The top 21 blue chip hedge fund stocks to buy now

Hedge funds as a group have a bad long-term track record, but there’s still something compelling about what putative smart money has been up to.

Additionally, you must give them credit where credit is due. Hedge funds as a group may not be generating positive returns in 2022, but hey, at least they’re beating the broader market.

And by a wide margin at that.

Hedging strategies, by definition, limit the upside when stocks rise, which explains the industry’s years of underperformance during the bull market. In the same way, however, hedging strategies limit declines when everything is selling. And heaven knows investors have seen a lot of red on their screens so far this year.

Case in point: The Eurekahedge Hedge Fund Index generated a total return (price appreciation plus dividends) of -4.2% year-to-date through July 31. This compares to the S&P 500 total return of -12.6% over the same period.

We won’t know how hedge funds are handling the current market sell-off until they disclose their Q3 buys and sells in mid-November. But we know what they were doing in the second quarter, thanks to a recent batch of regulatory filings.

“Holded by an uncertain market environment and recent low returns, hedge funds have reduced their leverage, moved to growth stocksand increased portfolio concentrations in their favorite stocks,” notes the portfolio strategy team at Goldman Sachs Global Investment Research.

And, indeed, as is always the case, hedge funds have been heavily invested in many of the largest and bluest stocks in the market – especially Dow Stocks.

Much of this depends on the massive market capitalizations of Dow stocks and the resulting liquidity, which leaves institutional investors with ample room to create or sell large positions.

Blue chip stocks also carry a lower level of reputational risk for professional fund managers. (It’s much easier to justify holding a large position in a Dow stock than an unnamed small cap if reluctant clients start complaining about their returns.)

Either way, half of those names don’t make it into the famous blue chip average, and a few of those picks might surprise you. But before we get to the full list of stocks in the table below, let’s take a look at some of the more notable entries.

  • Although (AMZN, $130.75) remained the second most popular stock with hedge funds in the second quarter, overall these institutional investors were heavy sellers. Hedge funds net sold more than 24 million shares of the e-commerce giant in the second quarter, a period in which AMZN stock fell 35%. The number of hedge funds holding positions in AMZN fell by 4%, according to WhaleWisdom. Additionally, the number of hedge funds with AMZN among the top 10 holdings fell by 22%.
  • The hedge funds that have remained attached to Google’s parent company alphabetical (GOOGL, $110.34) Class A shares absolutely stacked in the name when it went on sale. GOOGL fell 22% in the second quarter, yet hedge funds were net buyers of more than 117 million shares. Regardless, the number of hedge funds holding GOOGL fell by almost 6%, and the number of hedge funds with it among their top 10 positions fell by more than 10%.
  • At Warren Buffett’s Berkshire Hathaway (BRK.B, $289.96) went bargain hunting in Q2, by increasing its holdings in Apple (AAPL), Chevron (CVX) and Occidental Petroleum (OXY). But hedge funds did not take advantage of the same opportunity offered by the BRK.B crisis. Shares of Buffett’s holding company fell 23% in the second quarter and hedge funds provided some of the selling pressure. Indeed, hedge funds were net sellers of 14.6 million shares of Berkshire Hathaway in the three months ended June 30.

Take a look at the top 21 blue chip hedge fund stocks to buy now in the chart below.

Kiplinger; WhaleWisdom

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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