This article presents an overview of the 5 Stocks That Will Outperform the S&P 500 in 2024. For a detailed overview of such stocks, read our article, 15 Stocks That Will Outperform the S&P 500 in 2024.
5. Berkshire Hathaway Inc Class B (NYSE:BRK.B)
Number of Hedge Fund Investors: 116
Berkshire Hathaway Inc Class B (NYSE:BRK.B) ranks 5th in our list of the stocks Redditors believe will outperform in 2024.
As of the end of the third quarter of 2023, 116 hedge funds out of the 910 funds tracked by Insider Monkey had stakes in Berkshire Hathaway Inc Class B (NYSE:BRK.B).
Barron’s in December published a list of its top stock picks for 2024. Berkshire Hathaway Inc Class B (NYSE:BRK.B) made it to the list.
Barron’s said Warren Buffett has “positioned Berkshire to succeed without him.” Barron’s said Berkshire’s profits after tax in 2023 were up about 20% and the company’s earnings keep growing.
4. NVIDIA Corp (NASDAQ:NVDA)
Number of Hedge Fund Investors: 180
While Redditors remain divided on the valuation of NVIDIA Corp (NASDAQ:NVDA), an overwhelming number of retail investors on the platform believe the stock is still trading at attractive valuation multiples when compared to peers. NVIDIA Corp (NASDAQ:NVDA) is continuing to get huge orders for AI chips from major companies which is expected to keep supporting its fundamentals in the near future.
Polen Focus Growth Strategy stated the following regarding NVIDIA Corporation (NASDAQ:NVDA) in its fourth quarter 2023 investor letter:
“Apple and NVIDIA Corporation (NASDAQ:NVDA) alone drove over 1,100 basis points of the Russell 1000 Growth Index’s 42% return, so not owning them was a meaningful headwind to our relative return in 2023. NVIDIA shares rocketed higher by well over 200% in 2023 although they slightly underperformed our Portfolio and the Russell 1000 Growth in the fourth quarter. Generative AI has been a huge boon for NVIDIA as the use of LLMs like ChatGPT and others requires tremendous processing power that, today, is mostly provided by NVIDIA’s GPUs. All large cloud service providers, AI factories, and many large consumer internet companies are laying the foundation for generative AI by deploying NVIDIA GPUs and other parallel processing chips to be able to do large scale generative AI either for internal use (i.e., Meta) or as a service for others (i.e., AI factories) or both (cloud service providers such as Amazon, Microsoft, and Google).
Given many of NVIDIA’s customers or its end customers are still very much in the experimentation phase with generative AI, it is unclear how sustainable the current demand for GPUs truly is. At the same time, it is known that NVIDIA has historically been highly cyclical. By the end of 2024, we believe NVIDIA will already account for roughly half the market for datacenter chips, servers, and networking equipment, which is unprecedented. Even though the valuation at 25x forward earnings doesn’t look very demanding at first glance, it assumes NVIDIA will own virtually the entire datacenter chip market in just the next few years and will sustain year-on-year growth despite being a cyclical business that is currently experiencing much higher new peaks.
We believe NVIDIA is a highly advantaged business, but we also believe the long-term growth outcomes are currently too variable, and the expectations built into the company’s $1.2 trillion valuation as of this writing assume the most optimistic of those scenarios.”
3. Alphabet Inc (NASDAQ:GOOGL)
Number of Hedge Fund Investors: 221
An overwhelming number of Redditors believe Alphabet Inc (NASDAQ:GOOGL) has the potential to outperform S&P 500 in 2024. A Reddit comment which got a lot of upvotes and appreciation in a recent discussion thread said Google seems “unloved” and ever since ChatGPT came out Alphabet Inc (NASDAQ:GOOGL) has “woken” up to the new challenges.
“I think Gemini Ultra will be great, YT Premium and Youtube TV are growing very well. Cloud will continue to do well and Search will do well especially as they are incorporating generative AI in it, rates are expected to come down, advertisement spend will go up, especially with a big political year coming up,” the comment read.
