In this article, we will discuss the 5 best engineering stocks to buy now. To read the detailed analysis and recent updates about the engineering industry, go directly to the 10 Best Engineering Stocks to Buy Now.
5. Adobe Inc. (NASDAQ:ADBE)
Number of Hedge Fund Holders: 99
Adobe Inc. (NASDAQ:ADBE), previously known as Adobe Systems Incorporated, is a software powerhouse with a wide range of products including printing, graphics, and publishing software. The company is on our list of best engineering stocks to buy now because other than the software engineering team, its reliability, cloud perform, mobile, and product engineering subdivisions are largely responsible for the success of most of its products.
According to Insider Monkey’s database, Adobe Inc. (NASDAQ:ADBE)’s hedge fund sentiment improved slightly in the fourth quarter of 2022 as 99 funds were bullish on the company’s stock, compared to 93 in the previous quarter.
On March 28, Erste Group analyst Hans Engel upgraded Adobe Inc. (NASDAQ:ADBE)’s stock to Buy from Hold, highlighting the performance of the company and the upcoming revenue and profit growth estimates given by the management.
Polen Capital mentioned Adobe Inc. (NASDAQ:ADBE) in its first-quarter 2023 investor letter. Here is what it said:
“One area we are watching regarding Alphabet and Adobe Inc. (NASDAQ:ADBE) is AI systems and their capabilities, including generative AI. Interestingly, both Adobe and Alphabet could see benefits or threats from the emergence of generative AI and large language models (LLMs). Both companies already use generative AI to the benefit of their users in anticipating how content creators edit their work (Adobe) and in how search results are anticipated and generated (Google). At the same time, breakthrough technologies like AI can open the door to additional competition and/or impact a company’s profitability levels. We now see AI systems others are developing, including LLMs and generative AI offerings, that could be more competitive in the future. While we think it remains early days for ChatGPT and the capabilities of these types of LLMs and generative AI programs like DALL-E, the technology seems to be progressing at a fast rate and will at least require a strong response from incumbents.
As of now, we believe Alphabet and Adobe are leaders in their own right in these areas and have a clear path to improving their existing offerings with AI advancements, which would allow them to be net beneficiaries of AI. There are also significant barriers to building leading AI offerings in these areas. As a result, our position sizes in Adobe and Alphabet remain sizeable. For Adobe, the status of its pending $20 billion-plus Figma acquisition is also uncertain. There is a good chance, in our view, that it will be blocked by regulators, which would mean the future opportunity to expand its offerings to the developer community (beyond designers) may not occur.”
4. NVIDIA Corporation (NASDAQ:NVDA)
Number of Hedge Fund Holders: 106
NVIDIA Corporation (NASDAQ:NVDA) is an American technology company that is heavily dependent on engineers because of its portfolio of products such as GPUs, CPUs, chipsets, and groupware among others.
NVIDIA Corporation (NASDAQ:NVDA)’s biggest growth prospect is its market penetration in AI. The company is making AI-specific chips such as A100 graphic chips that were used to train ChatGPT and has now launched a new one, H100, which is significantly faster and better than the A100 according to NVIDIA Corporation (NASDAQ:NVDA).
NVIDIA Corporation (NASDAQ:NVDA) has been covered by 38 analysts in the last three months and 30 of them keep a Buy or Overweight rating on the stock. The average price target of the analysts is at $286.94.
Aristotle Atlantic Partners made the following comment about NVIDIA Corporation (NASDAQ:NVDA) in its Q1 2023 investor letter:
“NVIDIA Corporation (NASDAQ:NVDA) contributed to outperformance, as the company announced better-than-expected fourth quarter earnings driven by a strong rebound in Gaming and an improving outlook for the Datacenter business due to the acceleration of Graphics Processing Unit (GPU) driven Artifical Intelligence (AI) deployment. The company also hosted its Global Technology Conference (GTC) in March where it further highlighted its leading technology being used to develop AI Large Language Models (LLM). The company announced new partnerships with hyperscalers for its AI cloud-based service while also releasing new software and hardware offerings that will support GPU-driven AI growth. Nvidia continues to see a growing addressable market for its products and services as AI uses become more prevalent.”
3. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 135
Apple Inc. (NASDAQ:AAPL) is one of the largest tech companies in the world and its success is majorly dependent on its engineers that work on the products’ hardware (acoustic, camera, architecture, display, AI, etc.), software (apps, cloud, iOS, etc.), and services.
On May 2, Baird raised the price target on Apple Inc. (NASDAQ:AAPL)’s stock to $180 from $170 while maintaining an Outperform rating on the shares. The rating is given because the firm believes that the company will perform strongly in the coming months and would have a solid cash flow.
According to the Insider Monkey database, in the fourth quarter of 2022, 135 hedge funds had a stake in Apple Inc. (NASDAQ:AAPL) worth $136 billion. Warren Buffett’s Berkshire Hathaway was the most significant stakeholder and held 895 million shares, making up 38.89% of the fund’s portfolio.
