We recently compiled a list of the 7 Best Fast Money Stocks To Buy According To Hedge Funds. In this article, we are going to take a look at where Meta Platforms Inc. (NASDAQ:META) stands against the other fast money stocks.
As the financial world grapples with shifting economic indicators and political uncertainty, insights from leading experts offer a crucial perspective on what lies ahead. With inflation showing signs of easing and the Federal Reserve signaling a likely rate cut, the focus now shifts to earnings performance and broader economic trends. Adding to this complexity are political developments, such as the possibility of a Republican sweep.
The latest June 2024 inflation report revealed a softer-than-expected outcome, causing varied reactions across major stock indices. Initially, futures surged in response, but have since fluctuated. Currently, the Dow is showing gains, the S&P is up slightly, and the NASDAQ is just below the flatline. Inflation dropped by a tenth of a percent month-over-month, contrary to economists’ forecasts of a rise.
Chris Harvey, Head of Equity Strategy at Wells Fargo Securities, and Mike Feroli, Chief U.S. Economist at JPMorgan, shared their perspectives on the current financial situation in an episode of CNBC’s Fast Money. Chris Harvey is cautious about the concept of market rotation due to ongoing uncertainties about earnings. While he doesn’t oppose rotation, he pointed out that investor confidence is still shaky.
“That’s right. We’re not against rotation; we’re just waiting for more clarity. Many investors are uncertain about earnings. Until we see a situation where companies don’t go down on bad news, we won’t be fully convinced about the rotation. We want people to believe that numbers will improve and that things will get better. However, right now, bad news is bad news, and that suggests the rotation may not be sustainable.”
In contrast, Mike Feroli discussed the anticipated rate cuts. He believes that the Fed is likely to lower rates soon due to its more aggressive stance. Feroli suggests that the economy is weaker than some might think, which supports the expectation of rate cuts. He noted that we have probably reached the peak for interest rates and that future attention will shift to earnings performance.
Feroli also explained why he updated his forecast to September. This change is based on recent CPI data showing significant inflation drops over the past year and a rise in unemployment. He expects the Fed to begin cutting rates in September, with additional cuts likely on a quarterly basis.
“Yes, the rate cuts are coming. The Fed has signaled their intention to cut rates more aggressively than they have in the past. We also believe the economy isn’t as strong as some might think, so we expect rates to come down. I think we’ve already hit the peak for rates. Right now, it’s really about earnings.”
However, if the labor market weakens further, the pace of these cuts could accelerate. Regarding the potential impact of a Donald Trump presidency and a possible Republican sweep, Feroli highlighted the uncertainties. A Republican sweep could lead to more tax cuts, possibly extending or expanding those from 2017, which might boost growth but also increase deficits.
Additionally, trade and immigration policies remain unpredictable. While deregulation might mitigate some negative effects, the overall policy environment is still uncertain. Finally, when asked about the implications of a Republican sweep for bond markets, Feroli expressed concern about the deficit trajectory. Extending all tax cuts, particularly in a more Republican-leaning scenario, could exacerbate the deficit problem.
In another episode of Fast Money, Chris Mman, Chief Investment Officer at Lafayette College, discussed the potential timing for Federal Reserve rate cuts, emphasizing that September appears to be a strong possibility. He notes, however, that the Fed will be influenced by upcoming economic reports. Mman also highlights concerns over equity valuations and the potential impact of delayed rate cuts on the labor market.
“I believe July should have been on the table based on today’s report. However, the Fed usually prefers to signal their plans in advance. My expectation was that they probably wouldn’t preemptively set up for September, but given today’s report, it seems quite likely they will. The Fed might use upcoming meetings and communications to guide the market’s expectations.”
As political uncertainties, including the Democratic ticket’s spotlight, add to the mix, Mman reassures that the Fed is likely to focus on economic data rather than political pressures. He stresses that while inflation remains a critical issue, the Fed’s priority will be managing employment trends to avoid a deeper economic downturn.
