In this piece, we will take a look at Morgan Stanley’s best stock picks and the top 15 stocks to own for 2025.
The tail end of 2024 is seeing a market shift in the stock market as the Federal Reserve has finally signaled that interest rate cuts are on the horizon. This means that cheaper capital might be on the horizon, with the rate cuts coming just as the labor market starts to feel the pinch through lower growth.
It also means that consumer spending can pick up if economic output remains robust. For investors, it creates an opportunity to gain an early foothold into stocks that could benefit from the new environment. On this front, investment banks have been analyzing the situation diligently for quite some time.
One bank that’s out with regular reports is Morgan Stanley. It releases monthly reports that cover the latest trends in the economy and the stock market. The bank’s August report covered some recent trends. It shared that the labor market was one of its most closely watched economic indicators as it was “vulnerable to a further deceleration in economic activity.” To explain why, the bank shared that US excess labor supply, that is the demand minus supply, was at pre pandemic levels that had sustained since 2018. This implies that employers no longer have the incentive to offer lucrative pay packages to attract workers, which in turn leads to less money flowing into the economy to contribute to inflation.
MS added that the three month national unemployment average was 0.5% above the 12 month average, which is a warning bell for the economy. This is because according to one of the most widely used recession indicators, the Sahm Rule, a recession has started once the rate is 0.5% or higher than the 12 month average. MS is not the only one that is ringing warning bells on this front, as JPM also confirmed in early August that the rule was triggered when the unemployment rate jumped to 4.3%. However, it did add that we “do not think a recession is imminent” and “remain constructive on U.S. equities despite increased volatility, and see opportunity to lock in rates before they fall.”
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Returning to MS, it also sees an opportunity in the battered commercial real estate market. It cites the commercial real estate cap rate, which is the rate of return based on its income generation capability, to argue that commercial real estate valuations are currently depressed enough to warrant an investment. The office real estate market had a cap rate of 9% in March 2024 as per MS, for a two percentage point and three percentage point lead over retail and residential real estate, respectively. As for the stock market, the bank shared in August that it still prefers large cap stocks (an important point as you’ll find out when you check out the stocks in this piece).
The bank believes that small caps “are lower in quality, more volatile and carry greater exposure to cyclical sectors relative to large cap,” meaning that their outperformance “requires economic growth acceleration with lower interest rates.” MS warned that “softer economic data may constrain” small cap performance. In terms of data, it argues that small cap performance is dependent on bond yields. This data set shows that when we assume an index value of 100 for US small caps had led benchmark S&P stocks except the Magnificent 7 at a time when 10 year US bond yields were around 1.5% in July 2021, the indexed returns dropped to 90 in July 2023 when the yields were approximately 4.3%.
August’s final week was pivotal for the stock market as Fed Chair Jerome Powell finally signaled that the time for interest rates had come. “The time has come for policy to adjust,” stated Powell at Jackson Hole, Wyoming. “The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks,” he added.
Following the Fed Chair’s remarks, MS was out with its September report. Commenting on the economy, the bank shared that it does not “believe the economy is set to accelerate over the next few months, which makes the S&P 500 around 5650 our near-term upper bound. At the same time, the economy is not collapsing, which makes 5200 attractive and 5350 seem fair. We plan to trade around the ranges.” MS also shares key details for the unemployment rate, which are important when analyzed in tandem with the Sahm Rule. It comments that higher immigration “may be supporting a higher labor force participation rate, which in turn would contribute to a higher reported unemployment rate. From this perspective, a higher unemployment rate is not signaling weakness but rather an increase in the labor supply that would help bring inflation down without affecting growth.”
Subsequently, the bank believes that the percentage of total unemployed accounted for by people who lost their jobs (Job Losers) and the number of total layoffs (Challenger Layoffs) might be more relevant when analyzing the labor market. Job Losers currently sit at 50%, while Challenger Layoffs are less than 50,000 after having jumped to 100,000. In short, this paints a more robust labor market picture that might not signal a recession as the Sahm Rule might have suggested.
Remaining bearish on small caps, it believes that the “window for small cap outperformance is too narrow – requiring “Goldilocks” growth and inflation.” This sentiment is also echoed in the bank’s Vintage Values 2025 stock report, where it comments that its strategists “currently recommend avoiding small caps, and Vintage Values 2025 reflects that view. It skews heavily toward large-cap stocks: 80% of the names are classified as either mega-cap or large-cap.” Mind you, this sentiment was also echoed in the 2024 report, verbatim.
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Our Methodology
To make our list of MS’ top stocks for 2025, we ranked MS’ Vintage Value 2025 stock picks by their share price percentage upside based on the bank’s price target.
