In this piece, we will take a look at the 12 best S&P 500 stocks to buy according to analysts. If you want to skip our coverage of the latest happenings surrounding one of America’s most widely followed stock indexes, then you can take a look at the 5 Best S&P 500 Stocks To Buy According to Analysts.
The S&P 500 has had a great year so far. The flagship stock index, which was quite jittery a little over a year back, has been doing well as of late. This performance comes after the tail end of 2022 which saw analysts and investors all around worried about a recession in the U.S. due to high interest rates. However, 2023 came with a multitude of surprises in the form of artificial intelligence, falling inflation, and a growing economy – all of which ended up putting the bears to rest.
So how great has the first quarter of 2024 been for the S&P 500? Well, for starters, the index has set a new record this year. In fact, while the index has been regularly setting records in 2024, its latest record came just before the Easter holiday long weekend. This saw the S&P 500 set a new closing record of 5,245 – ensuring that the index comfortably remains above the coveted benchmark of 5,000 points that most folks would have thought was impossible at the close of 2022 and in an era marked by ‘expensive’ and difficult to get cash due to high interest rates.
The next question to ask is, why is the S&P 500 setting new records? After all, despite the ongoing euphoria surrounding artificial intelligence, the close of Q1 2024 has also seen investors re calibrate their expectations for the Federal Reserve potentially reducing the bank rate. These expectations have shifted for the worse, with most folks now expecting the rate cuts to start later than originally expected.
Well, several macroeconomic data points have led to the S&P setting new records. For instance, investors were dealt with a nice surprise in the form of an upward GDP growth revision for Q4 2023 which saw the new estimate grow to sit at 3.4% from an earlier 3.2%. Additionally, even though the commercial real estate sector continues to feel the pinch from a massive shakeup in the bond market and the interest rate environment, home sales in America grew by 1.6% in February to outpace estimates of a 1.5% growth. Another data point that is yet to be reflected in the S&P 500 is the Fed’s preferred inflation indication, the Personal Consumption Expenditures (PCE) index. The latest data shows that as of February 2024, inflation in the U.S. stood at 2.5% – meeting forecasts and being more in tune with the Fed’s preferred 2% reading.
Digging deeper, some of the stocks that have fueled the S&P 500’s 11% year to date gains are Super Micro Computer, Inc. (NASDAQ:SMCI), Constellation Energy Corporation (NASDAQ:CEG), and of course, Wall Street’s A.I. darling, NVIDIA Corporation (NASDAQ:NVDA). The three stocks are up 254%, 60%, and 88% year to date, and the fact that two out of three of the S&P 500’s best performing stocks in the first quarter of 2024 are technology companies shows how artificial intelligence has fundamentally shifted stock market valuations. While everyone knows that it’s NVIDIA’s high end GPUs that have injected steroids into its share price, for Super Micro and Constellation Energy, the catalysts were a second quarter earnings beat and guidance raise for the former and a 2024 forecast beat for the latter.
When it comes to investing, while the retail camp is often left reacting to the news, hedge funds spend countless hours and vast sums of money picking out the right set of stocks. As the first quarter of 2024 comes to a close, let’s see what the hedge funds were saying about NVIDIA in the fourth quarter of 2023.
An excerpt from Polen Capital‘s investor letter for the period is as follows:
NVIDIA shares rocketed higher by well over 200% in 2023 although they slightly underperformed our Portfolio and the Russell 1000 Growth in the fourth quarter. Generative AI has been a huge boon for NVIDIA as the use of LLMs like ChatGPT and others requires tremendous processing power that, today, is mostly provided by NVIDIA’s GPUs. All large cloud service providers, AI factories, and many large consumer internet companies are laying the foundation for generative AI by deploying NVIDIA GPUs and other parallel processing chips to be able to do large scale generative AI either for internal use (i.e., Meta) or as a service for others (i.e., AI factories) or both (cloud service providers such as Amazon, Microsoft, and Google).
Given many of NVIDIA’s customers or its end customers are still very much in the experimentation phase with generative AI, it is unclear how sustainable the current demand for GPUs truly is. At the same time, it is known that NVIDIA has historically been highly cyclical. By the end of 2024, we believe NVIDIA will already account for roughly half the market for datacenter chips, servers, and networking equipment, which is unprecedented. Even though the valuation at 25x forward earnings doesn’t look very demanding at first glance, it assumes NVIDIA will own virtually the entire datacenter chip market in just the next few years and will sustain year-on-year growth despite being a cyclical business that is currently experiencing much higher new peak.
With these details in mind, let’s take a look at which S&P 500 stocks analysts can’t stop talking about. A couple of notable picks are Newmont Corporation (NYSE:NEM), Warner Bros. Discovery, Inc. (NASDAQ:WBD), and Biogen Inc. (NASDAQ:BIIB).
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Our Methodology
To make our list of the S&P 500 stocks to buy according to analysts, we ranked the stocks in the index by the average share price target percentage upside and picked out the top stocks.
For these top S&P 500 stocks, we used hedge fund sentiment. Hedge funds’ top 10 consensus stock picks outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here). That’s why we pay very close attention to this often-ignored indicator.