“Even if inflation accelerates temporarily, it’s unlikely to concern the Fed greatly. Currently, the focus has shifted more to employment reports rather than inflation. If employment were to unexpectedly strengthen, it could reduce the Fed’s incentive to cut rates. Ultimately, the goal is to avoid a severe economic slowdown that would force them into aggressive rate cuts.”
Our Methodology
In this article, we review recent episodes of CNBC’s Fast Money, where Fast Money traders highlighted stocks with high growth potential. We tracked each stock mentioned and ranked them based on frequency. From this, we identified the top 7 stocks that were mentioned a lot by Fast Money traders and were widely held by hedge funds. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q2 2024.
At Insider Monkey we are obsessed with 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 team of developers working in unison to create the company’s messaging application.
Meta Platforms Inc. (NASDAQ:META)
Number of Hedge Fund Investors: 219
Meta Platforms Inc. (NASDAQ:META) dominates the social media space with platforms like Facebook, Instagram, and WhatsApp, each attracting billions of users. This large user base creates substantial revenue opportunities through targeted advertising, a key driver of Meta Platforms Inc. (NASDAQ:META)’s financial success. Meta Platforms Inc. (NASDAQ:META)’s investment in the metaverse is a bold move aimed at unlocking new revenue streams.
Through its Reality Labs division, Meta Platforms Inc. (NASDAQ:META) is at the forefront of developing augmented and virtual reality technologies, which have the potential to transform online interactions. Although still in the early stages, these initiatives promise significant long-term growth as the metaverse concept gains traction.
Meta Platforms Inc. (NASDAQ:META)’s strong financial performance this quarter highlights its leadership in the tech industry, driven by the innovative release of Llama 3.1, an open-source AI model. Llama 3.1, known for its better cost performance compared to leading closed models, could be a turning point for open-source AI, much like Linux was in its field. This innovation underscores Meta Platforms Inc. (NASDAQ:META)’s commitment to open-source development, which the company views as beneficial for developers, its apps, and the global community.
Financially, Meta Platforms Inc. (NASDAQ:META) posted $39.1 billion in revenue, reflecting a 22% year-over-year increase, alongside a 38% operating margin and $13.5 billion in net income. Meta Platforms Inc. (NASDAQ:META) also generated $10.9 billion in free cash flow and returned value to shareholders through stock repurchases and dividends. Meta Platforms Inc. (NASDAQ:META)’s focus on AI innovation, strong financials, and a growing user base of 3.27 billion daily active users across its Family of Apps positions it well for continued growth and long-term success.
Analysts remain optimistic about Meta Platforms Inc. (NASDAQ:META) due to its strategic positioning and growth potential. Meta Platforms Inc. (NASDAQ:META)’s dedication to evolving its platforms and exploring new technological frontiers indicates a promising future, making Meta an appealing choice for long-term investors.
Mar Vista Focus strategy stated the following regarding Meta Platforms, Inc. (NASDAQ:META) in its Q2 2024 investor letter:
“During the quarter, we established new investments in Broadcom and Meta Platforms, Inc. (NASDAQ:META). We previously divested from Meta during a period of stagnant advertising growth and the company’s initial, significant investment in the metaverse project. At that time, investors appeared complacent to the risks associated to an increasingly competitive landscape, and the Street’s robust financial expectations as the company transitioned towards monetizing short-format video (Reels). The subsequent decline in Meta’s stock price during 2022 reflected these concerns.
Since then, Meta has demonstrably shifted its strategic focus. The company has prioritized operational efficiency, implemented strategies to monetize Reels effectively, and initiated a robust artificial intelligence (AI) development program. We believe the focus on AI represents a more prudent capital allocation strategy compared to the earlier metaverse initiative. Meta AI holds significant potential to unlock substantial monetization opportunities and enhance user engagement, while maintaining tight controls on operating costs…” (Click here to read the full text)
Overall META ranks 2nd on our list of the best fast money stocks to buy according to hedge funds. While we acknowledge the potential of META as an investment, our conviction lies in the belief that under the radar 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 META 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.