Hedge funds have just released their trades for the fourth quarter. Remember this was one of the market’s most volatile quarters. So the 13F filings reveal which stock funds did — or didn’t — pick up on the dip. Hedge funds have the most advanced research tools at their disposal and (supposedly) the brightest minds, so these filings offer us a valuable glimpse into how they perceive the market. And the stocks they believe are set to outperform.
Another key point to bear in mind is that funds are only obligated to report holdings 45 days after the end of the quarter. So it is possible that hedge funds have bought/ sold stocks since the release of the filings. Think of it like a snapshot for the end of the fourth quarter — useful and valuable information yes, but 100% reflective of current holdings, no. Here we also use TipRanks data to gain some further insights from the Street into what’s driving hedge fund positions.
Let’s dive into some of the best stocks to buy now.
Tesla (NASDAQ:TSLA) must be doing something right. Hedge funds went crazy for the groundbreaking automaker in Q4. In fact, funds ramped up their holdings by a whopping 62% from Q3 to Q4.
If we take a look at the numbers, hedge funds now hold 3.205 million shares (according to the 13F filings). That’s versus just 1.977 million in the prior quarter.
Some of the biggest movers and players include quant guru David Shaw. He founded D. E. Shaw & Co., a hedge fund once described by Fortune as “the most intriguing and mysterious force on Wall Street.” In the quarter, Shaw initiated a new TSLA position worth over $100 million.
Meanwhile, Baillie Gifford & Company picked up 100,000 new shares, taking its major holding to over $4.4 billion.
Over at the Street, analysts are divided about TSLA’s outlook. However, Oppenheimer’s Colin Rusch (Track Record & Ratings) is one top analyst who is cheering TSLA on. He has just reiterated his buy rating with a $437 price target (42% upside potential).
“We believe TSLA has the potential to be a transformational technology company and deliver outsized returns,” comments Rusch post-Q4 earnings.
“We believe the company’s execution on Model 3 volumes and GM in 3Q18 reflect a critical inflection point in demonstrating positive incremental operating margin and positive cash flow supporting accelerating growth” he concluded. Want to learn more about Tesla? Get the free TSLA Stock Research Report.
Gene therapy stock Illumina (NASDAQ:ILMN) has the smart money thumbs up. In Q4, hedge funds increased their aggregate number of ILMN shares by 11%. Viking Global Investors made the biggest move, buying 758,000 shares, which took its Illumina position to $343.1 million.
And good news from the Street. Piper Jaffray’s William Quirk (Track Record & Ratings) reports that he continues to believe in the company’s “multi-catalyst long-term story.” Even though the recent earnings call “was less engaging than earlier ones,” he still advises investors to buy on weakness.
That’s with a $384 price target for 28% upside potential.
Similarly, Merrill Lynch’s Derek De Bruin writes “We are positive on Illumina’s prospects due to wide adoption of the company’s innovative genetic analysis tools, strong competitive position, and impressive forward-looking product and market strategy.”
Although macro and competitive risks remain, he believes ILMN’s recent launches and near-term pipeline should help it remain ahead of rivals. Get the ILMN Stock Research Report.
Just do it. Nike (NYSE:NKE) is crushing it right now. In the last year, shares have popped 25%. But this isn’t some flash in the pan. This is a stock with impressive long-term growth potential.
In Q4, hedge funds boosted NKE holdings by over 11% to 50.7 million shares. Both Vanguard Group and BlackRock significantly ramped up positions to $7.7 billion and $6.4 billion, respectively.
Oppenheimer’s Brian Bittner (Track Record & Ratings) is also a fan. He has just picked Nike as his top stock idea for the next 12 months. “In our view, Nike represents an already dominant, legacy global brand that is now aggressively embracing the power of digital to enhance almost all facets of its business model” he explains.
