In this piece we will take a look at the 11 best machine learning stocks to buy. If you want to skip our industry introduction and jump ahead to the top five stocks in this list, then head on over to 5 Best Machine Learning Stocks to Buy.
Machine learning refers to a set of technologies that enable researchers and others to use large or small datasets to their advantage by making predictions. It often requires breaking the data set into pieces, and depending on the size of the data set, often requires large amounts of computing power too.
The basics of machine learning involve two kinds, supervised and unsupervised. In the former, the data set is assigned categories for the conclusions that the software has to reach, and this also involves dividing the data into two sets - one for training the algorithm and the other for testing it. The latter simply involves the software itself identifying the 'interesting' details about the data, and one such technique is principal component analysis, which determines the key explanatory factors of a data set.
These techniques have transformed the manner in which corporations handle their data, and one strong beneficiary is supply chain management. Big and small enterprise resource planning software providers now provide machine learning as part of their software suites, and companies use them regularly to drive data driven insights that would have been science fiction just a couple of decades ago.
Therefore, the machine learning industry has one of the strongest compounded annual growth rates (CAGRs) that we have come across. For instance, a report from Fortune Business Insights assigns the industry with an astounding CAGR of 38.8% for the time period spanning between 2022 and 2029. It estimates that the sector will be worth $21 billion by the end of this year, and through strong CAGR, it will go on to be worth a whopping $210 billion in just seven years. Driving this demand will be the healthcare sector, as automated data analysis will provide companies with advanced ways of spearheading drug discovery. Healthcare has already proven pivotal for machine learning as drug makers relied on the technology to develop vaccines for the coronavirus pandemic.
A report from Market Research Future ascribes a similar 38.8% CAGR to the industry and it estimates that by the end of 2030, the machine learning industry will be worth $106 billion. Among the different segments that make up this industry, such as software developers, enterprise resource planning systems providers, and hardware manufacturers, Market Research Future believes that the hardware segment is slated to benefit the most, and enterprise machine learning will have the strongest demand.
Therefore, the future is bright for machine learning, and today we will identify the key players in the industry. Some top names likely to catch your attention are Alphabet Inc. (NASDAQ:GOOG), Amazon.com, Inc. (NASDAQ:AMZN), and Microsoft Corporation (NASDAQ:MSFT).
Our Methodology
We took a broad look at the industry and identified the different segments that it is divided into. Then, the key players in each segment were identified based on market trends, product strengths, and financial performance. They were then ranked according to hedge fund interest courtesy of Insider Monkey's 895 hedge fund survey for Q2 2022.
SAP SE (NYSE:SAP) is an enterprise resource planning software provider that is headquartered in Walldorf, Germany. The firm's products allow companies to manage their financials and drive data driven insights and production plans.
SAP SE (NYSE:SAP) is one of the strongest players in the cloud computing segment, as its revenues have grown at an average CAGR of 20% since 2020 and are now targeting to represent half of its revenue. The company earned $32 billion in revenue in 2021, which made it the largest non-U.S. software firm.
SAP SE (NYSE:SAP)'s fair share price value is $110 per share if a cost of capital of 8%, a 2.5% terminal growth rate, and consensus analyst growth rates of 7% are applied. This marks a nice premium over the current share price of $88.34. The company also pays a 52 cent dividend for a 2.39% yield. By the end of this year's second quarter, 16 out of the 895 hedge funds polled by Insider Monkey had invested in the firm.
SAP SE (NYSE:SAP)'s largest investor in our database is Ken Fisher's Fisher Asset Management which owns 8.6 million shares that are worth $784 million.
Mayar Capital mentioned the company in its Q2 2022 investor letter. Here is what the fund said:
“SAP, the German software company, continues its transition from a licensing-based business model to a Cloud subscription- based model. This is an attractive structural shift as the cloud business – aside from being more predictable – has greater lifetime value per customer. The cloud business now stands at 34%, up from just 14% five years previously.”
SAP SE (NYSE:SAP) joins our list of top machine learning stocks, alongside heavy hitters such as Amazon.com, Inc. (NASDAQ:AMZN), Alphabet Inc. (NASDAQ:GOOG), and Microsoft Corporation (NASDAQ:MSFT).
UiPath Inc. (NYSE:PATH) is a robotic process automation services provider that is headquartered in New York, New York, the United States. The firm uses artificial intelligence to build and manage automation systems within companies.
UiPath Inc. (NYSE:PATH) is the most advanced player in the robotics automation market, and the firm has been recognized as a leader in this space for four consecutive years by the famed research firm Gartner. The company has more than three hundred apps in its portfolio, and a reseller community of close to 2,000 resellers. This indicates that its products have cemented their place in the market.
As if this weren't enough, UiPath Inc. (NYSE:PATH) has consistently grown its market share over the years, as it grew share from 28.5% in 2020 to 34.1% in 2021. Insider Monkey's Q2 2022 survey of 895 hedge funds outlined that 24 had bought the company's shares.
Out of these, UiPath Inc. (NYSE:PATH)'s largest investor is Catherine D. Wood's ARK Investment Management which owns 37 million shares that are worth $641 million.
Verisk Analytics, Inc. (NASDAQ:VRSK) is a data analytics firm that offers several tools and covers several analytical targets such as risk and asset pricing for commodities and insurance products. The firm is headquartered in Jersey City, New Jersey, the United States.