12 Best S&P 500 Stocks To Buy According to Analysts
12. Carnival Corporation & plc (NYSE:CCL)
Number of Q4 2023 Hedge Fund Shareholders: 41
Average Analyst Share Price Target: 21
Percentage Upside: 28.82%
Carnival Corporation & plc (NYSE:CCL) is a carnival ship operator headquartered in Miami, Florida. 2024 has been a dynamic year for firm, as not only is it staring at potential losses in the aftermath of the bridge collapse in Baltimore, but Carnival Corporation & plc (NYSE:CCL) is uncertain it will be able to offer Red Sea cruises due to conflict.
During Q4 2023 end, 41 out of the 933 hedge funds profiled by Insider Monkey were Carnival Corporation & plc (NYSE:CCL)’s shareholders. Josh Overdeck and David Siegel’s Two Sigma Advisors was the biggest investor through its $298 million stake.
Along with Newmont Corporation (NYSE:NEM), Warner Bros. Discovery, Inc. (NASDAQ:WBD), and Biogen Inc. (NASDAQ:BIIB), is a highly rated S&P 500 stock by analysts.
11. Aptiv PLC (NYSE:APTV)
Number of Q4 2023 Hedge Fund Shareholders: 39
Average Analyst Share Price Target: $104
Percentage Upside: 31.09%
Aptiv PLC (NYSE:APTV) is an Ireland based car parts manufacturer that makes and sells electrical systems and other products. The firm has beaten analyst EPS estimates in all four of its latest quarters, and the shares are rated Buy on average.
By the end of December 2023, 39 out of the 933 hedge funds covered by Insider Monkey had held a stake in the firm. Aptiv PLC (NYSE:APTV)’s largest hedge fund shareholder is Ian Simm’s Impax Asset Management as it holds $651 million worth of shares.
10. Charter Communications, Inc. (NASDAQ:CHTR)
Number of Q4 2023 Hedge Fund Shareholders: 69
Average Analyst Share Price Target: $383
Percentage Upside: 31.79%
Charter Communications, Inc. (NASDAQ:CHTR) is a large telecommunications company that sells broadband packages. Its shares lost double digit percentages in February after the latest earnings report saw a reduction in customers and a drop in earnings.
For their fourth quarter of 2023 shareholdings, 69 out of the 933 hedge funds profiled by Insider Monkey had bought and owned Charter Communications, Inc. (NASDAQ:CHTR)’s shares. Natixis Global Asset Management’s Harris Associates was the biggest investor through its $2 billion investment.
9. First Solar, Inc. (NASDAQ:FSLR)
Number of Q4 2023 Hedge Fund Shareholders: 47
Average Analyst Share Price Target: $223
Percentage Upside: 32.11%
First Solar, Inc. (NASDAQ:FSLR) is a green energy stock that makes and sells solar power modules that are used in power generation systems. The fact that there’s a 32% upside to its stock is understandable given the recent bloodbath in green energy stocks due to high rates that make raising financing for new projects difficult.
As of December 2023 end, 47 out of the 933 hedge funds covered by Insider Monkey had invested in the firm. First Solar, Inc. (NASDAQ:FSLR)’s largest hedge fund shareholder is Robert Pohly’s Samlyn Capital through its $308 million stake.
8. Incyte Corporation (NASDAQ:INCY)
Number of Q4 2023 Hedge Fund Shareholders: 37
Average Analyst Share Price Target: $75
Percentage Upside: 32.37%
Incyte Corporation (NASDAQ:INCY) is a mid sized biotechnology company headquartered in Wilmington, Delaware. It is developing treatments for cancer, blood disease, and other ailments. The shares are rated Buy on average, and the average share price target is $75.41.
Insider Monkey dug through 933 hedge fund portfolios for their fourth quarter of 2023 shareholdings and found 37 Incyte Corporation (NASDAQ:INCY) investors. Julian Baker and Felix Baker’s Baker Bros. Advisors was the biggest investor due to its $2.2 billion investment.
7. Zoetis Inc. (NYSE:ZTS)
Number of Q4 2023 Hedge Fund Shareholders: 50
Average Analyst Share Price Target: $226
Percentage Upside: 33.47%
Zoetis Inc. (NYSE:ZTS) is a specialized healthcare company whose products cover animal health. The firm is in the midst of a bit of trouble in Europe these days, as it faces allegations that it might have stopped a rival from launching a pain relief product for dogs.
For their final quarter of 2023 investments, out of the 933 hedge funds covered by Insider Monkey’s research, 50 had bought the firm’s shares. The largest Zoetis Inc. (NYSE:ZTS) shareholder is William Von Mueffling’s Cantillon Capital Management as it holds $280 million worth of shares.
6. Caesars Entertainment, Inc. (NASDAQ:CZR)
Number of Q4 2023 Hedge Fund Shareholders: 65
Average Analyst Share Price Target: $59
Percentage Upside: 35.21%
Caesars Entertainment, Inc. (NASDAQ:CZR) is one of the biggest casino companies in the world, with a presence in more than a dozen American states. March 2024 has been a busy month for the firm that has seen it bring a Michelin-starred chef to some establishments and renew an NFL partnership.
65 out of the 933 hedge funds part of Insider Monkey’s Q4 2023 database had invested in Caesars Entertainment, Inc. (NASDAQ:CZR). Parag Vora’s HG Vora Capital Management was the biggest investor due to its $239 million investment.
Newmont Corporation (NYSE:NEM), Warner Bros. Discovery, Inc. (NASDAQ:WBD), and Biogen Inc. (NASDAQ:BIIB) are some top analyst S&P 500 stock picks.
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Disclosure. None. 12 Best S&P 500 Stocks To Buy According to Analysts was initially published on Insider Monkey.