We recently compiled a list of the 10 Unrivaled Stocks of the Next 5 Years. In this article, we are going to take a look at where Microsoft Corporation (NASDAQ:MSFT) stands against the other unrivaled stocks.
In the first week of February, the market experienced little changes as investors analyzed earnings reports from big tech companies, a better-than-anticipated January jobs report, and updates regarding President Trump’s tariff policies. According to Josh Schafer, Yahoo Finance Markets team, the S&P 500 remained almost unchanged for the week, while the Nasdaq Composite and Dow Jones Industrial Average decreased 0.4%.
Schafer noted that over 62% of S&P 500 companies are done reporting their earnings and the year-over-year growth rate for the index keeps rising. As of February 7, the S&P 500 was on track for earnings growth of 16.4% compared to the previous year. This exceeds the 11.8% earnings growth analysts had projected at the start of January and it would also mark the fastest pace of growth rate in three years.
READ ALSO: 10 Best Stocks to Buy and Hold For 2025 and 10 Best Low Priced Technology Stocks To Buy Now.
The January jobs report, released on Friday, February 7, highlighted resilience in the labor market with an unexpected fall in the unemployment rate and higher-than-expected wage growth. Additionally, December’s monthly job gains saw an upward revision that showed the US labor market ended the year 2024 in a better position than previously reported. This led economists to argue that the Federal Reserve will not be cutting interest rates in the near future. As a result, this puts more pressure on inflation data to cool down before the central bank considers reducing borrowing costs.
The Consumer Price Index (CPI) is set to be released in the second week of February on the morning of Wednesday. Investors are also expected to be paying close attention to President Trump’s planned announcement of new 25% tariffs on steel and aluminum imports and for additional details on reciprocal duties across the board.
Methodology
To compile our list of the 10 unrivaled stocks of the next 5 years, we sifted through our own rankings, financial media reports, ETFs, and various online resources. We used search phrases like “unrivaled stocks” and “wide moat stocks” to compile a list of the best unrivaled stocks. From an initial list of over 25 stocks, we focused on the top 10 stocks most favored by institutional investors. Data for the hedge fund sentiment surrounding each stock was taken from Insider Monkey’s Q3 2024 database of 900 elite hedge funds. The 10 unrivaled stocks of the next 5 years were then ranked in ascending order based on the number of hedge funds holding stakes in them as of Q3 2024.
Why do we care about what hedge funds do? 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 Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders: 279
Microsoft Corporation (NASDAQ:MSFT) is a leading developer of computer software, operating systems, artificial intelligence (AI, and cloud computing. The company’s early investment in OpenAI has allowed it to enhance its cloud computing services (Azure) and position itself as a leader in the rapidly growing field of generative AI. Microsoft Corporation (NASDAQ:MSFT) ranks among the top unrivaled stocks of the next 5 years.
RiverPark Advisors, an investment advisory firm, discussed Microsoft Corporation (NASDAQ:MSFT) in its “RiverPark Large Growth Fund” third quarter 2024 investor letter. The letter noted that MSFT reported strong revenue and earnings growth in its fiscal fourth quarter of 2024, driven by Azure and operating margins. However, the guidance anticipated lower-than-expected Azure revenue in its fiscal first quarter of 2025 because of infrastructure constraints. Microsoft Corporation (NASDAQ:MSFT) expects to reaccelerate growth in the second half of fiscal 2025 as more AI capacity comes online.
The investor letter also noted that cloud-based services are now Microsoft Corporation’s (NASDAQ:MSFT) largest revenue and earnings-generating segment. RiverPark Advisors believes that the company’s Azure platform has the potential to grow to over $200 billion in annual revenue over the next decade. The investment advisory firm expects Microsoft Corporation (NASDAQ:MSFT) to continue to deliver double-digit revenue and EPS growth and generate substantial free cash flow to return to shareholders and use for acquisitions.
Overall, MSFT ranks 2nd on our list of the unrivaled stocks of the next 5 years. While we acknowledge the potential of MSFT as an investment, our conviction lies in the belief that some 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: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap.
Disclosure: None. This article is originally published at Insider Monkey.
