We recently compiled a list of the 12 Best Fundamental Stocks to Buy Now. In this article, we are going to take a look at where Microsoft Corporation (NASDAQ:MSFT) stands against other best fundamental stocks to buy now.
The S&P 500 index closed 0.3% lower at 6,101.24 on Friday, January 24, reversing its course after hitting a fresh intraday record earlier in the session. The Nasdaq Composite and Dow Jones Industrial Average also slipped, with the former dropping 0.5% to 19,954.30 and the latter falling 140.82 points to 44,424.25. This marked the end of a four-day winning streak for the three major indexes. The decline was largely attributed to investors taking profits, particularly in mega-cap tech stocks. Despite this, the market remains bullish, with the S&P 500 and Nasdaq posting their second consecutive positive week, rising 1.7% and 1.7% respectively. The Dow climbed 2.2% over the same period.
In other news, President Trump made headlines on Thursday by calling for interest rates to drop immediately and asking Saudi Arabia and other OPEC nations to lower the price of oil. Market participants are closely watching the President’s statements, which have had a significant impact on the market. However, the market’s optimism is largely driven by President Donald Trump’s pro-business policies, which have boosted risk assets. Investors are also relieved that the President has only made threats on the tariff front, rather than taking formal action, during his first few days in office.
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In an interview with CNBC on January 23, Mike Bailey, Director of Research at FBB Capital Partners, discussed the current state of the market. He noted that companies have had a great quarter, which reflects the fact that the economy is doing well, people have jobs, and they’re buying things, which trickles down to the market. This, in turn, has a positive impact on the tech sector as a whole. However, Bailey advised investors to take a more nuanced approach and consider the specific fundamentals of each company.
Bailey believes that large-cap companies have the greatest opportunity to meet or exceed investor expectations for growth. He noted that while small caps are trading cheaper, they may not be the best option for long-term investments or high-conviction plays. Bailey explained that his firm’s approach is focused on identifying companies with strong earnings growth potential, and larger cap companies tend to have more resources and a stronger track record of delivering on their growth promises. However, he did acknowledge that small caps can be a good option for investors who are looking to capitalize on a short-term economic cycle or recovery.
Bailey emphasized the importance of looking beyond the top ten stocks that make up 50% of the market, which often dominate the conversation. He suggested that there are plenty of other companies that are worth considering. These companies, according to Bailey, offer a compelling combination of growth potential, valuation, and dividend yield, making them attractive options for investors looking to diversify their portfolios.
Furthermore, Bailey emphasized the importance of having a long-term perspective and not getting caught up in short-term market fluctuations. He encouraged investors to focus on the underlying fundamentals of each company and to avoid making emotional decisions based on market volatility.
Large-cap companies with stable revenue and consistent net income growth remain attractive options for investors seeking reliable returns and long-term stability.
A development team working together to create the next version of Windows.
Our Methodology
We used Blue Chip ETFs and financial media reports to compile a list of 25 companies with strong fundamentals. We then narrowed our choices to 12 stocks with a 10-year revenue growth rate between 8% to 20% and a 10-year net income growth rate of at least 8%, informed by reputable sources, such as SeekingAlpha. Then we used Insider Monkey’s Hedge Fund database to rank 12 stocks according to the largest number of hedge fund holders, as of Q3 2024. The list is sorted in ascending order of hedge fund sentiment.
Why do we care about what hedge funds do? 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).
Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holdings: 279
10-Year Revenue Growth Rate: 10.76%
10-Year Net Income Growth Rate: 15.53%
Microsoft Corporation (NASDAQ:MSFT) is a global technology leader providing software, hardware, and cloud-based solutions to individuals and businesses worldwide. The company has been transitioning from a traditional software company and has become a comprehensive technology provider driving innovation and digital transformation across multiple industries.
Microsoft Corporation (NASDAQ:MSFT) is investing heavily in its cloud computing platform, Azure. The company is seeing significant demand for its Azure services, particularly in the area of AI. Microsoft Corporation (NASDAQ:MSFT) is expanding its Azure capacity, with new data centers being built in various regions around the world, including Brazil, Italy, Mexico, and Sweden. This expansion will enable the company to better serve its customers and meet the growing demand for cloud computing services. Additionally, Microsoft Corporation (NASDAQ:MSFT) is innovating across the full stack to optimize its fleet for AI workloads by offering the broadest selection of AI accelerators, including its first-party accelerator, Maia 100, as well as the latest GPUs from AMD and NVIDIA.
Another key area of focus for Microsoft Corporation (NASDAQ:MSFT) is the development of its AI-powered products and services. The company is advancing its Productivity and Business Processes segment, which includes Office 365, LinkedIn, and Dynamics 365. Recently, Microsoft Corporation (NASDAQ:MSFT) integrated 365 Copilot, an AI-powered assistant, into productivity tools such as Word, Excel, and Outlook, which has significantly boosted user engagement and business value. Furthermore, Microsoft Corporation (NASDAQ:MSFT) is extending its presence in the enterprise market with Dynamics 365 while also introducing industry-specific AI solutions, such as DAX Copilot for healthcare. These advancements are helping Microsoft Corporation (NASDAQ:MSFT) strengthen its market position and solidify its leadership in business applications.
Overall MSFT ranks 1st on our list of the best fundamental stocks to buy now. While we acknowledge the potential of MSFT 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 MSFT 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.