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 Microsoft Corporation (NASDAQ:MSFT) 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).

Microsoft Corporation (NASDAQ:MSFT)

Number of Hedge Fund Holders as of Q4: 317

Adage Capital Management’s Equity Stake: $2.98 Billion 

Microsoft Corporation (NASDAQ:MSFT) reported impressive financial results for Q4, with revenue reaching $69.63 billion, marking a 12.27% year-over-year increase and surpassing expectations. Earnings per share (EPS) came in at $3.23, exceeding analyst forecasts of $3.12, highlighting the company’s continued profitability and strong market presence. Beyond financial performance, Microsoft achieved a major milestone in quantum computing by developing a topological qubit, a breakthrough with potential applications in artificial intelligence, medicine, and cryptography. This advancement solidifies Microsoft’s leadership in quantum research and enhances its long-term growth prospects.

Despite being at the forefront of technological innovation, Microsoft Corporation (NASDAQ:MSFT)’s shares declined on March 10 due to investor concerns over a potential recession and uncertainty surrounding trade policies. The fluctuating trade policies due to tariffs introduced by President Donald Trump have raised concerns over pricing stability and supply chains, leading some investors to offload stocks, particularly in the tech sector, where companies like Microsoft rely on global markets for production and distribution. The uncertainty has contributed to volatility in growth stocks, as investors weigh potential economic risks amid shifting trade regulations.

Moreover, a physicist has recently challenged Microsoft’s claim of creating the first topological qubits, arguing that the test used to detect the necessary quasiparticles, known as the topological gap protocol (TGP), is flawed. While Microsoft’s 19 February announcement lacked peer-reviewed proof, the company maintains that it has made significant progress beyond the published research. The critique, led by Henry Legg of the University of St Andrews, suggests that without a reliable test for Majorana quasiparticles, the foundation of Microsoft’s qubit breakthrough remains uncertain. However, the company’s quantum computing lead, Chetan Nayak, dismissed the criticism as a misrepresentation of their research. Despite this controversy, Microsoft (NASDAQ:MSFT) remains a strong stock to buy due to its robust financial performance, leadership in AI and cloud computing, and continued innovation in next-generation technologies like quantum computing.

Mairs & Power Growth Fund stated the following regarding Microsoft Corporation (NASDAQ:MSFT) in its Q4 2024 investor letter:

“Unlike the dot-com companies that operated at the turn-of-the-century, many of today’s technology companies are established businesses with significant cash flows. We have argued, and continue to argue, that many of these investments are perfectly aligned with our investments process in that they embody durable competitive advantages, above-average growth prospects, and excellent management teams.

A perfect example is Microsoft Corporation (NASDAQ:MSFT), which has grown to become the largest holding in the Growth Fund. Microsoft has a near monopoly on the office software productivity market with its Microsoft Office Suite. The company’s Azure platform is a leader in cloud computing and has been steadily gaining share. Thanks to its Office and Azure products, the company is deeply embedded within many enterprise IT ecosystems. Therefore, it should be well-positioned to expand its presence within its customer base, as it rolls out premium-price AI solutions. The company is not resting on its laurels and plans on spending an astounding $80 billion in 2025 to build out AI data centers.”

Overall, MSFT ranks 3rd on our list of top stocks to buy according to Adage Capital Management. While we acknowledge the potential for MSFT 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 MSFT but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires

Disclosure: None. This article is originally published at Insider Monkey.