Hedge fund trades have just been made public for the last quarter with the release of 13F forms filed with the SEC. TipRanks tracks top hedge fund transactions on more than 5,000 stocks, enabling us to monitor a couple of things when it comes to recent stock picks.
Namely:
- See what the best performing fund managers are up to.
- Assess the overall hedge fund sentiment on any particular stock.
It should be noted that fund managers are only required to submit these 13F forms to the SEC 45 days after the end of the last quarter. That means by the time the information on these stock picks is made public, it is no longer necessarily current. Nonetheless, these trades still give a valuable insight into the direction top fund managers believe the market is heading.
Here, I pinpoint ten stocks with particularly bullish hedge fund sentiment for Q1 from the savviest hedge fund billionaires out there.
Let’s take a closer look now:
Top Hedge Fund Stocks: Facebook (FB)
Without a doubt the no.1 hedge fund stock for Q1 is Facebook, Inc. (NASDAQ:FB). According to Goldman Sachs, 97 funds now count FB as a top-10 holding. Or to look at it another way- funds invested an eyebrow-raising $19.4 billion in Facebook. And this number is rising.
Funds made the most of FB’s low share price in Q1 by boosting holdings 27%. Following Q1 funds now hold a total of 170 million shares from 134 million previously. Notably, Viking Global Investors more than doubled its shares of Facebook to $1.49 billion, its largest U.S. equity position as of March 31.
FB shares plunged 15% during Q1 on the back of the Cambridge Analytica data scandal. However, since then the stock’s prospects have improved remarkably. Shares are now back at pre-scandal levels following stellar earnings results. But the upside potential is still compelling according to Monness analyst Brian White. He says the stock should trade at a healthy premium to both the market and the tech sector specifically.
“After a big quarter last week and Facebook beginning to shape the narrative around security and privacy, we believe the stock is an exceptional value at 18x our CY19 EPS projection (ex-cash)” writes White. He adds that the data crisis has “provided Facebook with an opportunity to strengthen the integrity of its brand by very publicly putting in place strong privacy controls to protect its users.”
This five-star analyst has a $225 price target on FB (20% upside potential). His price target comes just ahead of the Street average ($219). In the last three months, FB has received 31 buy ratings from analysts. This is versus just one 1 hold and 1 sell rating.
Top Hedge Fund Stocks: Micron (MU)
Shares in this high-flying semiconductor stock have exploded by 98% in the last year. So it’s not surprising that funds want a slice of the action. A number of funds initiated new Micron Technology, Inc. (NASDAQ:MU) positions in the last quarter including Rob Citrone, Philippe Laffont and George Soros. Meanwhile, David Tepper of Appaloosa Management boosted his MU holding 28% to $1.85 billion. Why change a winning strategy? Tepper made over $1 billion in personal earnings last year, partly due to the fund’s long position in MU.
Looking forward, MU shows little signs of slowing down. The company has just revealed multiple positive catalysts at its annual analyst day on May 21. First came an earnings guidance raise for fiscal Q3, then news of a deal with Intel- and the icing on the cake- a massive $10 billion share buyback program. The company will now return 50% of its free cash flow generation to stock repurchases.
This buyback announcement is important for two reasons. As five-star Needham analyst Rajvindra Gill explains “1) it signifies to the Street that management believes the shares are undervalued (choosing buyback instead of dividend) and 2) coincides with the structural changes occurring in the memory industry and at Micron.”
Gill ramped up his price target to $100, indicating huge upside potential of 60%. Overall, we can see that this ‘Strong Buy’ stock currently boasts 19 buy ratings, 4 hold ratings and 1 sell rating from the Street. Their average price target works out at $77 (23% upside potential).
Top Hedge Fund Stocks: Apple (AAPL)
As everyone knows, Apple Inc. (NASDAQ:AAPL) is one of the favorite stocks of hedge fund guru Warren Buffett. Shares in Apple popped to record-highs on the news that his Berkshire Hathaway fund snapped up 75 million AAPL shares in Q1. This is in addition to the whopping 165.3 million shares the fund already held.
Buffett maintains that the market is getting Apple all wrong. He says that stressing over iPhone X demand is a mistake. “The idea that you’re going to spend loads of time trying to guess how many iPhone X … are going to be sold in a 3 month period totally misses the point,” Buffett says. “It’s like worrying about the number of BlackBerrys 10 years ago.”
Instead, he told investors at the annual fund meeting: “It is an unbelievable company … If you look at Apple, I think it earns almost twice as much as the second most profitable company in the United States.” It looks like these feelings are mutual. Apple CEO Tim Cook replied in a statement: “On a personal level, I’ve always greatly admired Warren and have always been grateful for his insight and advice.”
Apple is one of the top 20 stocks held by huge funds- although in the last quarter it slipped from 8th to 18th place. Indeed 31 funds count AAPL as one of their 10 biggest stocks. Meanwhile, the Street is cautiously optimistic on AAPL right now with a ‘Moderate Buy’ rating.
