We recently compiled a list of the 12 Best Multibagger Stocks to Buy Right Now. In this article, we are going to take a look at where MicroStrategy Incorporated (NASDAQ:MSTR) stands against the other multibagger stocks.
The US equities continued their upward movement in 2024 and fueled the S&P 500 to record highs. Much of this optimism in the broader market was backed by the strong US economy and the Federal Reserve’s stance to cut interest rates. As per PBS News, 2024 saw several familiar winners, like big technology stocks. These stocks got even bigger due to continuous increases in their stock prices. Apart from certain tech giants, strong momentum was also seen in Bitcoin, gold, and other investments.
Performance of US Equity Markets in 2024- A Recap
Ameriprise Financial reported that 2024 had a strong start, with the S&P 500 Index concluding the Q1 on a high note due to a healthy US economic backdrop, moderating inflation, improvement in profit conditions, and anticipations of rate cuts from the US Fed.
The strong growth momentum continued in Q2 as the S&P 500 Index saw its strongest three-quarter run since mid-2021. Ameriprise Financial highlighted that an AI boom again drove healthy gains throughout IT and communication services. However, increased rates and a pause by the US Fed capped broader market gains. In September, the US Fed reduced its policy rate for the first time since 2020, concluding its aggressive rate-hiking cycle to control inflation. Therefore, it began a new monetary policy stance that supported economic growth and the labor market. Additionally, since the election, investors’ confidence has been further boosted towards risky assets, including equities.
READ ALSO: 7 Best Stocks to Buy For Long-Term and 8 Cheap Jim Cramer Stocks to Invest In.
What to Expect in 2025?
For the S&P 500, J.P. Morgan Research projects a price target of 6,500 next year, with EPS of $270. The US is expected to remain a global growth engine with the expansionary business cycle, healthy labor market, broadening of AI-associated capital spending, and the prospect of strong capital markets and dealmaking activity.
Furthermore, BlackRock sees several factors expected to support stocks in 2025. The decisive election result removed key uncertainty hanging over the broader US market. The rally that was seen after the results might continue into the start of 2025 primarily because of prospects of tax cuts and deregulation throughout key industries. While the impact of some policies remains uncertain, history has a long-term record of positive returns in 1st year of a Presidential term. The firm also believes that earnings and valuations hint at healthy potential for a continued broadening of the market. Its analysis of the S&P 500 data reflects that earnings for Mag 7 stocks outperformed the broader market by 37% in 2023. This earnings gap was narrowed across 2024. Now, it expects it to decline to 7.5% in 2025.
Our Methodology
To list the 12 Best Multibagger Stocks to Buy Right Now, we used a screener to shortlist the stocks that have gained over 100% over the past year and have healthy average upside potential. Finally, the stocks are arranged in ascending order of their average upside potential, as of 30th December 2024. We also mentioned the hedge fund sentiment around each stock, as of Q3 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).
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MicroStrategy Incorporated (NASDAQ:MSTR)
Number of Hedge Fund Holders: 25
One-year Return: ~342%
Average Upside Potential: ~81.5%
Market Cap as of 30th December: $64.1 billion
MicroStrategy Incorporated (NASDAQ:MSTR) offers AI-powered enterprise analytics software and services.
MicroStrategy Incorporated (NASDAQ:MSTR)’s strategic pivot towards Bitcoin acquisition placed it well in the public markets, providing investors indirect exposure to the world’s largest cryptocurrency. At the core of the company’s current strategy is its aggressive Bitcoin acquisition plan. It has been utilizing a combination of cash from operations, debt issuance, and equity raises to finance its Bitcoin purchases.
MicroStrategy Incorporated (NASDAQ:MSTR)’s Bitcoin strategy provides investors with significant potential upside if Bitcoin prices appreciate. With the company accumulating more Bitcoin, any appreciation in Bitcoin’s value is expected to be magnified in the company’s stock price. The strategy offers a way for investors to provide exposure to Bitcoin via publicly-traded company, which can be more accessible or compliant with certain investment mandates than direct cryptocurrency investments.
If Bitcoin gets wider adoption as a store of value or hedge against inflation, MicroStrategy Incorporated (NASDAQ:MSTR)’s early position can result in substantial returns. In October, the company unveiled its plans to garner $42 billion in fresh capital for Bitcoin purchases over the upcoming 3 years. It holds 252,220 bitcoins as of September 30, 2024. The new capital-raising plan, called the “21/21 Plan,” focuses on securing $21 billion via equity offerings and another $21 billion through fixed-income securities over 2025 and 2027.
While there is optimism around the company’s stock, Artisan Partners, an investment management company, has avoided this company because the firm believes there is a lack of conviction in its franchise characteristics. Here’s what the firm said in its Q2 2024 letter:
“Regarding MicroStrategy Incorporated (NASDAQ:MSTR), our decision to avoid this company comes down to a lack of conviction in its franchise characteristics. The stock has worked this year due to a rebound in the price of bitcoin. Since 2020, MicroStrategy has been focused on converting its cash and cash equivalent holdings, as well as issuing debt, to fund the purchase of bitcoin, which now makes up most of the company’s value.”
Overall MSTR ranks 5th on our list of the best multibagger stocks to buy right now. While we acknowledge the potential of MSTR as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued AI stock that is more promising than MSTR 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.
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