Upbeat Street forecasts and guidance is at least doable and supportive of a premium valuation says the analyst. However, bear in mind this caveat: “Our call on NKE is longer-term in nature and not necessarily pegged to near-term data points.” Get the NKE Stock Research Report.
Hilton Grand Vacations (HGV)
The surprise hit of the season. Hilton Grand Vacations Inc (NYSE:HGV) is a spinoff of the famous hotel group Hilton Inc. Its focus is the popular timeshare — a system of brand-name vacation club ownership resorts. Essentially, these resort villas are jointly owned by members who have limited but exclusive use of the properties.
In Q4, funds boosted their HGV positions by an eyebrow-raising 47%! The total number of shares held by these funds now stands at 32 million — up from 22 million at the end of September.
John C Bogle’s Vanguard Group is one of the world’s largest investment companies with over $5 trillion in assets under management (AUM). It currently owns close to 9% of HGV with a $355 million holding thanks to the purchase of 214,000 more shares in Q4.
However, the largest shareholder remains Fidelity Investments, with a holding of over $415 million. Get the HGV Stock Research Report.
After Microsoft (NASDAQ:MSFT) and Apple (NASDAQ:AAPL), we have Amazon (NASDAQ:AMZN). This is currently funds’ third-biggest holding by market value. The difference between MSFT and AMZN, however, is that funds actually increased AMZN holdings in the last quarter — up by 7.7%.
First, it’s likely that funds snapped up AMZN back when it was trading at a discount. In October, prices plunged 20%, and in December they plunged another 11%. So it’s easy to see why AMZN was looking particularly appealing back then. (In contrast, Microsoft showed relatively small losses during Q4.)
And given the stock’s Street outlook, these moves make sense. Out of 37 analysts covering AMZN, 36 have published a buy rating on the stock. That leaves only one analyst out on the sidelines.
“Amazon delivered a strong 4Q:18 performance but offered up a seasonal 1Q:19 outlook with caveats around 2019. We are raising our estimates and maintaining our 12-month price target of $2,300. We would be buyers on any weakness” writes five-star Monness analyst Brian White (Track Record & Ratings).
That suggests shares can surge by over 40% in the coming months. Get the AMZN Stock Research Report.
World domination beckons for this coffee giant. Starbucks (NASDAQ:SBUX) continues to attract the smart money in a big way.
Hedge funds increased SBUX holdings by 77% from Q3 to Q4. Now, 113 hedge funds hold Starbucks in their portfolios. Moreover, 35 funds initiated new SBUX positions vs only 14 funds closing out positions.
Bill Ackman’s Pershing Capital is one fund demonstrating a particularly bullish sentiment. The fund initiated a new holding with 11.75 million shares — worth almost $757 million.
“Key growth drivers including new product introductions and store growth combined with increasing operating efficiencies continue to drive accelerating Business Performance” comments Tigress Financial’s Ivan Feinseth (Track Record & Ratings).
Plus SBUX is further enhancing shareholder returns through ongoing dividend increases and share repurchases. With an impressive 2.04% yield, SBUX pays a lucrative quarterly dividend of 36 cents. That’s on the back of eight years of consistent dividend growth.
Feinseth sums it up: “We believe significant upside exists in the shares from current levels and continue to recommend purchase.” Get the SBUX Stock Research Report.
CVS Health (CVS)
CVS Health Corp (NYSE:CVS) offers PBM services, alongside thousands of retail stores and walk-in medical clinics. But the healthcare giant has bigger plans. It wants these stores to be rebranded as “healthcare destinations.”
Indeed, the company is currently trialing three “HealthHub” stores in Texas. “The service component will be an element that is hard to replicate online,” CEO Latty Merlo said last year.
Latest filings reveal that hedge funds increased their CVS holdings by 27% in Q4. Of the prominent hedge funds, Omega Advisors doubled its stake in CVS Health Corp with 401,000 shares. Founded by American billionaire Leon Cooperman, Omega counterbalanced this with sales of both Facebook and Alphabet.
