We recently published a list of 10 Best Stocks to Buy For Long Term Growth. In this article, we are going to take a look at where Microsoft Corporation (NASDAQ:MSFT) stands against other best stocks to buy for long term growth.

Strategist Expects S&P 500 to reach 6,600

Some investors consider 2024 as a transition year, while others debate that this year was just the beginning of the level of volatility awaiting financial markets in 2025. It is not an exaggeration to say that 2024 has been rough for markets given that crucial events like the commencement of an easing cycle followed by the US elections remained a major influence on the overall environment. Amid all these awaited events, the tech sector has not been an investor favorite, however, that may change sooner than we think.

On November 26, Venu Krishna, head of US equity strategy at Barclays, joined Yahoo Finance to share his opinion on the stock market, particularly the tech sector. Krishna raised his S&P 500 price target for 2025 to 6,600 and shed light on why he believes such is possible.

He shared that the economy is pretty constructive from a macro perspective given that the virtuous cycle between income and employment remains solid. He added that consumer balances are going up and believes that the overall economic conditions of the country have been positive. All these reasons combined explain the price target of 6,600 for the S&P 500.

Speaking of the technology sector, Krishna agreed that the “market is, on a consistent basis, underestimating the earnings power of tech, especially big tech.” He added that at the same time, the market is also overestimating the earnings power of the other non-tech names in the S&P 500. He shared that the market expected Big Tech to post earnings up by 19% year-over-year and have “flat revisions” in the third quarter. Non-tech stocks on the other hand were marked down by 2%.

However, Krishna revealed that as the earnings period of Q3 2024 comes to a close, Big Tech actually delivered 31% of earnings growth during the quarter. He added that non-tech stocks have moved in the same direction but only incrementally. He explained that, for example, non-tech stocks were originally marked down, but instead, they expanded by 2%, accelerating at a very slow pace.

He also emphasized that the rate at which the market expects Big Tech earnings to slow down is in reality much lower than the actual deceleration rate. Overall, Krishna expects the market to converge but highlighted that it may not be as close as we expect it to be, probably not sooner than Q1 2026.

While turmoil and uncertainty remain a key element in the market, some stocks are revolutionary enough that they are bound to offer great opportunities in the coming years, if not now. That said, let’s take a look at the 10 best stocks to buy for long term growth.

Our Methodology

To come up with the best stocks to buy for long term growth we sifted through multiple rankings on the internet. We then examined the hedge fund sentiment of each stock and ranked them in ascending order of the hedge fund sentiment as of Q3 2024.

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)

Number of Hedge Fund Holders: 279

Microsoft Corporation (NASDAQ:MSFT) is a technology giant that is spending generously on artificial intelligence. As the company ventures into new technologies and AI, it does represent a breakthrough stock that could promise long term growth. Microsoft Corporation (NASDAQ:MSFT) is known for making impactful technologies. In this month alone, the company has introduced several key partnerships and products. On November 14, Microsoft Corporation (NASDAQ:MSFT) partnered with Accenture and Avanade to help businesses transform their functions using artificial intelligence and Microsoft Copilot.

On November 13, the company launched new and improved adapted AI models expanding its position in various industries. The new models will help organizations address their particular AI needs with greater efficacy and will readily be available through the Azure AI model catalog. More recently, on November 19, Microsoft Corporation (NASDAQ:MSFT) announced that is it building three trusted platforms aimed at maximizing the benefits AI could reap for overall business functionality and efficiency.

Microsoft Corporation (NASDAQ:MSFT) is a company with solid fundamentals. This coupled with its investments in AI and data position it as a prominent investment opportunity, especially in the coming years.

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 best stocks to buy for long term growth. While we acknowledge the potential of MSFT to grow, 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.

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