“iPhone volumes are not deteriorating though iPhone X remains uninspiring,” wrote Nomura analyst Jeff Kvaal on May 21. “Apple guidance implied third fiscal-quarter iPhone unit volumes that were better than feared. We do not believe, however, sell through has meaningfully improved.”
Top Hedge Fund Stocks: Worldpay (WP)
Worldpay, Inc. (NYSE:WP) is a global leader in payments processing technology for business customers. This positions the stock perfectly for a key payment trend. Namely, the ongoing transition away from cash and cheques, and towards electronic payments.
Funds certainly seem keen to get in on the act. The latest filings reveal that, in total, funds boosted positions 27% from Q417 to Q118. This means that hedge funds now hold 37 million WP shares (assuming no big transactions since the last filing date). T Price Rowe Associates Inc is currently the stock’s No 1 investor with over $2.1 billion invested.
Luckily for T Price Rowe Associates, word on the Street is very bullish on WP. Five-star Robert W. Baird analyst David Koning has just picked Worldpay as one of the firm’s elite “Fresh Pick” stocks. He cites the company’s impressive EBITDA margins, growth, and solid core progression.
Now is the time start buying says Koning. While shares are currently range-bound at around $80 he sees prices rising to the $90s by the year-end. As our data shows, his $94 price target works out at 18% upside potential from the current share price. Plus Koning’s analysis is in line with the Street’s take on WP.
“Worldpay has one of the more attractive growth outlooks within Payment Processing, in our view. The company has enjoyed market share gains from aggressive direct sales force expansion and the rollout of integrated payments products,” explains Oppenheimer’s Glenn Greene.
In total, this ‘Strong Buy’ stock has received 14 recent buy ratings vs 2 hold ratings from the Street. These analysts have an average price target of $93 (16% upside potential).
Top Hedge Fund Stocks: Adobe (ADBE)
Software giant Adobe Systems Incorporated (NASDAQ:ADBE) made a big impact on hedge funds in the first quarter. Thirty funds opened new positions, while only 9 funds closed out their positions. As a result, 36.6 million ADBE shares are currently held in the hands of fund managers. Most notably, the company’s three biggest funds (FMR LLC, Vanguard and BlackRock Inc) all ramped up their holdings in Q1.
“We remain bullish on ADBE as a core cloud holding,” said KeyBanc’s Brent Bracelin last month. Following the Adobe Summit, Bracelin stated confidently that “Adobe has emerged as a juggernaut within the creative market, with a dominant position and a subscription business model that is approaching $5B in revenue.”
And now Adobe has further cemented its lead by snapping up e-commerce platform Magento. The $1.7 billion deal is a savvy move says Bracelin. Adding Magento “addresses an important hole for Adobe, giving it a single platform for both B2B and B2C across content creation, marketing, analytics, and now commerce.”
Bracelin has a $252 price target on the stock vs the average analyst price target of $249. Over the last three months, 15 analysts have published ADBE buy ratings with 5 analysts staying on the sidelines. The main reason for staying neutral: a concern that the stock is already ‘fairly valued’ at current levels.
Top Hedge Fund Stocks: Electronic Arts (EA)
Hedge funds have $5.53 billion invested in this hot video gaming stock- which pops up in 17% of the 340 hedge fund portfolios investigated by RBC Capital. Big-name fund managers betting on Electronic Arts Inc. (NASDAQ:EA) include Philippe Laffont, who ramped up his holding in Q1 by 56% to $811 million.
If you look at the Street take on EA, this makes sense. In the last three months, 10 analysts have published buy ratings on EA — with only 1 hold rating. Plus their average price target of $146 indicates 11% upside from current levels.
Hype is building ahead of the release of EA’s latest installment in the Battlefield franchise, Battlefield V (to be released on Oct. 19). And now top Oppenheimer analyst Andrew Uerkwitz has attended a ‘Battlefield reveal event.’ He likes what he sees. EA is wisely avoiding the controversy surrounding previous release Star Wars: Battlefront 2 by limiting in-game payments.
“Following lessons learned in the past, BFV shows EA’s commitment to live service (constantly updated content) and offering more value without sacrificing fair play. Microtransactions will be limited to cosmetic items only in BFV” explains Uerkwitz.
As a result, he concludes that: “we see the potential for this title to set up both near and long-term outperformance for the BF franchise.”
Top Hedge Fund Stocks: UnitedHealth Group (UNH)
One of the US’s largest health insurance companies, UnitedHealth Group Incorporated (NYSE:UNH) is winning over both hedge funds and analysts right now. Hedge funds currently have a whopping $5.25 billion invested in UNH- making it the 19th most popular hedge fund stock. Indeed Stephen Mandel has just boosted Lone Pine’s holding 17% to $910 million, although Boykin Curry wins first place with a $1.145 billion position. So what is it that makes this stock so special?
