We recently published a list of 7 Best American Stocks To Buy and Hold in 2024. In this article, we are going to take a look at where Apple Inc. (NASDAQ:AAPL) stands against other best American stocks to buy and hold in 2024.
Neutral Stance Amid Uncertainties
The tech sector has been showing positive performance amid market concerns, driven by improved earnings estimates and substantial investments in artificial intelligence. Approximately 40% of operating cash flow is currently allocated to AI, raising questions about when these investments will begin to yield returns. The strong profit margins of mega-cap stocks, averaging over 23%, compared to just over 8.5% for other sectors, suggest continued capital inflows into tech companies demonstrating earnings strength. While some consolidation and growth slowdown may occur, there is confidence that investor sentiment will eventually lead to a resurgence in these stocks.
As sentiments shift regarding major tech stocks, other profitable tech companies are maintaining positive momentum in the market. There was a conversation regarding this, covered a few days back in our article about the 10 Most Profitable NASDAQ Stocks To Invest In, where Jason Snipe, Odyssey Capital Advisors principal, discussed the tech sector’s mega-cap momentum, particularly in light of recent mega-cap stock downgrades and significant investor outflows. Here’s an excerpt from his sentiment:
“…This focus on AI has contributed to some recent downgrades but also suggests continued upside potential for select names within the sector.
…He acknowledged that while there may be some consolidation and a slowdown in growth, he believes that investors’ muscle memory will eventually lead to a resurgence in these stocks.
Snipe’s analysis underscores the complexities facing the tech sector amid market volatility and evolving economic conditions. While challenges persist, particularly with mega-cap stocks experiencing downgrades, there are also significant opportunities driven by innovation and strong profit margins that could support continued growth in this space…”
Katie Stockton, Fairlead Strategies founder, joined CNBC’s ‘Closing Bell’ on October 17 and highlighted that there’s a likelihood that the markets could move into choppier territory. Katie Stockton characterized her stance as neutral regarding the indices despite the strength of the trend and the participation of most stocks on the upside. She noted that while short-term momentum is currently positive, particularly behind major indices, there are concerns about potential problems if key players like NVIDIA falter. She highlighted that sentiment appears overly bullish or greedy, as evidenced by the Fear and Greed Index reaching an extreme level of 5%. This situation makes it challenging for the market to sustain overbought conditions, which are prevalent across various timeframes.
Stockton anticipates a pullback or possibly a more significant corrective phase in the fourth quarter for the S&P 500, suggesting that this could mark the beginning of a range-bound environment. She pointed to indicators such as the VIX, which has entered a new higher volatility cycle, and mentioned signs of long-term exhaustion indicated by the DeMark indicators, levels not seen collectively since late 2021. While this does not necessarily signal an impending bear market, it does enhance the likelihood of experiencing a choppier trading environment.
When asked about the recent performance of banks and cyclical stocks compared to defensive stocks, Stockton acknowledged that while there has been a positive move from the financial sector contributing to the S&P 500’s recent gains, it is too early to conclude that this represents a breakout in relative strength for financials. She indicated that most metrics suggest financials will likely perform in line with broader market trends rather than leading them. Furthermore, she expressed concern that mega-cap sectors are poised to lose their leadership position, which could pose challenges to overall market performance.
Regarding small-cap stocks, Stockton noted that while the Russell 2000 index made another attempt at an upside move, closing close to 2,300 with a 1.6% increase, long-term trends still indicate underperformance relative to the S&P 500. She pointed out that there has not been a breakout in the Russell 2000, which remains stalled below resistance levels established during summer highs. Consequently, she does not see actionable opportunities in small caps at this time and anticipates neutral trading conditions for this segment.
On the topic of bonds, Stockton mentioned that Treasury yields have shown some upside momentum but backed off recently. She sees potential entry points in Treasury bond proxies like TLT (iShares 20+ Year Treasury Bond ETF), suggesting signs of short-term downside exhaustion within a broader long-term uptrend for fixed income. She believes there is an opportunity for investors to enter Treasury bond proxies now, while also expecting yields to stall without significant long-term declines.