Apple Inc. (NASDAQ:AAPL) was mentioned in Polen Capital’s first-quarter 2023 investor letter. Here is what it said:
“Not owning Apple Inc. (NASDAQ:AAPL) and NVIDIA detracted from our relative performance. With respect to Apple, we have not felt that the combination of growth available and the valuation made for one of our best ideas. Concerning NVIDIA, while there seems to be strong demand for data center chips, the valuation and lack of clarity around pace and magnitude of that growth has kept us at bay to date.”
2. Alphabet Inc. (NASDAQ:GOOG)
Number of Hedge Fund Holders: 209
Alphabet Inc. (NASDAQ:GOOG) is a technology holding company with subsidiaries such as Google LLC, DeepMind, Calico Life Sciences LLC, etc. which rely heavily on software, machine learning, and research engineers.
On March 28, the European Commission announced that it has given approval to Alphabet Inc. (NASDAQ:GOOG)’s subsidiary, Google, to purchase the Croatian math app, Photomath, which has more than 300 million downloads.
On April 25, Alphabet Inc. (NASDAQ:GOOG) released its first quarter 2023 result where the reported EPS was $1.17, up from the $1.05 EPS of the last quarter. The revenue beat the estimates of $68.8 billion as it increased by 2.6% YoY to $69.8 billion.
Alphabet Inc. (NASDAQ:GOOG) was highlighted in Polen Capital’s first-quarter 2023 investor letter. Here is what it said:
“One area we are watching regarding Alphabet Inc. (NASDAQ:GOOG) and Adobe is AI systems and their capabilities, including generative AI. Interestingly, both Adobe and Alphabet could see benefits or threats from the emergence of generative AI and large language models (LLMs). Both companies already use generative AI to the benefit of their users in anticipating how content creators edit their work (Adobe) and in how search results are anticipated and generated (Google). At the same time, breakthrough technologies like AI can open the door to additional competition and/or impact a company’s profitability levels. We now see AI systems others are developing, including LLMs and generative AI offerings, that could be more competitive in the future. While we think it remains early days for ChatGPT and the capabilities of these types of LLMs and generative AI programs like DALL-E, the technology seems to be progressing at a fast rate and will at least require a strong response from incumbents.
As of now, we believe Alphabet and Adobe are leaders in their own right in these areas and have a clear path to improving their existing offerings with AI advancements, which would allow them to be net beneficiaries of AI. There are also significant barriers to building leading AI offerings in these areas. As a result, our position sizes in Adobe and Alphabet remain sizeable. For Adobe, the status of its pending $20 billion-plus Figma acquisition is also uncertain. There is a good chance, in our view, that it will be blocked by regulators, which would mean the future opportunity to expand its offerings to the developer community (beyond designers) may not occur.”
1. Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders: 259
Microsoft Corporation (NASDAQ:MSFT) is a Washington-based tech giant with a diverse product range including devices, software, storage systems, and more. The company employs 221,000 people all over the world and has offices in around 190 countries. As of 2021, the company employed more than 100,000 software engineers.
On April 25, Microsoft Corporation (NASDAQ:MSFT) announced its fiscal third quarter 2023 results after which the shares climbed 9%. The non-GAAP EPS reported by the company was $2.45, beating the estimates of $2.23 and the revenue grew by 7% YoY to $52.86 billion. The increase was owed to the growth of segments of productivity and business services, intelligent cloud, and personal computing which increased by 11%, 16%, and 9%, respectively.
On April 26, Deutsche Bank increased the price target on Microsoft Corporation (NASDAQ:MSFT)’s stock to $340 from $310 after the company published an impressive third quarter 2023 earnings report. The firm has a positive outlook on the company because of its record of execution and increases in market share.
Microsoft Corporation (NASDAQ:MSFT) is taking steps to enter the cloud gaming sector. In light of that, on April 28, the company reported partnering with Nware, a cloud gaming platform under which the partnership’s duration is 10 years.
Polen Capital mentioned Microsoft Corporation (NASDAQ:MSFT) in its first-quarter 2023 investor letter. Here is what it said:
“Microsoft Corporation (NASDAQ:MSFT)’s fundamentals have largely stayed intact despite the headwinds many technology companies are facing due to the macroeconomic environment. While growth has decelerated below our longer-term target (we expect low-double-digit revenue growth over the next 3-5 years), we believe the deceleration should prove to be ephemeral. Azure and Office Commercial remain bright spots, while Windows OEM has been and will continue to be a drag over the next few quarters. With respect to Azure, even at a decelerated rate, the business continues to grow well. After eight consecutive quarters of Azure’s top line growth being in the mid-to-high-40s range, over the last two quarters, growth has been 42% and 38%, respectively. Microsoft is a scaled business with multiple and interlocking competitive advantages, and we believe the company will compound at high rates for a long period of time.”
You can also look at the 10 Best Auto and Truck Dealership Stocks to Buy and 10 Best Computer Hardware Stocks To Buy Now.
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