For these stocks, we also mentioned the number of hedge fund investors. 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).
15. GE Vernova Inc. (NYSE:GEV)
Number of Hedge Fund Holders In Q2 2024: 92
Share Price Target Upside: -2%
Share Price Target: $220
GE Vernova Inc. (NYSE:GEV) is a diversified clean energy company that operates in the wind, solar, nuclear, gas and other power generation industries. The diversified product portfolio allows the firm to target emerging power generation avenues, such as solar and wind, and maintain a strong presence in established clean energy avenues namely nuclear and gas. In fact, GE Vernova Inc. (NYSE:GEV)’s installed gas generation capacity as of July 2024 was a whopping 53 gigawatts, which made it one of the biggest players in this industry. The gas segment allows the firm a sizeable moat, as it ensures that GE Vernova Inc. (NYSE:GEV) earns through refurbishment and maintains a strong global brand presence. Since it’s an industrial product company, the firm also benefits from future cash flow visibility through order backlogs. For the first half of 2024, GE Vernova Inc. (NYSE:GEV)’s total revenue was split evenly across service and equipment revenues. The two segments accounted for $7.6 billion and $7.8 billion, respectively. Overall, GE Vernova Inc. (NYSE:GEV) can benefit from strong AI demand for electrification products and a potential uptick in the demand for renewables as interest rates drop.
Carillon Tower Advisers mentioned GE Vernova Inc. (NYSE:GEV) in its Q2 2024 investor letter. Here is what the fund said:
“GE Vernova is a global electric power company that was recently spun out of a much larger industrial conglomerate. The company’s shares performed well in their first quarter as a standalone compa- ny, primarily as a result of the increasing outlook for power demand growth, both domestically and abroad. We believe GE Vernova is well positioned to capitalize on this growing trend across its various products and services, but most notably within its large-scale gas turbine equipment and related services, as well as in its high-volt- age electrical transmission products.”
14. Walmart Inc. (NYSE:WMT)
Number of Hedge Fund Holders In Q2 2024: 96
Share Price Target Upside: 2%
Share Price Target: $82
Walmart Inc. (NYSE:WMT) is the global leader in brick and mortar retail which serves the market through more than 100,000 locations worldwide. Its leadership position is evident through a fortress balance sheet and income statement, which reflect a whopping $252 billion in assets and $665 billion in revenue. The operational heft means that Walmart Inc. (NYSE:WMT) can set the terms for merchants and attract buyers to its platform through low prices. It also provides the firm with unmatched and enduring stability. However, Walmart Inc. (NYSE:WMT), along with other traditional retailers, is facing the heat from the eCommerce industry which is dominated by players like Amazon. They enjoy a much larger market presence due to the internet and have the potential to reach far off customers that Walmart Inc. (NYSE:WMT) might be unable to target with its stores. Consequently, along with same store sales, Walmart Inc. (NYSE:WMT)’s hypothesis hinges on its ability to boost eCommerce sales via the Marketplace division and attract merchants to the platform through advertising services. The picture is also complicated by the fact that the eCommerce market is dominated by diverse firms, like Amazon, and specialty players who only deliver groceries like Instacart.
Walmart Inc. (NYSE:WMT)’s management commented on its Marketplace performance during the Q2 2025 earnings call:
“For marketplace and Walmart fulfillment services, in the U.S., we’ve now seen more than 30% growth in each of the past four quarters, as we continued to increase seller counts on the platform by double-digits. Growth from sellers using our Marketplace Fulfillment Services increased 800 basis points in Q2, surpassing 40% penetration. Sales in fashion, toys, hard lines, and home all grew more than 20%. Outside the U.S., we’re seeing similar trends as we enhance our capabilities in product assortment. For example, Flipkart delivered double-digit top line growth and more than doubled the number of units that delivered same day. In Mexico, we grew marketplace items and sellers by around 60%.
And in Chile, we launched cross-border trade, adding sellers from China and the U.S. to our local marketplace offering. Within data analytics and insights, Walmart Data Ventures continues to see strong results as clients value the insights we provide, bringing together consumer behavior with omnichannel sales and inventory trends across our platform. Our client base has increased nearly 200% versus last year as we launch new tools and enter new markets, including the expansion of our Walmart Luminate product in Mexico in May.”