Five-star Cantor Fitzgerald analyst Steven Halper (Track Record & Ratings) has just reiterated his CVS buy rating. That’s with a 96% price target (38% upside potential). Halper, a Top 50 analyst, writes “We believe the risk/reward tradeoff is compelling at current levels.”
“We believe the acquisition of Aetna adds value, as the addition of Aetna’s clinical expertise and capabilities should allow the combined company to transform MinuteClinic into a “healthcare hub” and reduce cost of care by shifting patients to lower cost CVS-owned settings.” Get the CVS Stock Research Report.
Enbridge Inc (ENB)
Canadian multinational energy transportation company Enbridge (NYSE:ENB) proved a big hit with the funds in Q4. This company runs the world’s longest crude oil and liquids transportation system from the Western Canada to the U.S. Midwest.
Funds upped ENB holdings by over 65% in the quarter, making this one of Q4’s most popular stocks. Montreal based Fiera Capital has the No. 1 holding worth $110 million, while DE Shaw owns $73 million.
Luckily for fund managers, this stock scores a ‘Strong Buy’ Street consensus. “We continue to view ENB as our best idea in the Canadian pipeline/ midstream space” comments RBC’s Robert Kwan (Track Record & Ratings). He has a buy rating on the stock with a $C59 price target.
Plus Enbridge increased its dividend to a new annualized rate of $2.95/share (up 10% from $2.68/share).
“Specifically, we believe that Enbridge continues to respond to investor preferences with respect to organic growth, asset focus, dividend coverage and balance sheet leverage” sums up Kwan. Get the ENB Stock Research Report.
Even though Facebook (NASDAQ:FB) experienced a rough 2018, hedge funds do not appear overly concerned. In fact, they clearly took advantage of weakness to add to positions. Shares fell 22% in 2018. That was down to an unholy combo of privacy failures, data scandals and Congress hammering CEO Mark Zuckerberg.
Nonetheless, from where we stand now, social media giant Facebook is the seventh top holding for funds (by market value). In fact, hedge funds own a jaw-dropping $225 billion of FB shares!
In total, funds increased holdings by 10% from Q3 to Q4. Notably, Lone Pine Capital’s Steve Mandel boosted his fund’s FGB holding by 73% all the way to $874 million. Following the move, FB is now the fund’s fifth largest holding, and that’s good news, because since the last filing date (i.e., end of December), shares are already up 24%.
And from a Street perspective, this “Strong Buy” stock has its fair share of supporters. “We feel we could be in a period of sustained re-rating as the worst FB fears appear not to have been realized” says RBC Capital’s Mark Mahaney (Track Record & Ratings). He has a buy rating on shares and $200 price target (23% upside potential). Get the FB Stock Research Report.
Zendesk (NYSE:ZEN) is enjoying strong momentum right now. Hedge funds raked holdings up by 27% in Q4. That’s with Chase Coleman increasing Tiger Global Management’s holding by 15% to $212 million.
ZEN is a provider of cloud-based customer service software. It basically allows companies to engage with customers through everything from email and chat to social media and websites.
Indeed the company just reported stellar earnings results. “A strong quarter and even more impressive guide” summed up RBC Capital’s Ross MacMillan (Track Record & Ratings). He bumped his price target up from $71 to $90 on Feb. 6.
“We see a case for another high-30% growth year in CY19 with more margin upside” the analyst writes.
With $599 million CY18 revenue in a $10 billion market, Zendesk is still a small fish in a large sea. “Despite the competitive backdrop, this is one of the reasons we have conviction in the growth opportunity” enthuses MacMillan. Get the ZEN Stock Research Report.
TipRanks.com offers exclusive insights for investors by focusing on the moves of experts: Analysts, Insiders, Bloggers, Hedge Fund Managers and more. See what the experts are saying about your stocks now at TipRanks.com. As of this writing, Harriet Lefton did not hold a position in any of the aforementioned securities.