s 11 Favorite AI Stocks and Jim Cramer November Portfolio: Top 10 Stocks.

The billionaire also ranks among the top donors to outside spending groups for the 2024 election, which secured former President Donald Trump a second term. As the founder and CEO of Citadel, he contributed $100 million to conservative causes, making him the fifth-largest individual contributor to federal election spending, according to Federal Election Commission data. While Griffin has donated millions to Republican candidates, particularly since 2022, he has notably refrained from directly supporting Trump’s campaign. A self-described “Reagan Republican,” Griffin has historically favored establishment-focused Super PACs, such as the Congressional Leadership Fund.

Our Methodology

For this our list of the 10 best stocks in Ken Griffin’s portfolio, we examined Citadel Investment Group’s stock portfolio from the third quarter of 2024. The stocks are ranked based on the firm’s stake value in each holding.

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).

Microsoft Corporation (NASDAQ:MSFT)

Citadel Investment Group’s Stake: $544.1 million

Microsoft Corporation (NASDAQ:MSFT), a global tech leader, specializes in productivity software, cloud solutions, and personal computing products. Its products are distributed through OEMs, distributors, resellers, and directly via digital marketplaces, online platforms, and retail stores.

In FY25 Q1, Microsoft Corporation (NASDAQ:MSFT) posted $65.6 billion in revenue, a 16% year-over-year increase. The strong start to the fiscal year was fueled by Microsoft Cloud, which generated $38.9 billion in revenue. Segment-wise, Productivity and Business Processes revenue grew 12%, Intelligent Cloud rose 20%, and More Personal Computing increased by 17%, year-over-year.

On October 31, Citi reaffirmed its Buy rating on Microsoft Corporation (NASDAQ:MSFT) with a price target of $497, despite a mixed quarterly performance. The company exceeded top and bottom-line expectations, driven by a 1-2% revenue boost from Azure cloud services and a 5% rise in EPS, supported by 23% year-over-year growth in commercial bookings. However, the results were influenced by one-off factors like favorable revenue recognition and foreign exchange rates. Additionally, Microsoft’s Q2 guidance fell short of analyst expectations due to new capacity constraints with a collocation partner, which is projected to slow Azure’s growth by 1-2 percentage points.

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 8th on our list of Ken Griffin’s portfolio stocks to buy. While we acknowledge the potential of MSFT, our conviction lies in the belief that certain 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.

READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.

Disclosure: None. This article is originally published at Insider Monkey.