13. ServiceNow, Inc. (NYSE:NOW)
Number of Hedge Fund Holders In Q2 2024: 97
Share Price Target Upside: 2%
Share Price Target: $900
ServiceNow, Inc. (NYSE:NOW) is a software company that provides automation solutions. This means that growth and cost control are the two pillars on which its hypothesis rests. Since ServiceNow, Inc. (NYSE:NOW) is a profitable firm, with $1.1 billion in trailing twelve month net income, the firm also has to ensure that it retains its customers through new initiatives. Its revenue and future cash flows are measured through committed remaining performance obligations, which measure the money that the firm is guaranteed to receive from existing contracts in the future. This figure grew by 10% annually to $26.5 billion during ServiceNow, Inc. (NYSE:NOW)’s first quarter of fiscal year 2025, and the firm also benefited from a 40% increase in its customers that have an annual recurring revenue (ARR) greater than $20 million. ARR is a key metric for software companies as it measures their product subscriptions and ensures revenue growth in the future through existing deals. However, ServiceNow, Inc. (NYSE:NOW) can face headwinds in case of an economic slowdown, a recession, or a delayed rate cut cycle.
Lakehouse Capital mentioned ServiceNow, Inc. (NYSE:NOW) in its Q1 2024 investor letter. Here is what the fund said:
“US-based software company, ServiceNow, provided another strong result, continuing its long and consistent track record of 20%-plus revenue growth combined with healthy profitability. Subscription revenues grew 25% year-on-year to $2.5 billion and free cash flow grew 47% year-on-year to $1.2 billion. The company’s core operating metrics were also impressive with remaining performance obligations growing 26% year-on-year to $17.7 billion (i.e. roughly 2x 2023 revenue) and renewal rates holding steady at 98%. Performance was evenly spread across segments, products, and geographies, with notable strength in the US federal government. The company now boasts 1,933 customers generating in excess of $1 million in Annual Contract Value (ACV), which is pleasing to see as it implies multiple solutions are involved and that the company’s platform model is increasingly resonating with customers. In our view, ServiceNow is one the highest quality software businesses globally as the combination of consistent growth at scale, robust free cash flow generation and a large addressable market make it a compelling opportunity.”
12. Boston Scientific Corporation (NYSE:BSX)
Number of Hedge Fund Holders In Q2 2024: 82
Share Price Target Upside: 10%
Share Price Target: $92
Boston Scientific Corporation (NYSE:BSX) is one of the largest medical device manufacturers in the world. It sells items such as stents, catheters, brain stimulation systems, cardiac monitors, and others. It operates in more than 100 countries worldwide and generates $15.2 billion in revenue. Boston Scientific Corporation (NYSE:BSX)’s competitive position in the market is evident through its dominance in technologies such as pulsed field ablation (FPA) which enables physicians to selectively target health tissue while ensuring that the overall organ structure remains intact. Boston Scientific Corporation (NYSE:BSX) launched its Farapulse FPA product in America in January, and in Q2, the device contributed to a 17% revenue growth to the firm’s US revenue. Global regulatory approval of Farapulse can create additional tailwinds for Boston Scientific Corporation (NYSE:BSX), whose shares are up 44% year to date. The market’s optimism surrounding the firm is also visible in its valuation as Boston Scientific Corporation (NYSE:BSX) trades at a forward P/E of 30.49 which is nearly 2x of neer peer Medtronic’s 16.50.
Artisan Partners mentioned Boston Scientific Corporation (NYSE:BSX) in its Q2 2024 investor letter. Here is what the fund said:
“Boston Scientific is a global developer, manufacturer and marketer of medical devices that are used in a broad range of interventional medical specialties. The company develops cardiovascular and cardiac rhythm management products, including imaging catheters, imaging systems and guidewires. It also makes devices used for electrophysiology, endoscopy, pain management (neuromodulation), urology and pelvic health, including laser systems, hydrogel systems and brain stimulation systems. Boston Scientific markets its products in about 130 countries; the U.S. generates about 60% of revenue.
We believe Boston Scientific, as a leader in medical devices, is benefiting from the strong utilization trends coming out of COVID, positive demographic trends with aging patients, and new product innovation to gain market share. The company has executed well against the long-range plan issued last fall, which calls for organic sales growth in the range of 8%-10%, 150 basis points of operating margin expansion and category leadership over the period 2024 through 2026. Additionally, we see a consistent track record of accelerating organic sales growth and a track record of accretive M&A.”
11. Visa Inc. (NYSE:V)
Number of Hedge Fund Holders In Q2 2024: 163
Share Price Target Upside: 12%
Share Price Target: $322
Visa Inc. (NYSE:V) is one the world’s largest payment processors, which lends it a considerable market share and a sizeable moat. It accounts for 61% of the US market by purchase volume, implying that as opposed to growth, customer retention and cost and control are central tenets of the firm’s hypothesis. The former bit is particularly important owing to the rise of digital wallets and the propensity of businesses to avoid dealing with firms like Visa Inc. (NYSE:V) due to high transaction fees. On this front, the firm made history in 2024, when it and smaller rival Mastercard agreed to a whopping $30 billion settlement to help resolve these problems. However, the deal is currently on hold as of June, and if it fails to clear the courts, then Visa Inc. (NYSE:V) could see headwinds to the stock price. The firm, along with Mastercard, also offers 30 day fraud liability protection to consumers, which could become another thorny point with retailers. However, Visa Inc. (NYSE:V) is also improving its service and targeting growth by announcing features such as A2A that allow easy recurring bill payments and expansion into the developing world to target untapped populations.
