We recently published a list of 10 Best Wide Moat Stocks to Invest In. In this article, we are going to take a look at where Adobe Inc. (NASDAQ:ADBE) stands against other best wide moat stocks to invest in.
Russell Investments continues to monitor and analyze the potential for policy changes in President Trump’s second term in office. In December 2024, the North American Chief Investment Strategist noted 4 areas of focus- i.e., tariffs, immigration, fiscal policy, and deregulation. Let us see what impact tariffs can have on the broader US economy and what should investors do in these uncertain circumstances.
As per Russell Investments, the macroeconomic uncertainty is expected to continue to remain elevated in the near term, while the investors keenly wait to see whether the tariffs get scrapped after the 30-day period. To give a brief context, the US President announced that he and Mexican President Claudia Sheinbaum have decided to delay the imposition of these tariffs for 30 days. Notably, Trump also announced that he has delayed the imposition of tariffs on Canadian goods for 30 days.
If tariffs get implemented, there can be a modest one-time increase in price levels for US consumers, says the investment firm. This might push out marginally when inflation will return to the target range of 2%. However, in the base-case scenario, the firm expects that the US Fed will succeed in returning inflation to 2%. From a growth perspective, while the tariffs might create a modest drag on the US economic activity, the broader economy is expected to avoid a recession.
Saxo Bank A/S believes that investors are required to ignore the noise and remain focused on fundamentals. While short-term volatility remains inevitable, investors need to prioritize long-term growth trends over reactionary trades. Therefore, investing in quality companies having strong domestic revenue, pricing power, and resilient business models is expected to withstand such headwinds. The bank believes that investing in high dividend-paying stocks in defensive sectors such as consumer staples might help mitigate the short-term negative impacts. Furthermore, the focus can be on secular growth themes that have the potential to transcend political cycles.
Elsewhere, Russell Investments opines that investors can benefit from staying disciplined during uncertain times. While the tariffs can adversely impact the broader economic growth, mainly in Mexico and Canada, there is a possibility of central banks and governments stepping in with support to mitigate the impacts of tariffs.
To list the 10 Best Wide Moat Stocks to Invest In, we scanned through VanEck Morningstar Wide Moat ETF and some online rankings. Next, we chose the stocks that were popular among hedge funds. Finally, the stocks are arranged in the ascending order of their hedge fund sentiments, as of Q3 2024.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Is Adobe Inc. (ADBE) the Best Wide Moat Stocks to Invest In?
A team of engineers and scientists collaborating at a workstation surrounded by their applications and solutions.
Number of Hedge Fund Holders: 123
Adobe Inc. (NASDAQ:ADBE) has a wide economic moat, owing to the switching costs, a strong brand reputation, and a diversified product line. As per Morningstar, the company has been dominating content creation software with its Photoshop and Illustrator solutions. It added new products and features to the suite with the help of organic development and bolt-on acquisitions, enabling it to drive a comprehensive portfolio of tools utilized in print, digital, and video content creation. Furthermore, the launch of Firefly demonstrates a critical AI solution, further bolstering its economic moat.
Adobe Inc. (NASDAQ:ADBE)’s commitment to innovation is a key focus, mainly in the realm of AI. The company continues to integrate AI capabilities throughout its Creative, Document, and Experience Clouds. Additionally, it aims to enhance user productivity and expand the product offerings. Adobe Inc. (NASDAQ:ADBE) delivered a record FY 2024 revenue of $21.51 billion, highlighting robust demand and the critical role Creative Cloud, Document Cloud, and Experience Cloud play in fueling the broader AI economy.
The company’s strategy, AI innovation, and robust cross-cloud opportunity place it well for 2025 and beyond. Polen Capital, an investment management company, released its Q3 2024 investor letter. Hereis what the fund said:
“We added to several existing positions in the quarter including Adobe Inc. (NASDAQ:ADBE), Workday, Shopify, MSCI, and Paycom Software. We feel Adobe is poised for re-accelerating revenue and earnings growth partially due to the monetization of its Firefly GenAI product embedded in its creative software.”
Overall, ADBE ranks 5th on our list of best wide moat stocks to invest in. While we acknowledge the potential of ADBE as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for a deeply undervalued AI stock that is more promising than ADBE but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
