In this piece, we will take a look at the 11 best music stocks to invest in. If you want to skip our overview of the global music industry, then you can jump ahead to take a look at the 5 Best Music Stocks to Invest in.
When most people think about getting rich, the first avenue that comes to their mind is the business world. After all, the stock market is full of stories of rags to riches, whether we look at the multi billion dollar hedge fund industry or the business world. Even though business people such as Microsoft Corporation (NASDAQ:MSFT) founder Bill Gates and Tesla, Inc. (NASDAQ:TSLA) chief Elon Musk did have the luxury of supportive families that many others don’t, most of their wealth can nevertheless be attributed to their own grit and intelligence.
After all, if privilege were a necessary condition for success, then the countless MBAs that graduate from elite business schools each year would become multi billionaires as well. Yet, as we all know, not a single centi billionaire on Wall Street ended up attending any of the business schools that hundreds jostle each year to get into.
At this point, you must be thinking. What does any of this have to do with music stocks? Well, the music industry is another sector that can make one quite rich. And we don’t have to look too far for an example of this phenomenon, as one of the most successful pop stars of our age, Taylor Swift, is setting new records in style these days. Swift, whose followers call themselves ‘swifties’ is known for her generosity towards fans and team members, and owing to the marketing opportunities offered by the Internet, has been able to perform for hundreds of thousands of people all over the world.
In fact, while Swift has been making headlines for years now, April 2024 has been another historic month for the star as it has seen her officially secure a place in Forbes Magazine’s list of billionaires. According to Forbes, Swift is currently worth a cool $1.1 billion, and she also holds the distinct honor of having earned the title solely through her musical performances.
A key aspect behind the success of Swift and her modern day contemporaries is the Internet. Music stocks such as Spotify Technology S.A. (NYSE:SPOT) allow artists and record labels to spread their music worldwide and earn money from fans in far flung regions. So, while in 1924 a singer in New York City could at very best expect her fans in New Jersey to pay for her performance, in 2024, singers and performers can rely even on people in Japan to pay for their art.
Another key fact about the music industry, and one that isn’t widely understood, is that the sector might be recession proof. Or at least that’s what Bill Ackman of Pershing Square shared in the early post pandemic days. Ackman, who had piled into Universal Music Group N.V. (AMS:UMG.AS) back then, explained that one of the reasons he held this belief was the fact that UMG had managed to grow 5% during the pandemic – at a time when most other businesses were struggling. Another key factor influencing Pershing Square’s decision to take a big stake in the music company was its belief that by 2030 end, 67% of all smartphone users would end up subscribing to music streaming services.
At the same time, this growing popularity of music streaming services might also change the industry soon. One of the more controversial aspects of the industry is that when it comes to Spotify, the firm pays a share of the money earned from its streams to record labels. As of December 2023, 70% of the revenue went to the music license holder while Spotify got to keep 30% to itself. Seems good so far, but this sharing model has generated criticism for allowing record labels to cut the artists out of the loop. Consequently, there are growing incentives for artists to try operating independently, with the internet offering them a cheap and easy platform to share their work with the world.
One such shift has already started to take place, with Deezer deciding to slightly tweak its payout formulas to stop penalizing artists that are unable to generate significant revenue. This payout model could end up incentivizing independent record labels to grow their market, and while we talk of change, history is being made in the music industry as well. This comes in the form of Blackstone’s $1.6 billion acquisition of Hipgnosis Songs Fund Limited (LON:SONG.L). Hipgnosis has sought to transform music into a traded asset class, and the deal will see tens of thousands of songs added to Blackstone’s portfolio.
Finally, to understand what’s in store for music stocks in the future and what factors end up influencing their performance, we can see what hedge funds are saying about music stocks such as Spotify. On this front, here’s what Rowan Street Capital had to say about the firm in its fourth quarter of 2023 investor letter:
In our year-end 2022 letter we wrote: “Spotify (SPOT) is currently selling for about $15 billion. Does this make any sense?” We argued that Spotify stock was extremely mis-priced by the market. That aged pretty well as the current market cap for Spotify is ~$40 billion. Spotify’s stock skyrocketed +138% in 2023, strongly contributing to our outperformance. Spotify surpassed analyst expectations by adding 26% more monthly active users (MAUs) year-over-year in Q3 2023, reaching a total of 489 million (estimated to close the year with 600 million MAUs). This impressive growth solidified Spotify’s position as the world’s leading music streaming platform. Investors also applauded Spotify’s bid to improve profitability by suspending its podcasting spending spree and implementing cost-cutting measures, including layoffs, which reduced operating expenses
So, with these details in mind, let’s take a look at some top music stocks in 2024. Some notable picks in this list are Spotify Technology S.A. (NYSE:SPOT), Apple Inc. (NASDAQ:AAPL), and NetEase, Inc. (NASDAQ:NTES).
A group of musicians performing on stage with the audience in the background.