Aoris Management mentioned Visa Inc. (NYSE:V) in its Q2 2024 investor letter. Here is what the firm said:
“Visa operates the world’s largest payments network, which facilitates the movement of money between merchants, financial institutions, consumers, businesses, and governments.
The company is best known for enabling consumers to make debit and credit card payments. In the year to September 2023, 4.3 billion Visa cardholders made 213 billion transactions on its network, to a total value of US$12.1 trillion.
Compared to cash and cheques, which are still widely used around the world, Visa’s network is a more convenient, secure, and ubiquitous way for consumers to pay. Visa has invested to reduce friction and fraud in the payments experience, to the benefit of both merchants and consumers.”
10. Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Fund Holders In Q2 2024: 308
Share Price Target Upside: 13%
Share Price Target: $210
Amazon.com, Inc. (NASDAQ:AMZN) is an eCommerce and cloud computing company. This enables it to benefit from the sizeable nature of the eCommerce industry and the high growth, high margin, and recurring revenue offered through cloud computing. Amazon.com, Inc. (NASDAQ:AMZN) dominates the eCommerce market through its market share which saw it attract 3.25 billion users to its website in June. This also provides a wide moat to the firm in the advertising business, as merchants are eager to sell and advertise their products on its platform. Amazon.com, Inc. (NASDAQ:AMZN) also enjoys key operating advantages, as evidenced by the click to door speed of just 1.9 days for the firm as opposed to 4.4 days for the industry. Amazon.com, Inc. (NASDAQ:AMZN)’s resources have also enabled it to establish a strong footing in the AI industry as it is one of the few firms with a foundational AI model. The firm is operating on all three layers of the AI stack, from designing semiconductors to providing a platform for businesses to develop AI products and services. “Amazon’s high-margin businesses continue to allow Amazon to drive greater profitability while still continuing to invest,” believes Morgan Stanley. It adds that “Advertising serves as a key area for both further growth potential and profitability flow-through.”
Albyn Capital Management mentioned Amazon.com, Inc. (NASDAQ:AMZN) in its Q2 2024 investor letter. Here is what the fund said:
“In his annual letter to shareholders, CEO Andy Jassy underscores Amazon’s commitment to “primitive services” over the last 20 years – creating foundational building blocks that empower rapid development of higher level products and services. Examples include developing core functionalities like payments and search, which eventually led to the Fulfilled by Amazon service, or developing logistics infrastructure, which led to the Buy with Prime service. Amazon is adopting the same approach to the next front, GenAI, from custom AI chips and training/deployment services to empower companies to construct their own core GenAI models, to their Bedrock service which allows customers to use pre-existing models to more quickly develop applications, to Amazon developing their own applications for internal use (think Alexa and a new shopping AI called Rufus).
Amazon’s dominance comes not just from its scale but also from a relentless “customer obsession,” exemplified by its focus on building services that empower customers. This positions Amazon to capture significant shares of the growing retail and cloud markets. With a 45% share of online retail, which only makes up 25% of total retail sales, Amazon is well-placed for growth. The company’s expansion into the grocery sector, backed by investments in same-day delivery, shows promise. Currently, Amazon holds a 20% share of the grocery market, a segment that constitutes 34% of US retail sales but is only 12% penetrated. As online retail trends towards 40-50% penetration, Amazon’s growth potential is meaningful. Similarly, in the cloud sector, only 10% of IT spending has shifted to the cloud, with AWS holding a 35% market share.”
9. General Dynamics Corporation (NYSE:GD)
Number of Hedge Fund Holders In Q2 2024: 48
Share Price Target Upside: 13%
Share Price Target: $345
General Dynamics Corporation (NYSE:GD) is one of the biggest defense contractors in the world. It operates across most military domains, namely land, water, air, and cyber. This provides General Dynamics Corporation (NYSE:GD) with a wide moat, as its military systems such as the M1 Abrams tank and Virginia class nuclear submarines are long standing products of US national defense. Defense contracts remain stable even during turbulent economic times, and General Dynamics Corporation (NYSE:GD) might also see additional catalysts in the future if the conflict in Ukraine does not die down or if tensions between the US and China flare up. The firm also has a strong presence in the civilian aviation industry through its Gulfstream subsidiary, which commands a 13.6% market share of the business jet market. Additionally, General Dynamics Corporation (NYSE:GD) is one of the few defense contractors with a strong position in the cybersecurity market. It sells cybersecurity hardware and software capabilities, for a high margin business that complements existing hardware sales.
