The smart money (hedge fund managers) have been making some notable, although perhaps less surprising moves in recent quarters. Undoubtedly, a lot of big-money hedge funds have been adding to their position in the Magnificent Seven stocks. But they have been quite selective with the names within the cohort they’ve been scooping up. Indeed, I think it’s time to retire the Mag Seven acronym, given the difference in performance of its components and the direction they could be headed next. Personally, I think two notable stocks within the group have what it takes to do far better than the pack.
Meta Platforms (NASDAQ:META | META Price Prediction) and Microsoft (NASDAQ:MSFT) were among the most bought names by the smart money over the past two quarters. These big buys have proven right as both Mag Seven titans have seen their shares take off to new heights. Though investors buying in mid-August won’t get the same, lower price of admission as their favorite hedge fund heroes, I do think the pair of performers is worth snatching up, even as the stakes get a bit higher going into September and the next wave of big tech earnings.
Meta Platforms
Meta Platforms is on a hot streak right now, with shares recently blasting off to new highs of $790 per share. Indeed, if you bought the April dip, you’re now sitting on a near-60% gain in a few short months. As Mark Zuckerberg gets aggressive in attracting the world’s best AI researchers, I think it’s time to give Meta a higher multiple for its higher odds of leadership in AI.
Sure, LLaMA has stiff competition, but as it gets serious about beating the rest (think OpenAI and the pack), I am inclined to view Meta as an AI leader. It’s hard to know what to make of Meta’s Superintelligence “dream team and the fortune his firm is paying to attract the brightest AI minds. However, I do think that at current rates, Meta will become the world’s largest company in as little as three years. Zuckerberg’s willing to pay more than most others. Furthermore, Meta seems to have an exceptional hiring retention track record, which, I believe, bodes very well for the firm as it pulls ahead of everyone else in AI talent.
And while there’s a risk of overpaying for talent, there’s also a risk of underpaying. And that price is falling behind in the AI race. In any case, it’s not a mystery why hedge funds are sticking with (and buying more of) shares of META.
It has all the makings of an AI leader, and at just 28.6 times trailing price-to-earnings (P/E), I don’t think the stock is priced with the full long-term potential of the firm’s superintelligence ambitions in mind. Time and time again, investors have been rewarded for sticking with Zuckerberg. And I don’t think anything will change, even as the stock looks to become the hottest of the Mag Seven going into year’s end.
Microsoft
Microsoft is the ageless wonder that’s at the front of the pack when it comes to AI. The stock may be getting a tad frothy at 38.9 times trailing price-to-earnings (P/E). That said, I think Microsoft can monetize AI more effectively than a few others, especially as it continues to enhance its Copilot offering.
Perhaps Microsoft could also be a top AI agent play as the firm looks to see what its models are capable of. With ample momentum in the cloud and most of its core businesses firing on all cylinders, I find it tough to give up on MSFT, even at more than $530 per share. CEO Satya Nadella has his foot on the AI gas and it’s not about to pull back, especially as the battle for tech talent intensifies.
Indeed, Microsoft is a staple for many portfolios. Though the growth story has evolved in a big way, it’s a dependable growth hero to stash away and forget about. It’s tough to go wrong by following the hedge funds into this one, at least in my opinion.
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