We recently compiled a list of the top 10 stocks that hedge funds currently own the most. In this article, we’ll take a look at how Meta Platforms, Inc. (NASDAQ:META) stands compared to other stocks owned by hedge funds.
Wall Street stocks soared this month after the Federal Reserve released the minutes of its September meeting that led to its first interest rate cut in four years. Details revealed that a “substantial majority” of central bankers support a 0.5 percentage point cut in interest rates, increasing investors’ optimism about further rate cuts in the future.
The overall market hit a record high on October 11, led by several financial stocks that reported better-than-expected results during the recently ended quarter. Another factor encouraging investors is the slump in U.S. inflation, which fell to 2.4% in September, inching closer to the Federal Reserve’s annual rate of 2%. This has raised expectations that interest rates will be cut by a quarter point at the central bank’s next meeting in November.
However, some analysts caution against jumping into stocks after the rate cut, citing uncertainty surrounding the upcoming presidential election. Liz Young Thomas, head of investment strategy at SoFi, spoke with Business Insider in early September to discuss the historical pattern of the U.S. market from the end of the third quarter to the beginning of the fourth quarter. .
He noted that while the market will perform well from June to August as traders are on vacation and volume is low, there will be increased activity and volatility after traders return to their desks in September. But in election years, this fluctuation peaks around mid-October rather than September, Young-Thomas said.
Tom Lee, co-founder of Fundstrat Global Advisors, also warned investors about election-related uncertainty. Here’s what he said in an interview with CNBC late last month.
I think this Fed rate cut cycle is setting the stage for a very strong market over the next month or three months. However, I think there is still a high degree of uncertainty as to what will happen to stock prices between now and, say, voting day. That’s why I’m a little hesitant for investors to jump in.
Earlier in the month, in the weeks leading up to the interest rate cut, Lee, who is generally bullish on the stock market, predicted a 7-10% drop from September to October amid tensions over the presidential election. But Mr. Lee urged investors to “buy on the edge,” suggesting he sees the potential decline in share prices as an opportunity to buy stocks while they are down.
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LPL Financial’s Adam Turnquist also expects seasonal fluctuations in the coming weeks, but the dip offers an opportunity to buy when stocks are trading low and earn higher returns when the market stabilizes. He reiterated Lee’s point that he would do so. Turnquist advises investors not to rebalance existing portfolios because seasonal fluctuations have short-term effects and are difficult to predict.
With that said, let’s now shift our focus to hedge fund sentiment towards the stock market and discuss some of the stocks most widely held by hedge funds.
methodology
We scanned Insider Monkey’s database of 912 hedge funds in Q2 2024 and selected the top 10 companies with the most number of hedge funds holding shares. We have ranked each company in descending order of the number of hedge fund holders.
Why are we interested in stocks that hedge funds invest in? The reason is simple. Our research shows that by mimicking the top stock picks of the best hedge funds, you can outperform the market. Our quarterly newsletter strategy selects 14 small- and large-cap stocks each quarter and has returned 275% since May 2014, outperforming the benchmark by 150 percentage points (Learn more ).
A team of developers working together to create a messaging application for a company.
Meta Platforms, Inc. (NASDAQ:META)
Number of hedge fund holders: 219
Meta Platforms, Inc. (NASDAQ:META) is one of the world’s largest technology companies. It operates several popular social media platforms including Facebook, WhatsApp, Instagram, and Threads. An estimated 3.2 billion people use META’s applications every day.
Despite the global economic slowdown, the company’s ability to generate significant advertising revenue has been one of the main drivers behind its growth. Q2 2024 was another great quarter, with revenue increasing 22% year over year to $39.1 billion. Meta’s family of apps generated $38.1 billion in overall revenue, driven by strong performance in online commerce and gaming. Earnings for the quarter came to $13.5 billion, or $5.16 per share, beating analysts’ EPS estimates of $4.72 per share.
Meta Platforms, Inc. (NASDAQ:META) stock has soared 25% since the company announced its second quarter results on July 31st. Investors have also been active in investing in the company’s artificial intelligence, resulting in successful new product launches including: Demand for the Ray-Ban Meta Glasses and Meta Quest 3 has exceeded the tech giant’s expectations.
Wall Street analysts agree with the stock’s “strong buy” rating. Hedge fund sentiment remains strong given the company’s positive future outlook. According to Insider Monkey, 219 hedge funds had invested in META as of Q2 2024, making it one of the most-held stocks by hedge funds today.
However, several aspects may impact META’s short-term financials. The company plans another $40 billion in capital spending this year, which will likely weigh on the stock. Additionally, management said that the surge in advertisers on the company’s China-based social media apps like we saw last year is unlikely to occur this time around, so Reel’s impressions and We expect advertising to slow down.
Overall, META currently ranks #3 on the list of stocks most held by hedge funds. While we recognize META’s potential as an investment, we believe AI stocks are more likely to deliver higher returns and achieve them in a shorter period of time. If you’re looking for AI stocks that are more promising than META but trade at less than 5x earnings, check out our report on the cheapest AI stocks.
Read next: A $30 trillion opportunity: 15 humanoid robot stocks to buy as NVIDIA has ‘become a wasteland’, according to Morgan Stanley and Jim Cramer.
Disclosure: None. This article was originally published on Insider Monkey.
