Another 50 bps Cut is Still Restrictive
The labor market has been more resilient than ever. On October 4, Gary Cohn, the IBM vice chairman, and former US National Economic Council director in the Trump administration, appeared in an interview on Yahoo Finance to discuss the job report and the US economy.
Cohn suggests that the jobs data is the least scientific information the government puts out and therefore, it must be taken with a grain of salt. However, he emphasizes the importance of understanding trends. The number of people entering the workforce is expanding and jobs are being created, deducing that the market is in a neutral place.
Cohn believes that the US economy is normalizing. He reveals that we have not lived in a normal economy in over a decade, therefore, relative to history, the status quo is fairly reasonable. He adds that the Fed has orchestrated a soft landing and expects another 50 basis point cut before the end of 2024, which according to him is still restrictive.
Portfolio Manager Highlights High Growth Sectors
As the AI flame starts to settle, the market may be up for a major shift. On October 7, Keith Buchanan, GLOBALT Investments senior portfolio manager, appeared in an interview on Yahoo Finance to discuss his expectations of the market.
Expectations for earnings have been revised from mid-single digits to mid-double digitals, promising robust growth as 2024 comes to a close. Buchanan suggests that most of the growth comes from artificial intelligence and the widening of earnings growth beyond traditional growth sectors like technology.
This year, the industrial and energy sectors have enjoyed greater returns capturing a large chunk of the market. Buchanan is highly bullish on AI plays and value stocks. He also adds that names in financials, industrials, and consumer discretionary are poised for growth ahead of 2024. He advises investors to consider geopolitical events before making any investment decisions.
Now that we have assessed the future of the financial markets and possible sectors eyeing growth, let’s take a look at the 10 most promising long-term stocks according to hedge funds.
Our Methodology
To find the most promising long-term stocks according to hedge funds, we went over multiple rankings over the internet to list long-term blue chip stocks. We then examined the analyst upside and the hedge fund sentiment of these stocks as of Q2 2024 and picked the most popular ones. The stocks are sorted in ascending order of the number of hedge fund holders as of Q2 2024 as a primary metric and analyst upside as of October 13, as a secondary metric.
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).
The Walt Disney Company (NYSE:DIS)
Number of Hedge Fund Holders: 92
Analyst Upside as of October 13, 2024: 22%
The Walt Disney Company (NYSE:DIS) is a mass media multinational company that ranks seventh on our list of the most promising long-term stocks according to hedge funds. The company operates across five major segments including media networks, parks and resorts, studio entertainment, consumer products, and interactive media.
The Walt Disney Company (NYSE:DIS) holds dominance in the media industry and we say that because of its intellectual property. Walt Disney owns some of the world’s biggest studios including Pixar, Marvel, and Lucasfilm, impossible for competitors to replicate. In addition to that, the company has received countless nominations for its awards and shows. It recently bagged its 60th Emmy at the 76th Emmy Awards Show.
The company’s exquisite partnerships further enhance its position as a mass media giant. Recently, The Walt Disney Company (NYSE:DIS) signed an agreement with the National Basketball Association allowing it to stream all NBA events on ESPN’s new platform launching in 2025.
Overall, saying Walt Disney is a market leader in media will not be a hyperbole. While some investors and analysts share concerns over Disney’s future profitability, its direct-to-consumer services like Disney+, Hulu, and ESPN+ are promising, logging their first operating profit in the fiscal third quarter of 2024.
Analysts are bullish on DIS and their 12-month median price target of $115 points to a 22% upside from current levels. According to the Insider Monkey database, 92 hedge funds held positions in the stock at the end of Q2 2024.
Mar Vista Investment Partners’ Mar Vista Focus strategy stated the following regarding The Walt Disney Company (NYSE:DIS) in its Q2 2024 investor letter:
“The Walt Disney Company’s (NYSE:DIS) shares declined after its earnings release, even though the company exceeded recently upgraded financial forecasts. While Disney+ and Hulu reached a milestone by turning their first quarterly profit, the company cautioned about theme park attendance returning to pre-pandemic norms. This signals a deceleration following a period of exceptional growth, impacting the stock as theme parks and experiences account for roughly 60% of Disney’s earnings. Despite broader consumer worries, Disney’s stock is still trading with a significant discount to fair value. We expect the gap between Disney’s market price and its intrinsic value to shrink as its streaming division evolves and increases profitability over time.”
Overall DIS ranks 7th on our list of the most promising long-term stocks according to hedge funds. While we acknowledge the potential of DIS, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than DIS 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 on Insider Monkey.