We recently compiled a list of the 7 Best Stocks for Beginners with Little Money According to Analysts. In this article, we are going to take a look at where Amazon.com Inc (NASDAQ:AMZN) stands against the other beginner stocks.
On one hand, some investors view the status quo as a bear market, and on the other, some analysts hold a bullish view. While caution is necessary, blue chip stocks with historically solid results have an edge in the risk department.
The Status Quo Calls for Safer Investing
Geopolitical tensions on the one hand and economic turmoil on the other, have created a concerning situation for investors. On September 3, Tom Lee, Fundstrat Global Advisors managing partner and head of research, appeared in an interview on CNBC to share his outlook of the market. Lee is particularly concerned about the job market, the surprise inflation has in store for the economy, and weak growth projections.
Lee emphasized that investors must remain cautious for the next eight weeks or so, especially with elections and rate cuts, he predicts that the general public is bound to be nervous and confused. While his timeline may not be exact, he expects economic conditions and political turmoil to settle within the suggested time frame.
He further added that it is safer to be cautious than to make hasty decisions at the moment. He also stated that the oil industry is particularly weak due to geopolitical tensions despite a massive rise in production. Lee added that increasing production levels does not indicate a booming global economy, because, previously, production increased only because prices were rising which led to more drilling and activity in the sector.
Lee recommended that investors will be able to buy long, and therefore it is best to remain cautious. He further added that we already had 7% corrections twice this year, and there is a possibility of another 7% to 10% correction in the market. He did agree that the market is currently testing investors’ patience and he predicts something close to a 5% pullback.
How Must Investors Navigate Moving Forward?
On September 6, Liz Ann Sonders, Charles Schwab’s chief investment strategist, appeared in an interview on CNBC to discuss how investors should navigate the market right now. Sonders held a particularly bullish view of the market. She further added that while there has been significant weakness and churn on the surface, it is concealed by cap-weighted index returns.
Sonders suggested that the market level declines were most likely a set-up for the broadening out we have witnessed. She shared her point of view on the market, which is rather bullish, and emphasized that stocks in the consumer discretionary, technology, and communication services sectors are doing particularly well. Sonders, however, did point out that the market may see an exhaustion in the mega-cap tech trade.
She then suggests that investors must let go of the perception that to succeed they must invest in mega-cap tech stocks. She states that there are a myriad of opportunities outside of the mega-cap tech that are high quality. Finally, Sonders believes that a recession is not on the cards and that the current situation is nothing more than a growth scare.
Now that we have assessed the market, let’s take a look at the 7 best stocks for beginners with little money according to analysts. You can also take a look at the best defensive stocks to buy.
Our Methodology
To come up with the 7 best stocks for beginners with little money according to analysts we sifted over multiple similar rankings and ETFs to come up with safe and blue chip stocks. The rationale behind this was that investors with little money don’t afford to lose a lot and are more likely to invest in stocks that are safer or risk-free. We then sorted our stocks based on their upside potential. We have also included the hedge fund sentiment around each stock, as of Q2 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A customer entering an internet retail store, illustrating the convenience of online shopping.
Amazon.com Inc (NASDAQ:AMZN)
Analyst Upside as of September 10: 26%
Number of Hedge Fund Folders: 308
Amazon.com Inc (NASDAQ:AMZN) is a technology company that specializes in e-commerce, online retail, streaming, and data cloud services. Its e-commerce platform is functional in 20 countries and ships to over 100 countries. Its proprietary cloud service, Amazon Web Services, on the other hand, is used by millions of active customers and has over 130,000 AWS partners across 200 countries.
The company was first launched in 1994 and is on track to capture over 40% of the e-commerce market in the United States. As for its cloud segment, Amazon Web Services (AWS) increased its revenue by 17.2%, year-over-year in Q1 to 18.8% in Q2. AWS has logged 30% plus operating margins consistently for the past five quarters, making it a star performer.
Amazon.com Inc (NASDAQ:AMZN) is also making strides on the AI front. Over the past few months, the company has partnered with AI startups like Anthropic and signed deals with the US government to test new AI models. In July, the e-commerce giant processed a new server design, similar to the ones produced by NVIDIA. As for AI hardware, the company has produced several AI chips including Trainium and Inferentia, allowing it to reduce its dependence on other companies.
Analysts are bullish on AMZN and their 12-month median price target of $220 points to a 26% upside from current levels. Overall, AMZN was held by 308 hedge funds and Fisher Asset Management was the largest shareholder.
Diamond Hill Select Strategy stated the following regarding Amazon.com, Inc. (NASDAQ:AMZN) in its Q2 2024 investor letter:
“Among our top individual contributors in Q2 were Amazon.com, Inc. (NASDAQ:AMZN), Texas Instruments and Mr. Cooper Group. Internet retail and cloud infrastructure company Amazon is benefiting from strong profitability, particularly in its Amazon Web Services (AWS) business. Shares also received a boost amid growing optimism around the demand for AWS as Amazon customers’ investments in generative AI projects continue growing.”
Overall AMZN ranks 3rd on our list of the best beginner stocks to buy according to analysts. While we acknowledge the potential of AMZN as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than AMZN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.