General Dynamics Corporation (NYSE:GD) did face some troubles with its business jets recently. Here’s what management shared during the Q2 2024 earnings call:
“So very late in the certification process, we had a requirement to bind together some wires in the tail of the airplane. So relatively simple fix. For those airplanes that we had already built, we took the tails off. For those that we were building, we just didn’t put them on. So this is largely behind us. And contributed to a bit to the cost impact on lot one. But I would note that it’s extremely hard to discern anything meaningful looking from the outside in here. This is, as I said, largely behind us and was pretty late in the process. And not particularly difficult to do.”
8. Constellation Energy Corporation (NASDAQ:CEG)
Number of Hedge Fund Holders In Q2 2024: 71
Share Price Target Upside: 18%
Share Price Target: $232
Constellation Energy Corporation (NASDAQ:CEG) is the biggest green energy power generation firm in the US. This provides it with a wide moat when it comes to artificial intelligence. Estimates show that AI power demand globally could sit at 800 Twh, which makes it critical to ensure that clean energy is powering the revolutionary new technology. Constellation Energy Corporation (NASDAQ:CEG) has 33,000 megawatts of power generation capacity in its portfolio, and the firm can see further headwinds from US government spending through the Inflation Reduction Act (IRA). Constellation Energy Corporation (NASDAQ:CEG) generates a whopping 22 gigawatts of electricity from nuclear power, which also places it in a favorable position to benefit from any future growth in the US nuclear industry. However, its exposure to clean energy also means that if investors perceive tighter future capital conditions, then the shares can suffer. This was also the case at September’s start when worries of a recession and delayed rate cuts led to a 9.6% share price drop.
ClearBridge Investment mentioned Constellation Energy Corporation (NASDAQ:CEG) in its Q2 2024 investor letter. Here is what the fund said:
“Constellation Energy is primarily a nuclear generation company and is the largest producer of carbon- free electricity in the U.S., serving states including New York, Illinois, Maryland, Pennsylvania and New Jersey. The company’s combined generation capacity is more than 32 GW and 90% of annual output is carbon free. Constellation has been a beneficiary of AI and subsequent power demand as its 24/7 base load nuclear generation can get premium contracts.”
7. Eli Lilly and Company (NYSE:LLY)
Number of Hedge Fund Holders In Q2 2024: 100
Share Price Target Upside: 20%
Share Price Target: $1,106
Eli Lilly and Company (NYSE:LLY) is one of the hottest stocks these days due to its commanding presence in the weight loss drug market. The shares are up by 56% year to date, as investors continue to remain optimistic about its potential to lead the weight loss drug market. However, this market has rapidly evolved, and after the initial wave of products has made its mark, drug makers are now eager to expand their market share. This means that early movers like Eli Lilly and Company (NYSE:LLY) are under pressure to reduce prices to expand access. Additionally, as the first weight loss drugs were released in 2014, their patents are expiring which could flood the market with a slew of low cost generics. Consequently, Eli Lilly and Company (NYSE:LLY)’s hypothesis now depends on its ability to introduce newer weight loss drugs with higher efficacy and products that are competitively priced to ensure a commanding market share. Additionally, the firm’s considerable resources allow it to target other markets too, and the latest bit on this front is Eli Lilly and Company (NYSE:LLY)’s FDA approval for a skin disease treatment. Morgan Stanley is also aware of this potential, as it notes that “LLY has the most robust new product cycle (and hence growth) outlook in Pharma as the company could launch five new drugs over the next two years (across large end markets such as diabesity, Alzheimer’s disease, cancer and immunology).”
Baron Funds mentioned Eli Lilly and Company (NYSE:LLY) in its Q2 2024 investor letter. Here is what the fund said:
“In biopharmaceuticals, we remain bullish on the market opportunity for new diabetes and obesity medicines. In June at a medical meeting, the principal investigators of the SURMOUNT-OSA trial presented the full data which demonstrated that Eli Lilly and Company’s Tirzepatide reduced obstructive sleep apnea in adults with obesity by up to 62.8%, and up to 51.5% of participants met the criteria for disease resolution. This impressive data set paves the way for Tirzepatide to be used as a treatment for obstructive sleep apnea in overweight and obese individuals.”
