In this article, we will discuss the 10 best S&P 500 stocks to buy according to hedge funds.

According to AXA Investment Managers, the United States has dominated financial markets this year. The investment firm estimates that the economy as a whole has been stronger than expected, with GDP growing at an annualized rate of 3.0% in the second quarter. The blue-chip benchmark, the S&P 500, jumped about 22% on an annual basis. Additionally, US bond markets recorded strong returns. Overall, financial markets were supported by the success of the US Fed in its fight against inflation.

Interest rates have started to fall as credit markets reflect the strength of the U.S. corporate sector as a whole, according to AXA Investment Managers. In early October 2024, the investment firm mentioned that a 50/50 allocation to the S&P 500 Growth Equity Index and the ICE US High Yield Bond Index could have generated a return of around 18% since the start of the year.

S&P 500 Index – The way forward

Forbes believes the prevailing outlook for 2025 is cautious optimism. Although the momentum in technological innovation, combined with falling interest rates, should support the broader S&P 500 index, there are some risks investors should be wary of. These include high valuations, global tensions and uncertainty surrounding the US presidential election.

According to ClientFirst Wealth, Legacy & Estate Planning, which is an independent, fee-only registered investment advisor (RIA), continued AI innovation and falling rates are expected to help the S&P 500 index grow between 14.5% and 19.6%. . Another firm, Running Point Capital Advisors, expects the S&P 500 to rise 7% to 11% in 2025, with some volatility. According to the company, influencing factors include economic growth, increasing profits, increased merger and acquisition activities and a favorable interest rate environment.

ALSO READ: 7 Best Stocks to Buy for the Long Term And 8 Cheap Jim Cramer Stocks to Invest in.

Sectors to Keep on the Radar

Forbes highlighted that investors need to keep certain sectors, like technology, healthcare and energy, on the radar in 2025. According to IDC, global spending on AI, which includes applications, infrastructure and IT and business services associated, is expected to more than double by 2028 to reach $632 billion. The integration of AI, and generative AI (GenAI) in particular, into a product line is expected to drive a CAGR of approximately 29.0% over the period 2024-2028, which is expected to help the technology sector in its entirety.

Definitive Healthcare believes that investors should see more device makers and pharmaceutical companies jumping on the D2C bandwagon in 2025. Additionally, ICRA, a credit rating agency, expects a strong financial outlook for the the entire hospital sector in FY 2025. The optimistic outlook stems from the increasing incidence of lifestyle-related non-communicable diseases, increasing per capita healthcare expenditure, increasing medical tourism and health insurance penetration.

The United States Energy Information Administration, in its short-term energy outlook report (October 2024), mentioned that summer temperatures this year were warmer in the United States than last summer, mainly in regions of the upper Midwest and Northeast, which supported rising temperatures. Electricity demand in the United States. The EIA expects a 2% increase in electricity sales to end customers in the United States in 2024 compared to 2023, followed by an additional 2% growth forecast in 2025. Overall, it expects electricity sales to increase across all economic sectors. It forecasts commercial electricity sales will increase 3% this year, followed by 1% growth in 2025.

With all of these trends in context, let’s take a look at the 10 best S&P 500 stocks to buy according to hedge funds.

A professional financial analyst studies data on a computer, illustrating the company’s index investment decisions.

Our methodology

To list the top 10 S&P 500 stocks to buy according to hedge funds, we extracted stocks from the S&P 500 index. After obtaining the list, the most popular stocks among hedge funds were chosen. Finally, stocks were ranked in ascending order of their sentiment towards hedge funds, as of Q2 2024.

Why are we interested in stocks that hedge funds are piling into? The reason is simple: our research has shown that we can outperform the market by imitating the stocks selected by the best hedge funds. Our quarterly newsletter strategy selects 14 small- and large-cap stocks each quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).

10 Best S&P 500 Stocks to Buy According to Hedge Funds

10) Tesla, Inc. (NASDAQ:TSLA)

Number of hedge fund securities: 85

Tesla, Inc. (NASDAQ: TSLA) is engaged in the design, development, manufacturing, rental and sale of electric vehicles, and is also involved in the energy generation and storage systems markets.

Tesla, Inc.’s (NASDAQ: TSLA) shift from traditional vehicle sales and manufacturing to a focus on AI and self-driving technologies is expected to continue to drive revenue growth in the near term. The company has taken steps to increase FSD adoption. As Tesla, Inc. (NASDAQ: TSLA) plans to launch FSD in China, it reaffirms its commitment to the global expansion of this technology.

