Hedge funds don't always live up to their high fees and hype, but it's worth keeping tabs on what they're doing nonetheless. After all, they comprise a large swath of institutional investor dollars. They're the supposed "smart money," and often act like it. It matters what they buy, sell and hold.
As the good folks at WalletHub note, the 50 largest
Helpfully, WalletHub did a deep dive into which
Spoiler alert: Every one of these companies is massive by market value. Indeed, they would have to be to accommodate so much institutional interest. It also should come as no surprise that they are all household names.
Here's a look at the 10 highest-rank hedge-fund stock picks. Not every one of the following stocks is necessarily a buy at current prices, but there are certainly no dogs in the group. In other words, it's not hard to see why these stocks are the ones hedge funds love the most.
UnitedHealth Group
Market value: $224.6 billion
Dividend yield: 1.2%
Analysts' opinion: 17 strong buy, 1 buy, 0 hold, 0 sell, 1 strong sell
If you're a large institutional investor looking to make a big bet in the health insurance sector, you can't really avoid
Analysts expect
Visa
Market value: $280.8 billion
Dividend yield: 0.6%
Analysts' opinion: 24 strong buy, 2 buy, 1 hold, 0 sell, 0 strong sell
It's easy to see why
But it's not just the high-flying hedge-fund world that has taken a shine to
Shares in
Bank of America
Market value: $334.8 billion
Dividend yield: 1.2%
Analysts' opinion: 8 strong buy, 2 buy, 8 hold, 0 sell, 0 strong sell
No wonder Bank of America (BAC, $32.33) is so popular with the hedge-fund crown. It has been the best-performing big bank stock of the past few years, and now rising interest rates and lower taxes could give it more room to run. Shares in BAC have more than doubled in three years. JPMorgan Chase (JPM) gained 92% over the same time frame, while Citigroup (C) added just 45%.
Analysts are looking for Bank of America to deliver earnings-per-share growth of 35% this year, which explains hedge funds' bullishness on the name. But even some canny value investors with longer investment horizons are big fans.
JPMorgan Chase
Market value: $404.9 billion
Dividend yield: 1.8%
Analysts' opinion: 8 strong buy, 1 buy, 10 hold, 0 sell, 0 strong sell
JPMorgan Chase (JPM, $117.36) is the nation's biggest bank by assets, so any institutional investor looking for exposure to the most important financial stocks is going to feel its gravitational pull. Happily for all involved, shares in JPM have been pulling their weight. The stock is up nearly 30% over the past 52 weeks, almost doubling the performance of the S&P 500.
Bulls are looking forward to more outperformance in the year ahead after the company raised its profitability goals in late February. Analysts at Credit Suisse rate shares in JPMorgan Chase at "Outperform," thanks to its better-than-average earnings growth, market-share gains and "best-in-class" execution.
Wells Fargo
Market value: $293.1 billion
Dividend yield: 2.6%
Analysts' opinion: 8 strong buy, 0 buy, 11 hold, 1 sell, 5 strong sell
We've been bullish on WFC on more than one occasion in the past. After all, it's one of
Don't be surprised if WFC proves to be less popular with hedge funds going forward.
Alphabet
Market value: $781.5 billion
Dividend yield: N/A
Analysts' opinion: 23 strong buy, 4 buy, 5 hold, 0 sell, 0 strong sell
You can't fault hedge funds for loving
It owns commanding market share in the fast-growing digital advertising industry. Indeed, the
Alphabet's stock is up 31% in the past 52 weeks vs. a 16% gain for the S&P 500, and the great majority of analysts expect more outperformance ahead. Shares currently sell for 23 times forward earnings, which is more than reasonable given that profits are forecast to increase an average of 25% a year for the next five years.
Market value: $530.7 billion
Dividend yield: TK%
Analysts' opinion: 23 strong buy, 4 buy, 2 hold, 0 sell, 0 strong sell
There's a reason why
For all the controversy the company has endured in the past year or so, FB stock has been an out-and-out winner. Shares are up 34% over the last 52 weeks, more than doubling the performance of the broader market. And for all the handwringing over changes to
Apple
Market value: $916.0 billion
Dividend yield: 1.4%
Analysts' opinion: 13 strong buy, 1 buy, 13 hold, 0 sell, 1 strong sell
It's a no-brainer that one of the best stocks of all time would be a hedge-fund darling.
The bull case for Buffett and hedge funds alike is that
Amazon
Market value: $739.0 billion
Dividend yield: N/A
Analysts' opinion: 29 strong buy, 5 buy, 3 hold, 0 sell, 1 strong sell
"Long Duration Dominance." That was the headline on a recent research report by Stifel, and it sums up the bull case on Amazon (AMZN, $1,511.98) quite nicely. Analyst
How could hedge funds not love this name? Amazon has a market value of about three-quarters of a trillion dollars and earnings are projected to grow an average of 28% a year for the next half-decade. Big companies aren't supposed to be able to do that.
Hedge funds are expected to deliver outperformance. They simply cannot ignore Amazon.
Microsoft
Market value: $733.1 billion
Dividend yield: 1.7%
Analysts' opinion: 20 strong buy, 1 buy, 4 hold, 1 sell, 1 strong sell
There's something wonderful about boring old
The software giant's transition to subscription-based services and cloud computing has lit a fire under the stock. MSFT is up nearly 50% over the past year, beating
Analysts expect more such outperformance to come.
It looks like
Dan Burrows is a Contributing Writer for Kiplinger.