6. Lineage, Inc. (NASDAQ:LINE)
Number of Hedge Fund Holders In Q2 2024: N/A
Share Price Target Upside: 20%
Share Price Target: $100
Lineage, Inc. (NASDAQ:LINE) is a specialty real estate investment trust that operates in the warehousing industry. It primarily works with the food and beverage industry through a commanding position in the temperature controlled warehouse sector. Lineage, Inc. (NASDAQ:LINE) benefits from a dominant position in the market as it has a presence in 19 countries and a 33% market share in North America. The market share allows the firm to benefit from economies of scale through lower costs, and it also allows it to grow through non operational activities such as mergers and acquisitions. This is key since Lineage, Inc. (NASDAQ:LINE)’s large exposure to the food and beverage industry means that while the business is somewhat hedged against economic downturns, it can only perform on all cylinders if the economy is performing well. This is also reflected in the share price, as Lineage, Inc. (NASDAQ:LINE)’s stock is up by a mere 3% over the past twelve months. However, the firm is one of the most prolific acquirers in its industry having completed $11.7 billion in acquisitions to date.
5. Live Nation Entertainment, Inc. (NYSE:LYV)
Number of Hedge Fund Holders In Q2 2024: 50
Share Price Target Upside: 21%
Share Price Target: $120
Live Nation Entertainment, Inc. (NYSE:LYV) is an entertainment and advertisement company that conducts live events, operates ticket marketplaces, sponsors events, and conducts other associated operations. The firm’s Ticketmaster platform is the largest of its kind, which enables Live Nation Entertainment, Inc. (NYSE:LYV) to earn revenue through a whopping 620 million ticket sales in 2023. At the same time, Ticketmaster has come under sharp criticism from consumers for charging high prices, and Live Nation Entertainment, Inc. (NYSE:LYV) could face headwinds in the future if the government takes actions against it on the assumption that it is abusing its dominant market position. Live Nation Entertainment, Inc. (NYSE:LYV) also holds a key place in the music industry as while record sales have dropped due to the growth in digital streaming, artists still generate popularity through live concerts. The firm can also improve its margins through providing tertiary services such as parking and food at its entertainment venues.
Live Nation Entertainment, Inc. (NYSE:LYV)’s management is quite optimistic about its live events next year. Here’s what it said during the Q2 2024 earnings call:
“As we said from day one, this is never going to be a big stadium year. We’re thrilled that we can still grow the business coming off two years of extraordinary growth, given where we were in 2019. So it’s still a strong year for us overall. Stadiums were always the challenge, international was always going to be a stadium issue given Paris Olympics. Most of France shut down for that month, and most of that affected a lot of the stadium business for the summer. So the good news is, as we predicted, ’25 looks like to be a big banner year again. We’re looking right now at our stadium pipeline for ’25. It’s bigger right now than it was two years ago for ’23. Our amp and arena is bigger right now than it was last year at this time in terms of our pipeline.
So we’ve always thought 2024 would be the year of AOI and amphitheaters and arenas and ’25 will be back to a solid continual growth of stadiums. And as we’ve always predicted post-COVID, we’d be back to an 8%, 9% compounded annual growth as an industry on the top line, and we’ll see that come back to life next year and probably more.”
4. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders In Q2 2024: 184
Share Price Target Upside: 23%
Share Price Target: $273
Apple Inc. (NASDAQ:AAPL) is the world’s largest technology company in terms of revenue and market capitalization. With roughly $1.46 billion people using an iPhone worldwide, the phone is the bedrock of Apple Inc. (NASDAQ:AAPL)’s hypothesis. This is also evident through the fact that 52% of the firm’s revenue comes from smartphones, and its sizeable user base has also allowed Apple Inc. (NASDAQ:AAPL) to build a tertiary Services business capable of generating $78 billion in revenue annually. The user base is baked into the firm’s share price, and Apple Inc. (NASDAQ:AAPL)’s value is based primarily on its ability to ensure regular iPhone upgrades by keeping users in its fold through a closed ecosystem and unique design. It has also meant that the shares have managed to avoid Wall Street’s AI jitters in 2024, as while enterprise AI players like MSFT are down by 7.9% since the July peak, Apple Inc. (NASDAQ:AAPL)’s shares have lost just 1.70%. The ability to monetize AI and ensure regular upgrades are the two pillars of Apple Inc. (NASDAQ:AAPL)’s hypothesis.