Ensemble Capital Management stated the following regarding Alphabet Inc. (NASDAQ:GOOG) in its fourth quarter 2023 investor letter:
“Alphabet Inc. (NASDAQ:GOOG) (8.52% weight in the Fund): Google’s earnings report in October showed its core advertising business accelerating to double digit growth as the digital advertising recession of 2022 and early 2023 fades away. However, the company’s Cloud division, which is expected to generate growth from selling access to artificial intelligence services, saw its growth rate slow modestly. Juxtaposed with Microsoft’s Cloud business seeing growth pick up slightly, investors sold off Google’s stock on the report. While the stock recovered to new highs by the end of the year, the earnings report set back caused the stock to trail behind the S&P 500 with a gain of 6.8% for the quarter.”
2. Amazon.com Inc (NASDAQ:AMZN)
Number of Hedge Fund Investors: 286
Redditors believe Amazon.com Inc (NASDAQ:AMZN) can outperform the S&P 500 in 2024 due to its AI investments and ecommerce business growth.
BofA analyst Michael Hartnett recently said in a note that this is still a “buy the dip” market and investors will eventually revert to growth, Mag. 7 and monopoly stocks. Amazon.com Inc (NASDAQ:AMZN) is among the stocks Hartnett is bullish on.
Polen Focus Growth Strategy stated the following regarding Amazon.com, Inc. (NASDAQ:AMZN) in its fourth quarter 2023 investor letter:
“For the full year, the top relative and absolute contributors were Amazon.com, Inc. (NASDAQ:AMZN), Salesforce, and ServiceNow. Amazon shares appreciated 88% in 2023, driven primarily by rapidly expanding operating profit margins and free cash flow growth. After the pandemic, Amazon experienced a period of inefficiency and overinvestment in its distribution and logistics infrastructure. Amazon is now leveraging these investments as growth returned to its e-commerce business in 2023 after a highly unusual 2022. At the same time, Amazon’s rapidly growing and high-margin advertising business is contributing strongly to the entire company’s operating profit growth. The AWS (Amazon Web Services) cloud infrastructure and services business continued to slow in 2023 as customers anticipating a more difficult economic environment looked to save money on their cloud spend, but these cloud spending optimizations began to stabilize in the second half of 2023. We now expect customer interest in generative AI will begin to contribute to growth.”
1. Microsoft Corp (NASDAQ:MSFT)
Number of Hedge Fund Investors: 306
We scoured several investing-related discussion threads on Reddit and saw there’s almost a consensus among retail investors on Reddit that Microsoft Corp (NASDAQ:MSFT) shares will keep gaining value on the back of Microsoft Corp’s (NASDAQ:MSFT) AI investments and initiatives. Redditors are bullish on the stock because of a possible revival of Bing search, Microsoft Corp (NASDAQ:MSFT) investments in OpenAI and its diverse revenue stream.
Hedge funds agree. Microsoft Corp (NASDAQ:MSFT) was the most popular stock among the 910 hedge funds tracked by Insider Monkey as of the end of the third quarter.
Polen Focus Growth Strategy stated the following regarding Microsoft Corporation (NASDAQ:MSFT) in its fourth quarter 2023 investor letter:
“The largest relative detractors in the quarter were Illumina, Airbnb, and Microsoft Corporation (NASDAQ:MSFT). Microsoft’s business continues to grow well, albeit at slower rates than in the previous few years. That said, it was a relative detractor to the Portfolio because our 7% average weighting for both the quarter and the year were significantly lower than the 12% benchmark weighting in the Russell 1000 Growth. Microsoft shares appreciated a benchmark-beating 19% in 4Q and 58% in 2023.
In addition, we also expect generative AI to help not just Microsoft’s Azure cloud service business grow, but also to be an additional growth driver for the company’s Productivity Suite (Word, Excel, PowerPoint, etc.) and Power Platform, which helps build internal apps for businesses.
Microsoft has created generative AI co-pilots, which are bots that use large language models (LLMs) to make a customer’s Microsoft software even more functional. As an example, co-pilot offerings from Microsoft can take text and data from Word and Excel and automatically create a PowerPoint presentation from it. We expect to see generative AI demand from Azure customers becoming a larger contributor to growth of that segment while Microsoft Co-pilot becomes a premium feature of the high-end Microsoft commercial bundles, leading to better pricing. Given the strength of the company’s existing businesses and the expected strong product cycle driven by generative AI advancements, we chose to add to our Microsoft position. It is now our second largest position behind Amazon.”
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