We recently compiled a list of the 7 Best Stocks to Buy for Long Term. In this article, we are going to take a look at where Microsoft Corporation (NASDAQ:MSFT) stands against the other stocks.
Market Strategist Says The Economy May Re-Accelerate on its Own
On September 23, Chris Watling, Longview Economics founder, CEO, and chief market strategist, appeared in an interview on Yahoo Finance to discuss the rate easing path and the impact it may have on the market.
According to Walting, the market is deeply divided on not two but three different sides. While some analysts and investors foresee a recession, others believe the economy is going towards a soft landing, and of those a small minority believe that the economy may accelerate at a rapid pace. Walting also added that while predicting the appropriate terminal rate is interesting, there is a lot more going on with the economy. Comparing economic conditions to the 2008 recession, households and corporations are in much better shape, hinting that a recession may not be the most likely outcome.
He believes that the economy may be slowing right now but it may experience faster reacceleration than before without the need for further falls. His advice to investors is to judge the economy based on multiple data points. As for the appropriate portfolio, Walting suggests that bonds are overcooked and gold must be given a pause. At the moment, the market is rotating away from tech into defensive sectors, and in the future, it may rotate more towards cyclical stocks.
The Fed is Thinking About Growth
As the S&P 500 recorded an upside following the Fed’s easing cycle, investors and analysts alike eye a soft landing for the economy. On September 26, Liz Miller, Summit Place Financial Advisors founder and president, appeared in an interview on Yahoo Finance to discuss the future of markets.
Miller states that the pivot has been great for the financial markets and now that the Fed is thinking about growth, investors are hopeful of a soft landing. She suggests that stocks in sectors such as housing, rental, finance, and consumer goods may benefit immensely from the easing interest rate cycle.
Miller suggests that the S&P 500 is not the best way to measure the performance of financial markets, given that it is skewed to the mega-cap tech stocks. Looking at other indices, other sectors have not made highs since December 2021. She believes the market may be flat but there is huge potential for upsides. Miller shares concerns over the Chinese economy and how it influences the global outlook. She suggests that for the global economy to balance, companies must work to regain consumer confidence in China.
Now that we have studied the appropriate portfolio mix for investors following the Fed’s decision, let’s take a look at the 7 best stocks to buy for the long term.
Our Methodology
To come up with the 7 best stocks to buy for the long term we examined promising stocks hedge funds are piling into. These are blue chip stocks with wide moats and have long track records of driving shareholder returns. We have ranked the stocks in ascending order of the number of hedge funds that have stakes in them, as of Q2 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).
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 one of the biggest technology companies in the world that develops productivity and business suite applications, cloud products, and personal computing products.
Microsoft Corporation (NASDAQ:MSFT) reported revenue worth $64.7 billion in FQ4 2024, up by 15% year-over-year. During the same quarter, Microsoft Cloud had $36.8 billion in quarterly revenue, up by 21%. Its productivity/business processes and intelligent cloud segment, on the other hand, logged revenue worth $20.3 billion and $28.5 billion respectively.
The company is a leading investor in artificial intelligence technology. In July, Microsoft and Lumen Technologies partnered to enhance and modernize Lumen’s workloads to Microsoft Azure. Earlier in August, Microsoft Corporation (NASDAQ:MSFT) partnered with Palantir Technologies, a data software company, to deploy its suite of products in Microsoft Azure.
The company’s partnerships do not end here. BlackRock, Global Infrastructure Partners, Microsoft, and MGX recently made a $100 billion deal to enhance the functioning of data centers and AI. The company is also expanding its footprint by establishing engineering development centers in Abu Dhabi, UAE.
Overall, Microsoft Corporation’s (NASDAQ:MSFT) financial strength coupled with its strategic partnerships make it one of the best stocks to buy for the long term. In the second quarter, 279 hedge funds held positions in Microsoft (NASDAQ:MSFT) and their stakes amounted to $89.07 billion. As of June 30, the Bill & Melinda Gates Foundation Trust is the most dominant shareholder in the company and has a position worth $15.6 billion, according to the Insider Monkey database.
Fred Alger Management’s Alger Spectra Fund stated the following regarding Microsoft Corporation (NASDAQ:MSFT) in its Q2 2024 investor letter:
“Microsoft Corporation (NASDAQ:MSFT) is a beneficiary of corporate America’s transformative digitization. The company operates through three segments: Productivity and Business Processes (Office, LinkedIn, and Dynamics), Intelligent Cloud (Server Products and Cloud Services, Azure, and Enterprise Services), and More Personal Computing (Windows, Devices, Gaming, and Search). During the quarter, shares contributed to performance after the company reported strong fiscal third quarter results, underscoring its leadership position in the cloud and highlighted its role as a primary facilitator and beneficiary of AI adoption. Company revenue growth, operating margin, and earnings growth surpassed consensus expectations. The utility scale Azure cloud business grew 31% in constant currency of which 7% was AI related versus 3% two quarters ago. Further, management noted most of the AI revenue continues to stem from inference rather than training indicating high quality AI applications by Microsoft’s clients. Management also indicated that the significant cost-cutting programs in corporate America are done, suggesting that the cost optimization headwinds previously impacting Azure’s growth are over. Separately, management provided color on their new AI-productivity tool, Copilot, noting that approximately 60% of Fortune 500 companies are already using Copilot, and that the quarter witnessed a 50% increase in Copilot assistance integration within Teams. We continue to believe that Microsoft has the potential to hold a leading position in AI, given its innovative approach and demonstrated high unit volume growth opportunity.”
Overall MSFT ranks 2nd on our list of the best stocks to buy for long term. While we acknowledge the potential of MSFT 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 timeframe. 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: $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. This article is originally published at Insider Monkey.