For top-rated Oppenheimer analyst Michael Wiederhorn, the answer is clear: “The company remains the premier operator in the healthcare services universe, with many competitors trying to emulate its business model.” He continues: “We believe UNH is well positioned by virtue of its diversification, strong track record, elite management team and exposure to certain higher growth businesses.”
And don’t forget that UNH also boasts its lucrative Optum business. According to Wiederhorn Optum “is a nice complement to its core managed care operations and continues to account for a large share of earnings.” Turning to Q1 results, we can see that Optum revenues soared +11% y-y to $23.6B with earnings also up +29% to $1.7B.
He has a $276 price target on UNH- which is exactly in line with the Street- and translates into upside potential of just over 12%. Impressively, UNH has received eight consecutive buy ratings from analysts in the last three months.
Top Hedge Fund Stocks: Mastercard (MA)
RBC Capital reveals that 19% of hedge funds hold Mastercard Incorporated (NYSE:MA) with a total of $5.17 billion invested. This makes MA the 20th most popular hedge fund stock right now. At the top of the pack is Charles Akre (of Akre Capital Management) with his massive $932m holding. Luckily for these funds, the Street is just as bullish on Mastercard’s outlook.
Indeed, top Tigress Financial analyst Ivan Feinseth calls MA one of his top stock picks. He explains: We reiterate our Strong Buy rating on MA as growth in gross dollar volume (GDV) and increasing market share penetration continues to drive accelerating Business Performance. Plus “2018 will continue to be another strong year as MA continues to benefit from positive global macroeconomic trends.” Given this upbeat take, it’s not surprising that MA remains on the firm’s Research Focus List and Focus Opportunity Portfolio.
Overall our data reveals that this Strong Buy stock has scored 11 buy ratings in the last three months. Only one analyst has stayed on the sidelines. Meanwhile, the average analyst price target of $205 indicates just over 7% upside from the current share price.
However- this is just the average. SunTrust’s Andrew Jeffrey recently ramped up his price target to $215, while calling MA the “most innovative and competitively advantaged Payments ecosystem participant.”
Top Hedge Fund Stocks: Pioneer Natural (PXD)
Hedge funds upped their exposure to the Permian Basin in Q1 via leading oil and gas stock Pioneer Natural Resources Company (NYSE:PXD). Our data shows that Pioneer has a ‘Very Positive’ hedge fund sentiment- with 34 funds creating new positions and 22 funds adding to existing positions. Famous fund players with big PXD positions include Izzy Englander, Ken Griffin and Seth Cohen.
The company is fast becoming a Permian Basin pure-play as it divests of assets outside the basin. According to the company, in the Permian Basin alone, Pioneer’s acreage could contain 20,000 drilling locations and a whopping 11 BBOE (billion barrels of oil equivalent).
PXD has recorded a very strong start to the year in terms of production. The company outperformed in Q1, recording a triple whammy of better-than-expected production, EPS, and cash flow. And now MUFG analyst Michael McAllister raised his price target on the stock to $223 from $220. PXD deserves a premium due to its acreage position, production growth, and the strength of its balance sheet says the analyst.
Our data reveal that this ‘Strong Buy’ stock has received 11 recent buy ratings vs 3 hold ratings. The stock is also on Goldman Sachs’ exclusive ‘Conviction Buy’ stock list. Analysts are predicting (on average) further upside potential of 20% to $236.
Top Hedge Fund Stocks: Qualcomm (QCOM)
Last but not least we have chipmaking giant Qualcomm Incorporated (NASDAQ:QCOM). The company proved a big hit with funds in Q1- with 124 funds holding the stock. Most notably Theofanis Kolokotrones of the $133 billion Primecap fund boosted his holding 41% to $1.2 billion.
Kolokotrones is now heavily invested in the outcome of QCOM’s planned $44 billion takeover of NXP Semiconductors (NASDAQ:NXPI). The big question is whether China’s MOFCOM (Ministry of Commerce) will finally approve QCOM’s bid after 15 months of waiting! Thankfully, RBC Capital’s top analyst Amit Daryanani sees signs that approval is becoming increasingly likely. Fingers crossed because the “NXPI deal getting approved would unlock sizable $1.50+ synergies for QCOM”.
But even without NXPI, QCOM is an attractive large-cap value name:
“We think QCOM is an attractive name for value investors as a) either NXPI deal gets done or QCOM does a sizable buyback and b) we see high probability that OEMs under dispute could settle sooner now that it’s clear QCOM isn’t going anywhere. Finally, should we get more discipline and consistent execution, the stock should see a sustained multiple expansion.”
Daryanani reiterates a Buy rating on Qualcomm shares with a price target of $70 (20% upside potential). Overall the stock has a ‘Moderate Buy’ analyst consensus rating with a $62 price target.
TipRanks offers investors the latest insight into eight different sectors by tracking the activity of 4,700 analysts, 5,000 financial bloggers and even 37,000 corporate insiders. As of this writing, Harriet Lefton did not hold a position in any of the aforementioned securities.
