Smart Money Favorites: 3 Stocks Top Money Managers Can’t Live Without

Stocks to buy

Investment managers tend to flock to a select group of outperforming stocks that drive consistent returns. The stocks top money managers can’t live without generally hail from sectors like technology, healthcare and consumer staples.

However, tech reigns supreme, hosting stocks that permeate most portfolios. In particular, Microsoft (NASDAQ:MSFT), Apple (NASDAQ:AAPL), and Amazon (NASDAQ:AMZN) represent core technology holdings found among an overwhelming majority of money managers. For instance, Apple constitutes Warren Buffett’s top position at Berkshire Hathaway, making up over 40% of its holdings. Meanwhile, Ken Fisher, Mairs and Power, Philippe Laffont’s Coatue Management and Fidelity’s Contrafund all share top stakes in Microsoft, Apple, and Amazon as well.

Exciting AI and metaverse plays like Nvidia (NASDAQ:NVDA) entice more risk-tolerant managers. However, Microsoft, Appl and Amazon remain the cherished stocks top money managers can’t live without thanks to their dominant positions and immense growth runways in cloud computing, e-commerce and beyond. This article explores why these big tech companies represent such a significant allocation across top investment managers’ portfolios.

Microsoft (MSFT)

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With its strong fundamentals and competitive edge, Microsoft (NASDAQ:MSFT) is undoubtedly one of the stocks top money managers can’t live without. As many portfolio managers have wisely realized, Microsoft is exceptionally positioned for long-term outperformance. This is especially obvious when taking into account the near monopoly the company holds across some of the company’s key business segments.

Powering Microsoft’s success is its cloud dominance. The tech titan’s robust cloud platform remains unrivaled, fueling its Q2 2024 revenue growth to $62 billion, up 18% year-over-year. Such financial strength confirms Microsoft’s near monopoly status in major tech sectors. Plus, with sturdy operating income up 33% to $27 billion for the quarter, Microsoft has the backing to continue expanding its cloud, AI and metaverse lead.

Adding to its upside potential, Microsoft is making big metaverse moves — evidenced by its monumental $68.7 billion acquisition of Activision Blizzard last October. This deal fortifies Microsoft’s supremacy in gaming while allowing for tremendous metaverse monetization ahead. With gaming revenue already up 61% in Q2 2024, Microsoft is clearly on track to deliver metaverse profits down the road.

Given its cloud dominance, metaverse momentum and exceptional growth metrics this quarter, Microsoft epitomizes one of the key stocks top money managers can’t live without for both present returns and future-forward gains.

Apple (AAPL)

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Its coveted brand and dominant position in consumer technology make Apple (NASDAQ:AAPL) one of the favored stocks top money managers can’t live without. The iPhone maker continues to ride on hardware sales and services revenue, surpassing Wall Street estimates.

In its latest earnings report for the first quarter of fiscal 2024, ending Dec. 31, 2023, Apple posted over $119 billion in quarterly revenue, an increase of 2% YoY. Fueled by robust iPhone demand during the holiday season, Apple even faced supply chain constraints that limited sales growth. Still, the results beat expectations. This resilience confirms why Apple remains a favorite among institutional investors and top money managers.

Bolstering its hardware ecosystem further, Apple recently unveiled a mixed-reality headset called Vision Pro in January 2024. The $3,499 premium device with both AR and VR capabilities targets creative professionals and showcases Apple’s ambitions in futuristic technologies. Although niche for now, it expands Apple’s total addressable market.

With immense brand loyalty and an installed base exceeding 1.8 billion active devices globally, Apple retains pricing power and stable revenues. Top money managers see these qualities as enduring competitive strengths no matter the economic climate. Additionally, Apple’s services segment hit an all-time revenue record of $23.1 billion last quarter, up 11%. Offerings like Apple Music, iCloud, Apple TV+, Apple Arcade and more drive this high-margin recurring revenue stream. Such resilience makes Apple one of the stocks top money managers can’t live without, even amidst market uncertainty.

Amazon (AMZN)

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Amazon (NASDAQ:AMZN) has firmly established itself as one of the stocks top money managers can’t live without thanks to its dominant position in global e-commerce and cloud computing. The company reported staggering net sales of $574.8 billion in 2023, up 12% year-over-year. Operating income also soared to $36.9 billion, triple that of the previous year.

Driving this growth is Amazon’s core online retail segment, which continues to make up a significant portion of total sales. However, its true crown jewel is Amazon Web Services (AWS) — the company’s cloud computing arm. AWS raked in revenue of $91 billion in 2023, with operating margins hitting a superb 30%. With the global cloud market expected to hit $1.6 trillion by 2030, AWS provides an immense growth runway.

Geographically, too, Amazon still has plenty of room to expand. Online shopping only accounts for 16% of total U.S. retail sales, a number that Amazon has greatly influenced. By securing nearly 40% of all U.S. e-commerce spending, Amazon is poised to benefit tremendously as more shopping moves online. Given these outstanding fundamentals and growth prospects, it is no wonder that money managers view Amazon as a core long-term holding. Nearly every major mutual fund has a sizable stake in Amazon stock. With dominant positions in two high-growth markets, Amazon remains undoubtedly one of the stocks top money managers can’t live without.

On the date of publication, Andrea van Schalkwyk held long positions in AAPL and AMZN. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Andrea van Schalkwyk is a value investor who adheres to the principles of the renowned Warren Buffett and his mentor Benjamin Graham. He holds a Master of Engineering (MEng) from the University of Padua and an Executive MBA from the CUOA Business School.

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