We recently compiled a list of the 10 Most Owned Stocks by Hedge Funds Right Now. In this article, we are going to take a look at where Meta Platforms, Inc. (NASDAQ:META) stands against the other stocks owned by hedge funds.
Wall Street stocks surged this month after the Federal Reserve released minutes of its September meeting, which resulted in the first interest rate cuts in over four years. The details disclosed a ‘substantial majority’ of central bankers backing the 0.5 percentage-point cut, raising optimism among investors for further cuts ahead.
The broader market hit record highs on October 11, driven by several financial stocks reporting stronger-than-expected results during the recently concluded quarter. Another factor encouraging investors has been the downturn in US inflation, which fell to 2.4% in September and is inching toward the Federal Reserve’s goal of a two percent annual rate. This has raised hopes of a quarter-point cut in the central bank’s next meeting in November.
However, some analysts warn against diving into stocks after interest rate cuts, citing uncertainty around the upcoming presidential elections. Liz Young Thomas, the head of investment strategy at SoFi, while talking to Business Insider in early September discussed historic patterns in US markets towards the end of the third quarter and the beginning of the fourth.
She noted how the market performs well between June and August due to thinner volumes when traders are on vacation, while volatility picks up with an uptick in activity after they return to their desks in September. However, during the election year, this volatility peaks around mid-October, instead of September, according to Young Thomas.
Fundstrat Global Advisors’ co-founder, Tom Lee, has also cautioned investors against election-related uncertainty. Here is what he stated in an interview with CNBC late last month:
This Fed cut cycle I think is setting the stage for markets to be really strong over the next one month or next three months. But, what the stocks do between now and let’s say election day, I think is still a lot of uncertainty. And that’s the reason why I’m a little hesitant for investors to dive in.
Earlier that month in the weeks leading to the interest rate cuts, Lee, who is generally bullish on the stock market, forecasted a 7-10% dip between September and October amid nervousness around the presidential elections. However, Lee urged investors to ‘buy the dip’, indicating that he sees the likely fall as an opportunity to buy stocks while they trade for a lower value.
Adam Turnquist from LPL Financial also anticipates seasonal volatility in the weeks ahead but reiterated what Lee did, that the dip presents an opportunity to buy when the share is trading low and earn high returns when the market stabilizes. Turnquist advises investors not to readjust their existing portfolios because seasonal volatility has short-term effects and is difficult to forecast.
With that said, let’s now shift focus to hedge fund sentiment on the stock market and discuss some of the most widely held stocks by hedge funds.
Methodology
We scanned Insider Monkey’s database of 912 hedge funds for the second quarter of 2024 and picked the top 10 companies with the highest number of hedge funds having stakes in them. We ranked them in ascending order of hedge fund holders in each company.
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).
A team of developers working in unison to create the company’s messaging application.
Meta Platforms, Inc. (NASDAQ:META)
Number of Hedge Fund Holders: 219
Meta Platforms, Inc. (NASDAQ:META) is one of the largest technology companies in the world. It operates several popular social media platforms, including Facebook, WhatsApp, Instagram, and Threads. An estimated 3.2 billion people use one of META’s applications every day.
The company’s ability to generate handsome advertisement revenue despite the global economic slowdown has been one of the primary drivers behind its growth. It had another impressive quarter during Q2 2024, in which revenue expanded 22% year-over-year to reach $39.1 billion. Meta’s Family of Apps generated $38.1 billion of the overall revenue, fueled by strong performances in online commercial verticals and gaming. Earnings for the quarter were posted at $13.5 billion, or $5.16 per share, beating analysts’ EPS expectations of $4.72 per share.
Meta Platforms, Inc. (NASDAQ:META)’s share price has surged 25% since the announcement of Q2 results on July 31. Investors are also buoyant about the company’s investments in artificial intelligence, which has resulted in successful launches of new products like the Ray-Ban Meta Glasses and Meta Quest 3, whose demand has outpaced the tech giant’s expectations.
Wall Street analysts agree on the stock’s Strong Buy rating. Hedge fund sentiment also remains strong, given the company’s positive future outlook. According to Insider Monkey, 219 hedge funds had investments in META as of Q2 2024, making it one of the most owned stocks by hedge funds right now.
However, some aspects can affect META’s short-term financials. The company plans to incur an additional $40 billion in capital expenditure this year, which will likely put pressure on its share price. Moreover, management expects a slowdown in Reel impressions and advertisements on its social media platforms in Q3, as the surge of China-based advertisers on its social media apps which was witnessed last year is unlikely this time around.
Overall META ranks 3rd on our list of the most owned stocks by hedge funds right now. While we acknowledge the potential of META 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 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.