Our Methodology
To make our list of the best music stocks, we made a list of firms that either directly operate in the music industry or have a presence in the label and other segments through their subsidiaries. Finally, while firms such as Amazon were excluded, Apple was included since its Apple Music business division earns almost as much revenue as some of the biggest music streaming companies in the world.
For some of these best music stocks, we used hedge fund sentiment. Hedge funds’ top 10 consensus stock picks outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here). That’s why we pay very close attention to this often-ignored indicator.
11 Best Music Stocks to Invest in
11. Hipgnosis Songs Fund Limited (LON:SONG.L)
Number of Q4 2023 Hedge Fund Shareholders: N/A
Hipgnosis Songs Fund Limited (LON:SONG.L) is one of the biggest music management companies in the world. Its song catalogs are worth a whopping $3 billion that cover 150 song catalogs. The firm’s size is evident in its business division Hipgnosis Songs Capital (HSC) which works with the world’s largest asset manager Blackstone. It joins Apple Inc. (NASDAQ:AAPL), Spotify Technology S.A. (NYSE:SPOT), and NetEase, Inc. (NASDAQ:NTES) in our list of the best music stocks.
10. Vivendi SE (OTC:VIVHY)
Number of Q4 2023 Hedge Fund Shareholders: N/A
Vivendi SE (OTC:VIVHY) is another sizeable European entertainment company. Headquartered in Paris, France, the firm has nearly forty thousand employees on its roster. A diversified entertainment company, Vivendi SE (OTC:VIVHY) manages live musical events and is also engaged in the film business. However, as the global media industry feels the pinch of high interest rates, Vivendi SE (OTC:VIVHY) is looking to sell its ticketing business.
9. Reservoir Media, Inc. (NASDAQ:RSVR)
Number of Q4 2023 Hedge Fund Shareholders: 15
Reservoir Media, Inc. (NASDAQ:RSVR) is a small American entertainment company headquartered in New York City. The firm is involved in nearly all aspects of the music ‘supply chain’ from signing artists to marketing their content. It has been struggling on the financial front as of late by having missed analyst EPS estimates in three out of its four latest quarters. However, Reservoir Media, Inc. (NASDAQ:RSVR)’s latest quarterly results did mark a 15% annual revenue growth.
During Q4 2023, 15 out of the 933 hedge funds profiled by Insider Monkey had bought and owned Reservoir Media, Inc. (NASDAQ:RSVR)’s shares. Adam Katz and Andy Dodge’s Irenic Capital Management was the firm’s largest hedge fund investor due to its $24.6 million stake.
8. Sony Group Corporation (NYSE:SONY)
Number of Q4 2023 Hedge Fund Shareholders: 21
Sony Group Corporation (NYSE:SONY) is one of the biggest media, entertainment, and technology companies in the world. It participates in the music industry through its music business division. The shares are rated Strong Buy on average, and the average analyst share price target is $115.78.
As of December 2023 end, 21 out of the 933 hedge funds profiled by Insider Monkey had invested in the firm. Sony Group Corporation (NYSE:SONY)’s biggest stakeholder in our database is Ken Fisher’s Fisher Asset Management as it owns $602 million worth of shares.
7. Sirius XM Holdings Inc. (NASDAQ:SIRI)
Number of Q4 2023 Hedge Fund Shareholders: 22
Sirius XM Holdings Inc. (NASDAQ:SIRI) is an audio entertainment company that also offers music streaming services. Its Canadian division made a rather interesting announcement in April 2024 when it revealed that it had signed an agreement with actors from the popular U.S. TV show Suits for a new podcast to provide fans more closure with their favorite show.
After digging through 933 hedge fund portfolios for their fourth quarter of 2023 shareholdings, Insider Monkey found 22 Sirius XM Holdings Inc. (NASDAQ:SIRI) shareholders. Warren Buffett’s Berkshire Hathaway owned the biggest stake which was worth $220 million.
6. Tencent Music Entertainment Group (NYSE:TME)
Number of Q4 2023 Hedge Fund Shareholders: 23
Tencent Music Entertainment Group (NYSE:TME) is a Chinese company headquartered in Shenzhen, China. It provides music streaming, merchandise, and other associated services. The shares are rated Strong Buy on average, with the average share price target being $11.91.
23 out of the 933 hedge funds covered by Insider Monkey’s research during Q4 2023 had held a stake in the firm. Tencent Music Entertainment Group (NYSE:TME)’s largest hedge fund investor is Paul Marshall and Ian Wace’s Marshall Wace LLP as it owns $94.1 million worth of shares.
Tencent Music Entertainment Group (NYSE:TME), Spotify Technology S.A. (NYSE:SPOT), Apple Inc. (NASDAQ:AAPL), and NetEase, Inc. (NASDAQ:NTES) are some top music stocks that hedge funds are buying.
Click to continue reading and see 5 Best Music Stocks to Invest in.
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Disclosure. None. 11 Best Music Stocks to Invest in was initially published on Insider Monkey.
