We recently published a list of Top 10 Stocks to Buy According to Adage Capital Management. In this article, we are going to take a look at where Amazon.com, Inc. (NASDAQ:AMZN) stands against other top stocks to buy according to Adage Capital Management.
Adage Capital Management, based in Boston, is a major investment firm specializing in managing the broader market’s assets, with a strong focus on Endowments and Foundations. Among its prominent clients are institutions such as Harvard University, Dartmouth College, Northwestern University, the American Red Cross, and the Getty Foundation. Over the last 15 years, Adage and its predecessor, the Select Equity Group at Harvard Management Company, have consistently surpassed the wider market’s performance by an average of 3.5%.
The firm’s origins date back to the mid-1980s when co-founders Phillip Gross and Robert Atchinson met as investment analysts for Harvard’s endowment. In the 1990s, following controversy over large performance bonuses at Harvard Management, they, along with an 18-person team, left to establish Adage Capital Management. Their launch was backed by a $1.8 billion initial investment from Harvard, with an agreement that the university would receive 10% of Adage’s earnings.
Adage Capital Management primarily manages the broader market’s assets for endowments and foundations, utilizing a long/short equity strategy driven by fundamental analysis. The firm also explores risk arbitrage and event-driven investment opportunities when suitable.
Phillip Gross, more commonly known as Phill Gross, co-founded Adage Capital Management, L.P. in 2001 and serves as a Managing Director and Healthcare Portfolio Manager. Before establishing the firm, he spent 18 years at Harvard Management Company, Inc., where he held roles as a Healthcare and Retail Analyst, Equity Research Director, and Partner.
Gross earned both his B.S. in finance and economics in 1982 and M.S. in investments in 1983 from the University of Wisconsin. He previously served on the UW Foundation Board of Directors and is currently involved with the Steve Hawk Center for Applied Securities Analysis Advisory Board and the Nicholas Center for Applied Corporate Finance Advisory Board. In 2006, he was honored with the Distinguished Alumnus Award from the UW Business School.
In philanthropy, Gross co-founded Strategic Grant Partners, an initiative aimed at systemic change in education and family services in Massachusetts. He serves as Vice President of the Board of Directors for Youth Enrichment Services, a Boston-based organization that introduces urban youth to outdoor activities. Additionally, he is a Board Trustee of the U.S. Ski and Snowboard Association, vice-chair of its Investment Committee, and a board member of the T2 Foundation.
Adage Capital Management’s Q4 2024 13F filing reported $57.19 billion in managed 13F securities, with its top 10 holdings accounting for 31.7% of the total portfolio. This distribution highlights the firm’s diversified investment approach.
Our Methodology
The stocks discussed below were picked from Adage Capital Management’s Q4 2024 13F filings. They are compiled in the ascending order of the hedge fund’s stake in them as of December 31, 2024. To assist readers with more context, we have included the hedge fund sentiment regarding each stock using data from over 1,000 hedge funds tracked by Insider Monkey in the fourth quarter of 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 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
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Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Fund Holders as of Q4: 339
Adage Capital Management’s Equity Stake: $1.96 Billion
As of Q4 2024, Adage Capital Management held over 7 million shares of Amazon.com, Inc. (NASDAQ:AMZN), valued at over $1.9 billion. Hedge fund interest in the company also increased, with 339 funds tracked by Insider Monkey holding positions worth nearly $69.04 billion by the end of the quarter, up from 286 funds in Q3.
The company’s operating income for Q4 2024 surged to $21.2 billion from $13.2 billion the previous year, while net income doubled to $20 billion. AWS continued to drive growth, with a 19% increase in quarterly revenue to $28.8 billion. For the full year, Amazon.com, Inc. (NASDAQ:AMZN)’s net sales grew by 11% to $638 billion, with operating income nearly doubling to $68.6 billion and net income reaching $59.2 billion. The company reported record operating income of $68.6 billion, an 86% increase year-over-year, largely driven by the success of its cloud-computing division, Amazon Web Services (AWS). With enterprises increasingly turning to AWS for artificial intelligence (AI) applications, the division remains a key driver of Amazon’s long-term growth.
Despite posting strong financial results for 2024, Amazon.com, Inc. (NASDAQ:AMZN) experienced a 10.7% drop in its stock price in February. Investor concerns over the company’s aggressive capital expenditures have weighed on the stock. The company plans to spend $100 billion in the form of capital expenditures in 2025, a significant increase from $77.7 billion in 2024, with most of the investment focused on AI infrastructure for AWS. While CEO Andy Jassy remains confident in the strategy, investors worry that such high spending could hurt profit margins, especially since Amazon expects its full-year 2025 operating income to decline by $700 million. Historically, the stock has been sensitive to fluctuations in operating income, which may explain the market’s cautious response. However, Amazon.com, Inc. (NASDAQ:AMZN) remains a top stock to buy due to its dominant position in e-commerce and cloud computing, strong AI-driven growth in AWS, and long-term investment in cutting-edge technology despite short-term profitability concerns.
Parnassus Core Equity Fund stated the following regarding Amazon.com, Inc. (NASDAQ:AMZN) in its Q4 2024 investor letter:
“Amazon.com, Inc. (NASDAQ:AMZN) posted better-than-expected quarterly earnings, lifting investor confidence in the e-commerce giant’s ability to generate margin while continuing to invest into its large AI and retail end markets.
Amazon’s shares experienced volatility throughout the year as IT spending and the company’s margin structure came under scrutiny. Despite this, the stock outperformed as sentiment and results improved across both the overall environment for Amazon Web Services and the company’s ability to show margin.”
Overall, AMZN ranks 4th on our list of top stocks to buy according to Adage Capital Management. While we acknowledge the potential for AMZN as an investment, our conviction lies in the belief that some 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.