We recently published a list of 10 Stocks with Consistent Growth to Buy. In this article, we are going to take a look at where Microsoft Corporation (NASDAQ:MSFT) stands against other stocks with consistent growth to buy.
Currently, financial markets are experiencing a mix of optimism and caution as investors react to changing economic conditions. Many are closely watching trends and data that could impact future growth and stability.
Tom Lee, managing partner and head of research at Fundstrat Global Advisors, recently shared his insights on the current market trends during an interview on CNBC’s ‘Squawk Box’ on October 14. He acknowledged that he underestimated the strength of the market, noting that it has been surprisingly resilient despite expectations of volatility leading up to the 2024 election. Lee highlighted that there is a significant amount of cash—about $6 trillion—sitting on the sidelines, which has contributed to the market’s stability. He observed that many investors had anticipated a recession, but instead, companies have shown strong earnings and resilience.
Lee also mentioned that the Federal Reserve is likely to adopt a supportive stance as inflation data continues to trend toward their 2% target. He believes that regardless of who wins the upcoming election, stocks are likely to perform well in the following year. Lee pointed out that markets tend to thrive on visibility and certainty, suggesting that if one candidate appears to be gaining an advantage, it could lead to a more favorable trading environment before the election. Overall, he remains optimistic about the market’s outlook.
S&P 500 and Dow Reach New Heights Ahead of Election Season
On October 18, both the S&P 500 and the Dow Jones Industrial Average reached new record highs, marking six consecutive weeks of gains for these major indices. As reported by CNBC, the S&P 500 rose by 0.40%, closing at 5,864.67, while the Dow rose by 0.09% and added 36.86 points to close at 43,275.91. The Nasdaq also performed well, increasing 0.63% to close at 18,489.55. This marks the longest winning streak of the year for both the Dow and S&P 500, with notable increases in their overall performance.
As earnings season progresses, over 70 companies in the S&P 500 have reported their results, with about 75% of those companies surpassing expectations. Despite potential market volatility leading up to the upcoming election, some analysts believe that stocks may continue to rise through November.
Rob Williams, a chief investment strategist at Sage Advisory, noted that this trend is unusual for an election year, where markets typically hesitate before improving post-election. He suggested that investors might be optimistic about a possible victory for Republican nominee Donald Trump, whose policies are seen as more favorable for businesses in terms of regulations and taxes.
Methodology
To compile our list of the 10 stocks with consistent growth to buy, we used the Finviz and Yahoo stock screeners. We sorted our results based on market capitalization and picked the top 30 stocks.
Next, we focused on identifying stocks that had demonstrated consistent growth. From the initial list, we narrowed our choices to stocks that have grown their revenue positively over the past 5 years. We further refined our selection to include only those that had positive revenue growth each year in their last five reported annual revenues.
To ensure the reliability of our findings, we consulted reputable sources such as SeekingAlpha, which provided insights into the revenue CAGR over the past five years, and Macrotrends, which offered information on historical annual revenue data. Finally, we have ranked the 10 stocks with consistent growth to buy below in ascending order based on their five-year revenue CAGR.
Additionally, we mentioned the hedge fund sentiment surrounding each stock, which was taken from Insider Monkey’s database of 912 elite hedge funds as of Q2 of 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)
5-Year Revenue CAGR: 14.26%
Number of Hedge Fund Holders: 279
Microsoft Corporation (NASDAQ:MSFT) is a leading American technology company that is best known for its software products, including the Windows operating system and the Microsoft 365 suite of productivity applications. In addition to software, the company also develops hardware such as the Xbox gaming consoles and Surface tablets. The company has made significant investments in cloud computing through its Azure platform, which offers various services for businesses and developers. Microsoft continues to expand its offerings in artificial intelligence (AI), gaming, and productivity tools, aiming to enhance both personal and professional experiences for users worldwide.
The company is focusing on significant growth strategies, particularly in cloud computing and AI. In Q4 2024, the company reported accelerated gains in its Azure platform, driven by investments in new data center locations across four continents. This expansion allows Microsoft Corporation (NASDAQ:MSFT) to enhance its cloud services and support a growing number of customers, including major enterprises migrating their critical workloads to Azure. The introduction of advanced AI capabilities, such as Azure OpenAI Service, is also attracting corporations from a diverse range of industries. In the Q4 2024 earnings call, management shared that the corporation now has over 60,000 Azure AI customers, up nearly 60% year-over-year.
Additionally, Microsoft is integrating AI across its product offerings to improve user experience and productivity. Tools like GitHub Copilot and Copilot for Microsoft 365 are transforming how developers and knowledge workers operate, leading to increased adoption and engagement. The company is also prioritizing security through its Secure Future Initiative, ensuring that its solutions remain safe and reliable for customers.
With these strategic investments and innovations, Microsoft Corporation (NASDAQ:MSFT) is well-positioned for sustained growth, making it an appealing stock option for investors looking for long-term value.
Microsoft Corporation (NASDAQ:MSFT) has successfully increased its revenue every year over the last five reported years. During this period, the company achieved a compound annual growth rate (CAGR) of 14.26% in revenue, while its net income grew even faster, with a CAGR of 17.57%. This consistent growth highlights Microsoft’s strong performance and ability to adapt to changing market demands.
As of the second quarter of 2024, MSFT was held by 279 hedge funds, according to Insider Monkey’s database. Mar Vista Investment Partners, LLC stated the following regarding Microsoft Corporation (NASDAQ:MSFT) in its “Mar Vista Focus strategy” Q2 2024 investor letter:
“Microsoft Corporation (NASDAQ:MSFT) continues to occupy a strong position, poised to capture market share as businesses, both large and small, navigate the transition to a digital-first landscape and embrace generative AI-driven solutions. The company’s commanding presence in the enterprise arena, combined with its comprehensive product portfolio encompassing Infrastructure-as-a-Service (IaaS), Platform-as-a-Service (PaaS), and Software-as-a-Service (SaaS), establishes it as a crucial provider of IT solutions for companies of all scales. Microsoft is effectively executing its strategy in a sizable market by offering a roadmap for digital transformation and adoption of innovative, AI-driven solutions, such as ChatGPT, while enhancing productivity and reducing costs. Consequently, we anticipate that Microsoft’s solutions should exhibit resilience even in a more challenging macroeconomic environment, supporting low-double-digit growth in intrinsic value within our investment horizon.”
Overall, MSFT ranks 9th on our list of stocks with consistent growth to buy. While we acknowledge the potential of MSFT, 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 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.