Tesla, Inc.’s (NASDAQ: TSLA) global manufacturing footprint, given its facilities in the United States, China and Germany, provides it with economies of scale and the ability to effectively serve multiple markets. Additionally, the company has the largest charging infrastructure in the industry, which should continue to be a significant competitive advantage as electric vehicle adoption grows. Market experts believe that the success of Tesla, Inc.’s (NASDAQ: TSLA) Robotaxi service and the adoption of its FSD technology should serve as potential catalysts for future growth.

By leveraging the current fleet of vehicles equipped with FSD hardware, Tesla, Inc. (NASDAQ: TSLA) can deploy an autonomous ride-hailing service at scale, which should help it capture a significant share of the global robotaxi market . This transition will shift the company from primarily an automaker to a mobility service provider, which can generate high-margin recurring revenue streams.

Morgan Stanley reissued an “overweight” rating on the company’s shares, setting a price target of $310.00 on 3^rd October. Baron Funds, an investment management firm, has released its third quarter 2024 investor letter. Here this is what the fund says:

Tesla, Inc. (NASDAQ: TSLA) designs, manufactures and sells electric vehicles, related software and components, and solar and energy storage products. Tesla shares contributed to performance during the quarter, reflecting increased investor confidence and optimism in Tesla’s AI initiatives, the stabilization of the company’s industrial operations, including strong growth in its segment energy, and the planned launch of new vehicle models in the first half of 2025. After years of industry-wide investment in autonomous vehicles, advances in AI technology have accelerated the development of autonomous driving technology. Tesla rolled out its AI-based Full Self Driving (FSD) solution last year and demonstrated rapid improvements in driving performance. The goal is to increase the number of miles flown between critical disengagements nearly 20-fold – soon to exceed 10,000 miles – over a two-month period this fall.

AI relies on large amounts of high-quality data and computing power, and we believe Tesla has distinct strengths that will serve as a strong foundation for its AI initiatives. Since 2016, every Tesla vehicle produced has been equipped with cameras and essential hardware, resulting in millions of connected cars around the world that collect data on billions of miles traveled by the Tesla fleet each year. This rich and unique dataset is invaluable for FSD training. Tesla also differentiates itself with its AI training calculation factory. Tesla ended 2023 with nearly 15,000 NVIDIA H100 chip equivalents in drive computing power. In the second quarter of 2024, this capacity doubled. In the third quarter, the company activated its advanced training data center in Texas, which is expected to enable the company to harness up to 90,000 H100-equivalent computing power by the end of 2024, six times the computing capacity it had at the start of the year and by far the largest autonomous driving training center in the world. Unlike any other auto company, Tesla is investing billions in profits generated by its automotive segment into its AI initiatives aimed at capturing hardware share in the lucrative autonomy and robotics markets…” (Click here to read the full text)

9) Walmart Inc. (NYSE:WMT)

Number of hedge fund holders: 95

Walmart Inc. (NYSE: WMT) is engaged in the operation of retail, wholesale and e-commerce businesses worldwide.

Wall Street believes that Walmart Inc.’s (NYSE: WMT) long-term growth should be driven by its competitive advantages, which stem from advantage in costs and efficiencies and scale-based capabilities. The company’s strategic initiatives and growth drivers revolve around, among others, the development of private brands, technology and automation, as well as international growth. Walmart Inc. (NYSE: WMT) has expanded its private label offerings, which includes the introduction of “better products” at Walmart US as well as the strengthening of the “Member’s Mark” brand at Sam’s Club. Such initiatives are expected to improve brand loyalty and boost sales.

Notably, significant investments in supply chain automation and in-store technology are expected to reduce costs and improve operational efficiencies. Walmart Inc. (NYSE: WMT) continues to focus on high-margin businesses like Walmart Marketplace, Walmart Connect (advertising), and financial services to fuel profitability. The company’s focus on developing alternative profit sources, including digital advertising and financial services, provides a strong opportunity for margin expansion.

Long term, the company’s focus on price leadership, assortment improvement and convenience through digital and delivery services should continue to act as a tailwind. Walmart Inc.’s (NYSE: WMT) value proposition now extends beyond simple price competitiveness as convenience becomes an increasingly crucial factor for consumers. Analysts at UBS Group raised their price target on shares of Walmart Inc. (NYSE: WMT) from $81.00 to $92.00, giving a “Buy” rating on the 11th.^th October.