Baron Funds mentioned Apple Inc. (NASDAQ:AAPL) in its Q2 2024 investor letter. Here is what the fund said:
“Recent Activity This quarter we re-initiated a position in Apple Inc., a leading technology company known for its innovative consumer electronics products like the iPhone, MacBook, iPad, and Apple Watch. Apple is a leader across its categories and geographies, with a growing installed base that now exceeds 2 billion devices globally. The company’s attached services – including the App Store, iCloud, Apple TV+, Apple Music, and Apple Pay – provide a higher margin, recurring revenue stream that both enhances the value proposition for its hardware products and improves the financial profile. Apple now has well over 1 billion subscribers paying for these services, more than double the number it had just 4 years ago. The increasing services mix has led to healthy operating margin improvement, providing more free cash flow for Apple to reinvest in the business and to distribute to shareholders. Throughout its 48-year history, Apple has successfully navigated and capitalized on major technological shis, from PCs to mobile to cloud computing. We believe the company’s leading brand and device ecosystem position it to do equally well in the AI age, and this was the driver of our decision to re-invest. “Apple Intelligence” – the AI strategy unveiled at Apple’s recent Worldwide Developer Conference – leverages on- device AI and integrations with tools like ChatGPT to enhance user experiences across its ecosystem. The AI suite enables users to create new images, summarize and generate text, and use Siri to perform actions across their mobile applications, all while maintaining user privacy and security. We think Apple Intelligence can drive accelerated product upgrade cycles and higher demand for Apple services. The combination of growth re-acceleration, increasing services contribution, and thoughtful capital allocation should continue driving long-term shareholder value.”
3. NVIDIA Corporation (NASDAQ:NVDA)
Number of Hedge Fund Holders In Q2 2024: 179
Share Price Target Upside: 26%
Share Price Target: $150
NVIDIA Corporation (NASDAQ:NVDA) is the world’s largest and most advanced graphics processing unit designer. Its GPUs, which offer businesses the ability to accelerate their workloads, are also key to its hypothesis. NVIDIA Corporation (NASDAQ:NVDA)’s rapid share price growth of 715% since 2023 started is built on Wall Street’s optimism of its GPUs being heavily demanded for enterprise computing use cases. Artificial intelligence is also one of these use cases, and as NVIDIA Corporation (NASDAQ:NVDA)’s shares have lost 12% since their June peak, the firm has sought to slightly shift the narrative. At a recent conference, CEO Jensen Huang shared that NVIDIA Corporation (NASDAQ:NVDA) also plays in a non AI $1 trillion market for GPUs that will help accelerate computing that has slowed down over the years due to physical limitations of CPU design. Naturally, this means that as long as NVIDIA Corporation (NASDAQ:NVDA) continues to design superior products and there is demand for them, its shares perform well. However, any inventory glut or growth in custom chips by the likes of Amazon and Meta could spell trouble.
Baron Funds mentioned NVIDIA Corporation (NASDAQ:NVDA) in its Q2 2024 investor letter. Here is what it said:
“More recently, however, we’ve entered the period of doubts and questioning, some of which is real and normal in the first stages of a new paradigm, and some of which is prompted by short sellers. Given the explosive returns of NVIDIA and other AI leaders, AI bears and fear mongers have been comparing the current AI market winners with the internet bubble of the late 1990s/early 2000s, and NVIDIA’s stock move today with Cisco’s back then. First, while many stocks were trading at nosebleed valuations and on made up metrics (such as price per eyeballs) before the bursting of the internet bubble, as we’ve said many times, the internet proved to transform our world and create the digital age we are now living in. Second, while NVIDIA’s stock price inflection has been nothing short of unprecedented for a company of its size, it was fueled almost entirely by explosive growth in revenues, earnings, and cash flows– not multiple expansion. Over the last 12 months, NVIDIA’s stock has eectively tripled, but its forward P/E multiple has remained essentially flat, because NVIDIA blew away Wall Street expectations despite being covered by over 60 sell-side analysts, who have increased their forward projections every single quarter. In my career, the only comparative analogue is when Apple first introduced the iPhone and stunned Wall Street with its growth. In contrast, most of Cisco’s move in the late 1990s was due to multiple expansion. At its peak, Cisco traded at a P/E ratio over 130 times, more than quadruple its five-year average of 37 times. At the end of the second quarter, NVIDIA traded at a P/E ratio of 40 times, equal to its five-year average, and at a P/E to growth (or PEG) ratio for 2025 of 0.8 times, as consensus expectations are for NVIDIA to grow earnings per share 40% next year.
Moreover, investor concerns have arisen about the financial impact AI is having and whether surging capital expenditures (capex) across the technology landscape, particularly the large cloud players (Microso, Google, Amazon, and Meta), known as the hyperscalers, will be justified and earn reasonable returns on invested capital (ROIC). First, the adoption and penetration of new technology typically traces a classic S-curve–or more precisely, in our view, a series of S-curves or phases. For at least the past year and a half, we’ve been in what might be called the AI infrastructure- build phase – building the AI factories, as NVIDIA CEO Jensen Huang has articulated it, and this phase has been dominated by the infrastructure- layer players – the accelerated computing chips suppliers like NVIDIA and Broadcom, as well as data center, cloud infrastructure and energy companies. The hyperscalers, other enterprises, and sovereign entities investing ahead understand that if you want to be in the AI game, you must invest now – build the infrastructure, build the factories – or else you’ll find yourselves disrupted on the sidelines or playing catch up in the biggest game, the most important race in a technology generation. Only those who invest today even have the chance to be the winners of the future.”
