We recently published a list of the 10 Best of Breed Stocks to Buy For The Third Quarter of 2024 According to Bank of America. Since NVIDIA Corporation (NASDAQ:NVDA) ranks 1st on the list, it deserves a deeper look.
Analysts at BofA Securities recently published a list of “best of breed” stocks for the third quarter of 2024, which they believe are the top choices for investors on the back of their high quality, liquidity, earnings growth and margin upside when compared with peers. BofA’s “best of breed” basket of stocks has reportedly outperformed the MSCI All Country World Index (NASDAQ:ACWI) by 584 basis points, and returned a whopping 470% since its inception in April 2010.
Bank of America analyst Michael Hartnett thinks these best of breed companies have strong balance sheets, cash flow and high EPS growth as well as competent management. Hartnett believes these companies generate the “best relative returns” in the long term and can protect investors against short-term volatility.
For this article we scanned BofA’s best of breed basket of stocks and picked 10 companies with the highest 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).
Nvidia Corp (NASDAQ:NVDA)
Number of Hedge Fund Investors: 186
Bank of America recently said Nvidia is one of the best of breed stocks for the third quarter of 2024. Nvidia recently fell, triggering concerns the stock’s rally might be over. However, Wall Street thinks Nvidia’s run is far from over.
Recently, Oppenheimer’s Rick Schafer joined the NVIDIA Corp (NASDAQ:NVDA) bull chorus, raising the chipmaker’s price target to $150 from $110 following the 10-1 stock split.
NVIDIA Corp (NASDAQ:NVDA) is one of the stocks accounting for a huge chunk of the total market returns, thanks to its AI-fueled rally that seems to have no end in sight. NVIDIA Corp (NASDAQ:NVDA) shares have gained about 206% over the past one year.
Recently, Barclays Tom O’Malley gave bullish comments on the stock, with a $145 price target and an Overweight rating. The analyst pointed to a potential $25 billion opportunity from countries building up their AI capabilities. O’Malley expects NVIDIA Corp’s (NASDAQ:NVDA) earnings at $3.62 per share in fiscal 2026, while Wall Street analysts on average have a $3.55 per share estimate for NVIDIA Corp (NASDAQ:NVDA) earnings for 2026.
RiverPark Large Growth Fund stated the following regarding NVIDIA Corporation (NASDAQ:NVDA) in its first quarter 2024 investor letter:
“NVIDIA Corporation (NASDAQ:NVDA): NVDA shares were our top contributor in the quarter following blowout 4Q results and 1Q guidance driven by strong data center sales. The company reported quarterly revenue of $22.1 billion, up 265% year-over-year, and EPS in the quarter of $5.16, up 487% year-over-year and 12% ahead of expectations. Revenue guidance for 1Q of $24 billion was 8% above very high expectations. The artificial intelligence arms race kicked-off by ChatGPT and Alphabet’s Bard, among others, has generated tremendous demand for Nvidia’s next generation graphic processors.
NVDA is the leading designer of graphics processing units (GPU’s) required for powerful computer processing. Over the past 20 years, the company has evolved through innovation and adaptation from a predominantly gaming-focused chip vendor to one of the largest semiconductor/software vendors in the world. Over the past decade, the company has grown revenue at a compound annual rate of over 20% while expanding operating margins and, through its asset light business model, producing ever increasing amounts of free cash flow. Following recent results, Jensen Huang, founder and CEO of NVIDIA stated in the company’s press release, “a trillion dollars of installed global data center infrastructure will transition from general purpose to accelerated computing as companies race to apply generative AI into every product, service and business process.”
Overall, NVIDIA Corporation (NASDAQ:NVDA) ranks 1st on Insider Monkey’s list titled 10 Best of Breed Stocks to Buy For The Third Quarter of 2024 According to Bank of America. While we acknowledge the potential of NVIDIA Corporation (NASDAQ:NVDA), 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 NVIDIA Corporation (NASDAQ:NVDA) 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.