We recently compiled a list of the Harvard University Stock Portfolio: Top 10 Stock Picks. In this article, we are going to take a look at where Light & Wonder, Inc. (NASDAQ:LNW) stands against Harvard University’s other stock picks.

When it comes to college prestige, Ivy League institutions lead the rankings. For an investment that can approach $60,000 per year in tuition and fees as of the 2022-2023 academic year, these schools promise an elite education and promising career prospects post-graduation. Although opinions may vary on which Ivy League school offers the best education, there’s no debate over which has the largest endowment. Harvard University’s endowment stands at an impressive $53.2 billion, bolstered by generous donations and strategic investments managed by the Harvard Management Company (HMC).

Founded in 1974, Harvard Management Company provides a dedicated funding stream that supports the university’s teaching and research, contributing over one-third of Harvard’s annual operating budget. In fiscal year 2024, Harvard’s endowment distributions totaled $2.4 billion, representing 37% of the university’s annual revenue. These funds supported key areas such as financial aid, faculty, and research initiatives. The university allocated $749 million toward financial aid across its schools, including $250 million for undergraduates. Harvard’s endowment portfolio is heavily weighted toward private equity and hedge funds, with private equity comprising 39% of the portfolio and hedge funds making up 32%.

According to Harvard Management Company CEO N.P. “Narv” Narvekar, the endowment targets an 8% return, and its seven-year annualized return of 9.3% has exceeded that goal. This performance currently places it mid-tier among Ivy League and other elite institutions. While its fiscal year 2024 return did not match Columbia’s 11.5% or Brown’s 11.3%, it outpaced those of MIT, Cornell, Dartmouth, and the University of Pennsylvania. Despite fiscal year 2024 being a strong period for public equities, with the S&P 500 frequently hitting record highs, Narvekar states that HMC’s strategy of lower public equity exposure still delivered robust returns:

“In FY24, public equity and hedge fund portfolios stood out for their strong performance. This is a particularly positive indicator, since HMC’s hedge fund portfolio has less equity exposure than most hedge fund indices, yet still outperformed during a strong year for equities.”

Notably, HMC significantly reduced the endowment’s exposure to real estate and natural resources, scaling it down from 25% in 2018 to just 6% in fiscal year 2024. This strategic shift has contributed positively to the endowment’s overall returns. Large-cap technology equities, particularly in the IT sector, may have also boosted returns for the fund. Michael Markov, founder of Markov Processes International, suggested that Harvard likely benefitted from “overweighting IT and the Mag 7 relative to the broad S&P 500.” Markov considers fiscal year 2024 a success for Harvard and a testament to HMC CEO Narvekar’s strategy of overhauling the university’s complex portfolio during his seven-year tenure.

Our Methodology

For this analysis, we examined Harvard Management Company’s stock portfolio from the third quarter of 2024. The stocks are ranked based on the firm’s stake value in each holding.

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).

Light & Wonder, Inc. (NASDAQ:LNW)

Harvard Management Company’s Stake: $130.8 million

Light & Wonder, Inc. (NASDAQ:LNW) is a global, cross-platform gaming company focused on content and digital markets. Its operations are divided into Gaming, SciPlay, and iGaming segments. The company offers its gaming products and services to commercial casinos, Native American casinos, and wide-area gaming operators, including licensed betting offices (LBOs) and bingo operators in the UK and Europe.

For the third quarter, Light & Wonder, Inc. (NASDAQ:LNW) reported earnings of $1.34 per share, surpassing analysts’ expectations of $1.16 per share. This marks a significant improvement from earnings of $0.81 per share in the same period last year, representing an earnings surprise of 15.52%. In the previous quarter, the company had also exceeded expectations, posting earnings of $1.42 per share, against an expected $1.04, resulting in a 36.54% surprise.

Earlier in October, B.Riley resumed coverage of Light & Wonder, Inc. (NASDAQ:LNW) with a Buy rating and raised its price target to $120. The firm highlighted the company’s market position, noting that its enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA) ratio is about 40% lower than its closest peer. Despite recent challenges, such as a stock price decline following a preliminary injunction related to its Dragon Train franchise, B.Riley views these developments as presenting an attractive entry point for investors.

Overall LNW ranks 4th on Harvard University’s list of top stock picks. While we acknowledge the potential of LNW as an investment, our conviction lies in the belief that certain AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than LNW 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.