NVIDIA’s dominant presence in the AI chip market has led to a 27.39% surge in its price, year-to-date, with NVDA currently trading at $613.62.
Despite the celebrated price action, Adobe (ADBE) and Microsoft(ADBE) have pipped NVIDIA as the leading mutual fund buys for January 2024.
Trading.biz analyst Rahul Nambiampurath believes that a low ESR or Earnings Stability Rating number is why Adobe is preferred by the funds, in comparison to NVIDIA.
However, the latter has experienced a more aggressive price growth. Over the past six months, NVDA has risen by over 34%, whereas ADBE has surged by over 15%.
Adobe and Microsoft are the mutual fund favorites
The interest in Adobe is primarily due to its growth in the Digital Media space. Besides that, the company has also been making strides in AI, with its software-specific popularity aligning well with NVIDIA’s hardware-focused take on AI.
However, Adobe’s popularity among mutual funds isn’t exclusive to 2024. Even in late 2023, funds like the Vanguard Total Stock Market Index, Fidelity 500 Index, and SPDR S&P 500 ETF Trust had substantial investments in ADBE.
The ESR, as identified by Rahul, stands at 4 for Adobe, signifying very low earnings volatility. The ESR is still low at 6 for Microsoft, hinting at predictable earnings. Despite the surging 2024, NVIDIA has an ESR of 28 — a reason why fund managers and investors currently prefer it less.
For traders and investors focusing on ADBE, some short-selling opportunities might be around the corner. The daily chart identifies ADBE trading inside an ascending wedge, with the lower trendline tested as solid support. Despite the rising prices, the momentum seems to be weakening courtesy of a dropping Relative Strength Index indicator.
Other mutual fund buys and what it indicates
For long-term traders and investors, here are the top mutual fund buys listed according to the amount:
- Microsoft (MSFT): $17.4 billion
- Broadcom (AVGO): $12.9 billion
- Intuit (INTU): $1.9 billion
- Adobe (ADBE): $1.3 billion
- Salesforce (CRM): $1.2 billion
The buy patterns signify technology dominance and a call for portfolio diversification. The top buys also have high composite scores as companies — ranging between 92 to 99. This shows that in 2024, the focus is and will be on strong performance metrics and not standalone quarter-specific profitability.
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