Adobe Inc. (ADBE): Among Billionaire Quants' Two Sigma's 10 Stock Picks with Huge Upside Potential

We recently published a list of Billionaire Quants’ Two Sigma’s 10 Stock Picks with Huge Upside Potential. In this article, we are going to take a look at where Adobe Inc. (NASDAQ:ADBE) stands against other billionaire quants’ two sigma’s stock picks with huge upside potential.

Two Sigma Advisors is one of the leading players in the quantitative hedge fund space, according to Archive Market Research’s analysis. The quant fund operates as an investment management company and was founded in 2001 by David Siegel, a computer scientist, and John Overdeck, a mathematician. The fund manages $60 billion worth of assets as of April 2025.

Quant funds and their multi-strategy counterparts often do well in the market. A Reuters analysis found that many quant hedge funds posted double-digit growth in 2024. This growth happened despite “negative drivers” in sectors like energy, metals, and European equities. Two Sigma, alongside quant funds like D.E. Shaw and Citadel, also managed solid performance last year.

The hedge fund’s Spectrum Fund returned 10.9% and 14.3% for the Absolute Return Enhanced Fund. But one might argue that for a hedge fund that relies on complex algorithms to make investment decisions, the asset manager should have beat the market. For context, the S&P 500 finished 2024 with a total gain of 25.0%.

READ ALSO: Billionaire Ray Dalio’s Bridgewater’s 10 Stock Picks with Huge Upside Potential and Billionaire Mario Gabelli’s 10 Large-Cap Stock Picks with Huge Upside Potential.

In August last year, the billionaire founders of the hedge fund exited from active management because they couldn’t resolve tension between them.

“Over the past year and a half, we and our senior management team have dedicated significant effort to securing the long-term success and stability of Two Sigma. Throughout this process, our own roles have been a central consideration. Today, we are confident that stepping back from our day-to-day management roles is the right decision at this time,” the co-founders said in a letter to investors.

But recent reports indicate that Overdeck is returning to active management. “John has determined now is the right time for him to return to this role in order to progress certain priorities and decisions he believes are important to the future of Two Sigma,” Two Sigma said in a letter. Siegel chose to remain outside of the fund’s top ranks but had “full confidence” in Scott Hoffman, one of the Co-CEOs who took over last year.

It is good news that Two Sigma won’t be held back by feuding management because they need it to navigate a challenging market. According to a Reuters analysis, the risk of recession is alarming, even though it may not be as clear-cut. The report quoted Zurich Insurance Group’s chief market strategist, Guy Miller, who said that the risk of a US recession is quite plausible. “Recession risks have risen markedly even if there are some deals struck on tariffs. The risk of a U.S. recession is 50-50, it’s that close.”

Our Methodology

We sifted through Two Sigma Advisors’ SEC Q4 2024 13F filings to create this list. We primarily targeted the fund’s most valuable equity holdings (excluding ETFs and options) and then ranked the picks based on analyst price targets as of May 8, 2025. We picked stocks with an upside potential of at least 30% and then selected the top 10. We have also added the broader hedge fund sentiment for the stocks, as of Q4 2024.

Why are we interested in 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 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).

Adobe Inc. (NASDAQ:ADBE)

Two Sigma Advisors Stake Value: $395,320,520

Upside Potential as of May 8: 32.02%

Number of Hedge Fund Holders: 117

Adobe Inc. (NASDAQ:ADBE) is a global software company best known for creative and multimedia applications. Its product portfolio includes Photoshop, Illustrator, Acrobat, and Premiere Pro. The products serve creative professionals, marketers, and enterprises across design, document management, and digital experience segments.

Adobe Inc.’s (NASDAQ:ADBE) financials in Q1 FY25 point to a company that is doing well. Revenue came in at $5.7 billion, a 10% year-over-year increase, which surpassed estimates by approximately $50 million. The company’s Digital Media segment, which includes Creative Cloud and Document Cloud, grew by 12% to $4.25 billion, while Digital Experience revenue increased by 7% to $1.37 billion. Non-GAAP earnings per share came in at $5.08, beating analyst expectations by $0.11.

Adobe Inc. (NASDAQ:ADBE) has also established itself as a leader in the generative AI space. For instance, its Firefly platform has powered over 12 billion generations since its launch. CEO Shantanu Narayen emphasized during the earnings call that the company’s differentiated approach to AI combines proprietary models with enterprise-grade security and governance. As a result, Adobe (NASDAQ:ADBE) can capture demand across creative, document, and experience workflows. The integration of AI capabilities throughout its product portfolio, including text-to-image and text-to-video generation in Creative Cloud applications, has enhanced user productivity and driven subscription growth. Despite these strengths, RBC Capital analyst Matthew Swanson lowered the firm’s price target on Adobe (NASDAQ:ADBE) from $530 to $480 on April 14, 2025. Swanson cited peer multiple contractions, though he maintained an Outperform rating.

Overall, ADBE ranks 8th on our list of billionaire quants’ two sigma’s stock picks with huge upside potential. While we acknowledge the potential of ADBE as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for an AI stock that is more promising than ADBE but that trades at less than 5 times its earnings check out our report about this cheapest AI stock.

READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires.

Disclosure: None. This article is originally published at Insider Monkey.