Verisk Analytics, Inc. (NASDAQ:VRSK) is the cheapest stock in its sector, as its enterprise value to operating income (EV/EBITDA) stands at 17x. This is nearly half of that of the largest reading of 33x, and below the readings for the rest of the pack. Over the last three years, the firm has posted an average revenue growth of 7.7%.
Verisk Analytics, Inc. (NASDAQ:VRSK) expanded its data products in September 2022, as it announced that it had integrated labor pricing and material costs for property insurers in its platform. 38 out of the 895 hedge funds polled by Insider Monkey for their June quarter of 2022 investments had invested in the company. Verisk Analytics, Inc. (NASDAQ:VRSK) also pays a 31 cent dividend for a 0.72% yield.
Verisk Analytics, Inc. (NASDAQ:VRSK)'s largest investor is John Nevin Jr.'s Ayrshire Capital Management which owns 19,128 shares that are worth $3.2 million.
8. International Business Machines Corporation (NYSE:IBM)
Number of Hedge Fund Holders: 40
International Business Machines Corporation (NYSE:IBM) is one of the oldest computing companies in the world that was set up in 1911 and is currently headquartered in Armonk, New York, the United States. Over the years, the firm has transformed itself from targeting personal computing to focusing on enterprise computing.
International Business Machines Corporation (NYSE:IBM) has one of the strongest machine learning platforms in the world, with its Watson division offering companies a many solutions such as risk compliance, advertising, customer service, financial operations, and healthcare. The firm also had the largest market share in artificial intelligence life cycle software in 2020, as it commanded 13.7% of the market for a whopping 46.6% annual growth.
International Business Machines Corporation (NYSE:IBM)'s machine learning platform has generated a many positive outcomes such as enabling at risk students at Wichita University to receive early intervention through virtual learning and identifying 800 marginalized families in North Carolina for home ownership. The company pays a $1.65 dividend for a 5.4% yield and 40 out of the 895 hedge funds polled by Insider Monkey during Q2 2022 had held a stake in it.
International Business Machines Corporation (NYSE:IBM)'s largest investor is Peter Rathjens, Bruce Clarke, and John Campbell's Arrowstreet Capital which owns 2.6 million shares that are worth $372 million.
Autodesk, Inc. (NASDAQ:ADSK) is a design and engineering software services provider that is headquartered in San Rafael, California, the United States. The firm's software lets engineers and architects design their products.
Autodesk, Inc. (NASDAQ:ADSK) has integrated machine learning into its platform, and its software use machine learning technologies such as Generative Design, Risk Mitigation, and Contractor Safety. Generative Design uses machine learning to identify design goals and then run thousands of permutations for the best design. Risk Mitigation uses machine learning to identify which factors (look up unsupervised learning above) are the likeliest for hazardous outcomes and then create mitigatory approaches for them.
By the end of this year's second quarter, 53 out of the 895 hedge funds polled by Insider Monkey had invested in Autodesk, Inc. (NASDAQ:ADSK).
Autodesk, Inc. (NASDAQ:ADSK)'s largest investor is Ian Simm's Impax Asset Management which owns 1.2 million shares that are worth $221 million.
Aristotle Capital Management, LLC mentioned the company in its Q2 2022 investor letter. Here is what the fund said:
In recent years, the AEC industry has increasingly sought to resolve the inefficiencies that arise when many parties are needed to complete a building project. Autodesk has been at the cutting edge of enabling improvement through innovation and promoting the use of open standards, or open building information modeling (BIM), which allows for all relevant building data to be processed virtually in a 3D model and shared across stakeholders. Importantly, Autodesk’s leadership in ensuring the interoperability of its software with that of competitors increases collaboration and productivity among architects, engineers and contractors – an attractive value proposition for its customers…” (Click here to read the full text)
Oracle Corporation (NYSE:ORCL) is an enterprise resource planning software provider which provides a a variety of software such as basic ERP, cloud computing options, and more. It is headquartered in Austin, Texas, the United States.
Oracle Corporation (NYSE:ORCL)'s Database allows support for a wide variety of machine learning systems such as SQL, R, Python, and AutoML. These enable developers to pick out their language of choice when running analytical models, deploy and manage database-based machine learning models, mine large amounts of data to generate valuable insights, and accelerate machine learning with high performance computing platforms.
Oracle Corporation (NYSE:ORCL) also pays a 32 cent dividend for a 1.91% yield. Insider Monkey's Q2 2022 survey of 895 hedge funds outlined that 69 had held a stake in the company.
Out of these, Jean-Marie Eveillard's First Eagle Investment Management is Oracle Corporation (NYSE:ORCL)'s largest investor through a $1.8 billion stake that comes via 25 million shares.
“Oracle is one of the world’s largest independent enterprise software companies and has been reinventing itself for the cloud-computing environment, a transition pursued primarily through investments in organic research and design and smallish, well-priced acquisitions. That said, Oracle in June closed its largest-ever deal with the acquisition of Cerner, a designer of software to store and analyze medical records and other healthcare data.
Along with Alphabet Inc. (NASDAQ:GOOG), Amazon.com, Inc. (NASDAQ:AMZN), and Microsoft Corporation (NASDAQ:MSFT), Oracle Corporation (NYSE:ORCL) is a hot machine learning stock.