2. Bank of America Corporation (NYSE:BAC)
Number of Hedge Fund Holders In Q2 2024: 92
Share Price Target Upside: 27%
Share Price Target: $49
Bank of America Corporation (NYSE:BAC) is one of the biggest banks in the world and in America courtesy of its user base of 6 million people. It is also one of the few Global Systematically Important Banks (GSIBs) designated by the US government, which means that Bank of America Corporation (NYSE:BAC) can seek government help in case of turmoil to ensure it does not cease functioning. However, the bank’s large consumer focus means that in times of high rates, the bank faces corresponding high costs. For instance, in H1 2023, Bank of America Corporation (NYSE:BAC)’s interest expense was $32.4 billion and marked a 734% annual jump. While H1 2024 saw this growth taper to 40%, the impact of high costs remained as the bank’s net interest dropped by $900 million and led to flat net income growth. Yet, since Bank of America Corporation (NYSE:BAC) is a diversified bank, it also has a sizeable presence in the investing banking, investment services, and card markets. These do well in a growing economy marked by low rates and could create tailwinds in the future.
Bank of America Corporation (NYSE:BAC) is already seeing growth in these areas. Here’s what management said during the Q2 2024 earnings call. Here is what they said:
“We grew investment banking fees 29% year-over-year and saw sales and trading revenue increase 7%. Global Markets had its 9th consecutive quarter of year-over-year growth in sales and trading revenue, a good job by Jimmy DeMare and his team. Card and service charge revenue also grew by 6% year-over-year in our Consumer business. Much of this fee growth is a result of our intensity around organic growth, and is a testament to the diversity of our operating model. Now on to slide three. Organic growth has been driven by several key factors. First, we focus on our customers. We continue to place them at the center of everything we do. Consumer led the way in delivering solid organic growth with high-quality accounts and engaged clients. For the 22nd consecutive quarter, we had significant net new consumer checking accounts.
We expanded our customer base and our market share. Specifically, we added 278,000 net new checking accounts this quarter, which brings our first six months of 2024 to more than 500,000. In wealth management, we added another 6,100 new relationships this quarter. In our commercial businesses, we added 1,000s of small businesses and 100s of commercial banking relationships. This has led to now managing $5.7 trillion in client balances, loans, deposits, and investments across the consumer and wealth management client segments. In those areas, we saw flows of $58 billion in the past four quarters. Our emphasis on personalized financial solutions and superior customer service has strengthened customer loyalty, attracted new clients across all our businesses.”
1. M&T Bank Corporation (NYSE:MTB)
Number of Hedge Fund Holders In Q2 2024: 34
Share Price Target Upside: 30%
Share Price Target: $220
M&T Bank Corporation (NYSE:MTB) is a regional bank headquartered in Buffalo, New York. It is one of the biggest banks of its kind in terms of assets, with the figure sitting at a cool $208 billion as of December 2023. M&T Bank Corporation (NYSE:MTB) has benefited from high interest rates, as they have allowed it to grow its revenue from $5.9 billion in 2020 to $9.3 billion in 2023 for a 57% growth. M&T Bank Corporation (NYSE:MTB) has some exposure to the troubled commercial real estate sector though. As of Q2, its CRE loans were $31.5 billion which increases the risk of headwinds in case real estate defaults pick up particularly if there is a recession. Additionally, M&T Bank Corporation (NYSE:MTB)’s shares could suffer in the future if rate cuts are delayed. This is because the bank’s net interest income (NII) is struggling as it faces off with high deposit costs which will continue to be sticky in case of higher rates.
On the flip side, lower rates could also reduce M&T Bank Corporation (NYSE:MTB)’s NII. Here’s how management is preparing in advance for this:
“Higher for longer rates in the first half of the year allowed us to take additional actions to protect NII from lower interest rate environment.
For example, in the first half of the year, we shifted $3 billion of cash into securities and added $5 billion in forward starting cash flow hedges, which became active in 2025. During — or further, we expect that the downside in interest-bearing deposit beta will be approximately 30% to 40% in the first couple of rate cuts.”
MTB tops the list of MS’ top stocks for 2025 by share price percentage upside. But our conviction lies in the belief that some 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 MTB 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’.
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