Her insights highlight her focus on maintaining balance amid prevailing uncertainties in both equity and bond markets.
Methodology
To find the best American stocks, we used Insider Monkey’s proprietary database to find US stocks that were the most popular among elite hedge funds. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q2 2024. The hedge fund data was sourced from Insider Monkey’s database which tracks the moves of over 900 elite money managers.
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 wide view of an Apple store, showing the range of products the company offers.
Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 184
Apple Inc. (NASDAQ:AAPL) is a multinational technology company that designs, manufactures, and sells personal computers, smartphones, tablets, wearables, and various accessories and software, best known for its iconic products such as the iPhone, iPad, Mac, and Apple Watch. Its focus on user experience, innovative design, and ecosystem of products and services has made it one of the most valuable companies in the world.
The company’s FQ3 2024 revenue rose 4.87% as compared to the year-ago period, with services reaching a record $24.2 billion, up 14%. iPhone revenue was $39.3 billion, while Mac and iPad revenue grew 2% and 24%, respectively. iPhone 16 shipments are lower than last year, with shorter wait times for Pro Max models. Initial iPhone 16 series pre-orders are down 12.7%. Overall, iPhone 16 Pro models have largely met expectations but the base model and 16 Plus have not matched last year’s figures.
Despite initial iPhone 16 demand concerns, the company’s stock rose 3% in two days, reaching its highest close since July, as reported this Tuesday, October 14. Analysts are optimistic about Apple Intelligence’s potential to drive a “stronger-for-longer” upgrade cycle, with price targets reaching $265. However, recently, Huawei has surpassed Apple Inc. (NASDAQ:AAPL) as the leading smartphone brand in China, driven by factors such as nationalism, economic conditions, and trade restrictions on Huawei, causing sales to decline for Apple Inc. (NASDAQ:AAPL).
Its AI tool, Apple Intelligence, could boost demand in the US market. Apple Inc.’s (NASDAQ:AAPL) long-term decline in mobile carrier upgrade rates raises concerns about the impact of Apple Intelligence on device upgrade cycles. Despite potential challenges related to iPhone upgrade cycles and the services business, strong brand recognition, innovative product lineup, and expanding ecosystem position the company for continued growth.
Vltava Fund stated the following regarding Apple Inc. (NASDAQ:AAPL) in its Q3 2024 investor letter:
“You probably have not missed the news that Warren Buffett has already sold half the stock from his largest public markets investment, Apple Inc. (NASDAQ:AAPL). It was a phenomenal investment for Berkshire. Over the course of seven years or so, it brought a profit of well over USD 100 billion. Apple comprised a very large position within Berkshire’s public portfolio, and this was the reason we avoided Apple stock outright during that time. We considered our exposure to Apple through our holdings of Berkshire stock to be sufficient, and we ended up making a lot of money on it. There has been a great deal of speculation in the market about what Buffett’s sale of Apple signals regarding his view of the stock market. I think the reason for the sale is much simpler. Buffett probably considers Apple stock so expensive that he prefers to cash in at 20% less (after all, Berkshire must pay tax on its profits). He started selling in the first quarter of the year. When I was in Omaha for the general meeting in May, Buffett said he was still selling, and I expect he continued to do so in the third quarter. I have to say that, as a Berkshire shareholder, I am happy about the Apple sale. I think Berkshire’s management will find a better use for this money, as they always have in the past. It is quite likely that they already have a very specific idea about this. If that takes two or three years, it does not matter at all. This is not a race and, in the meantime, the risk of holding Berkshire Hathaway stock itself has been greatly reduced.”
Overall, AAPL ranks 5th on our list of best American stocks to buy and hold in 2024. While we acknowledge the potential of AAPL as an investment, our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than AAPL 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.