Two Sigma Advisors 5 Top Stock Picks and their Performance against S&P 500 ETF (SPY)

4. Microsoft Corporation (NASDAQ:MSFT)

Two Sigma Advisors Equity Stake: $491.1 million

Year-to-date Performance: +50.6%

SPDR S&P 500 ETF Trust (NYSEARCA:SPY) YTD Performance: +15.59%

Number of Hedge Fund Holders: 300

Based in Redmond, Washington, Microsoft Corporation (NASDAQ:MSFT) is a technology company that develops and supports software services, devices, and solutions worldwide. The company offers various software solutions for enterprises, including Microsoft Teams, Office 365 Security and Compliance, Microsoft Viva, and Microsoft 365 Copilot. It also provides cloud computing solutions through Azure and gaming solutions through the Xbox Console.

Even as Two Sigma Advisors has been embroiled in leadership wrangles, Microsoft Corporation (NASDAQ:MSFT) has remained a top pick for gaining exposure to the artificial intelligence boom. Having invested over $13 billion in OpenAI, the company has seen its sentiments improve significantly. Consequently, the stock is up by 50.6%.

Two Sigma Advisors increased its stakes in the company in the second quarter after it gained 18.8% against a 6% gain for the S&P 500 ETF (SPY). Microsoft Corporation (NASDAQ:MSFT) was also up by 19.7% in Q2 against a 9.9% gain for the SPY ETF. However, it dropped 7% in Q3 against a 3.6% drop for the ETF. The hedge fund has been buying and selling the stock since 2010 and accounted for 1.25% of the portfolio as of Q2 2023.

Baron Technology Fund made the following comment about Microsoft Corporation (NASDAQ:MSFT) in its Q3 2023 investor letter:

“Microsoft Corporation is the world’s largest software company. Microsoft was traditionally known for its Windows and Office products, but over the last five years, it has built an over $60 billion cloud business, including its Azure cloud infrastructure service and its Office 365 and Dynamics 365 cloud-delivered applications. The stock detracted from performance because Microsoft is the Fund’s largest holding and shares retreated 7.0% after strong first half performance. For the June quarter, Microsoft reported better-than-expected Azure results for the third straight period, highlighted by Azure revenue growing 27% in constant currency. Its computing division also beat expectations, with Windows revenue benefiting from an early back-to-school inventory build. Microsoft’s September quarter revenue guidance came in below Street expectations; however, with Azure effectively in line and demonstrating stabilization, but computing seeing the negative sequential impact of the pull-forward in back-to-school purchases. Looking at the big picture, Microsoft continues to execute at a high level, navigating a challenging macro backdrop while aggressively investing in long-term growth, and we remain confident that Microsoft is well positioned to leverage AI over the medium to long term as it infuses Open AI and other generative AI technologies across its entire product portfolio.”

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