Hedge Fund Favorites: 7 Stocks the Big Money Is Loving Now


  • STMicroelectronics (STM): STMicroelectronics offers huge relevance for connected services.
  • UnitedHealth (UNH): UnitedHealth is a relevant and financially stable enterprise.
  • Kenvue (KVUE): Kenvue should bank on its consumer healthcare products business.
  • Read more about these favored hedge fund stocks.
Hedge Fund Favorite Stocks - Hedge Fund Favorites: 7 Stocks the Big Money Is Loving Now

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Ever had the experience of befriending the schoolyard bully? That’s sort of the underlying catalyst behind hedge fund favorite stocks. As professionally managed pools of investor capital, hedge funds command leverage. It’s not just an opinion entering the blogosphere – there are millions if not billions of dollars backing said thesis.

Further, what I appreciate about hedge fund favorite stocks is that the other party has something to lose. In life, you can generally trust advice from individuals who has skin tied to said advice. For example, a car passenger might say that it’s not a good idea for the driver to run the red light. If the driver gets pulled over, both individuals will be late to their destination.

Of course, the most basic reason to trade with these major players is the capitalistic endeavor. No one enters Wall Street to lose money. So, if the biggest and smartest institutions believe in an opportunity, that alone doesn’t guarantee anything. However, it’s a heckuva lot better than going with a gut feeling.

With that, below are enticing ideas for hedge fund favorite stocks.

STMicroelectronics (STM)

STMicroelectronics building
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Given the rise of automation and artificial intelligence, STMicroelectronics (NYSE:STM) is almost a no-brainer. Of course, every idea carries risks – let’s not get carried away. However, the company is a global semiconductor manufacturer that specializes in analog and mixed-signal chips. Essentially, they help bridge the gap between the digital and physical worlds and so they’re found in connectivity platforms; smartphones, computers, and advanced vehicles, among other products.

Unsurprisingly, STM ranks among the hedge fund favorite stocks. According to TipRanks, sentiment among these institutional players rates as very positive. In the first quarter of 2023, hedge funds only had exposure amounting to 17,956 shares. By Q2, this figure jumped to 270,368. And in the three months ended September 2023, the metric soared to 1.96 million shares.

Just as well, Wall Street analysts rate shares a consensus strong buy with a $50.37 average price target, implying 13% upside potential. The high-side target lands at $60, projecting over 34% upside.

UnitedHealth (UNH)

The UnitedHealth (UNH) headquarters in Minnetonka, Minnesota.
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As a healthcare and insurance juggernaut, UnitedHealth (NYSE:UNH) will likely only get more relevant over time. That’s why it’s no surprise it ranks among the hedge fund favorite stocks. Thanks to its wide range of products and services – along with a growing presence in the pharmacy benefits management (PBM) market – it’s well-suited for long-term growth.

Now, it’s true that UNH only gained less than 4% in the trailing 52 weeks. However, hedge funds appear to view that as a buying opportunity. Per TipRanks, sentiment among these institutions clocks in as very positive. In Q4 2022, hedge funds had exposure amounting to a bit over 15 million shares. By the following quarter, the figure had jumped to 17.2 million shares. As of the most recent read (Q3), the tally increased to 19.2 million.

Financially, UnitedHealth benefits from consistent profitability and a high return on invested capital (ROIC) of 10.74%. Analysts view shares as a consensus strong buy with a $593.13 price target, implying almost 18% growth potential.

Kenvue (KVUE)

Albuquerque, New Mexico / USA - November 2 2020: Boxes of Band-Aids in Walmart in the pharmacy and over-the-counter medication aisle. Kenvue (KVUE) split from JNJ and now owns the Band-aid brand.
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Sometimes, the hedge fund favorite stocks align perfectly with your own market thesis. Personally, that’s the case for me with Kenvue (NYSE:KVUE). Representing the consumer health unit of Johnson & Johnson (NYSE:JNJ) that was spun off last year, I could go with either company. However, if I had to choose based on current economic circumstances, I’d give the edge to KVUE. Basically, if troubles arise, demand should stay stable for consumer health products.

As much as I love J&J’s pharmaceutical and medical technology businesses, the reality is that you need money to afford premium healthcare in this country. However, if you have the sniffles or get a boo-boo, everyone can afford Tylenol or Band-Aid. Further, people may be tempted to forego certain clinical care during economic hardships. More than likely, though, that won’t be the case for consumer health products.

Hedge funds seem to agree, with sentiment clocking in as very positive. Between Q2 and Q3 of last year, fund exposure increased by a whopping 257%. Plus, analysts view it as a moderate buy with a $24.43 price target.

Anheuser-Busch (BUD)

Corporate building with Anheuser Busch (BUD) logo on it
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It may be our own Louis Navellier who said it the best. With controversial alcoholic beverage manufacturer Anheuser-Busch (NYSE:BUD), the narrative shifted from boycotts to bargains. Yes, I suppose that some folks may be fuming about the company’s Bud Light brand and the firestorm that a certain marketing campaign catalyzed. But trading at 15.65X free cash flow (FCF), BUD makes a solid case for hedge fund favorite stocks.

In other words, the ugliness toward the enterprise may have gone too far. Companies, like people, misread things and make mistakes. It happens to the best of us. Further, it’s unnatural to stay angry indefinitely over an issue that will eventually fade away. Sure enough, sentiment among hedge funds rate as very positive. Aside from a little dip in Q4 2022, hedge fund exposure has steadily increased since Q3 2021.

Additionally, Wall Street analysts peg shares as a moderate buy with a $74 price target, projecting 19% growth. Also, the company offers a forward yield of 2.65%, which isn’t bad at all.

Block (SQ)

The logo for Block (SQ) is shown on a phone screen with the company's old name and logo, Square, visible behind the phone.
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A powerhouse in the financial technology (fintech) ecosystem, Block (NYSE:SQ) offers an intriguing case for hedge fund favorite stocks. For one thing, the buy now, pay later (BNPL) industry has soared. And Block stands to benefit via its wholly-owned subsidiary Afterpay. As I pointed out not too long ago, consumers who have been hit hard with various economic pressures still opened their wallets for the holidays. Largely, that was because of BNPL proliferation.

Second, Block continues to generate impressive top-line growth. For example, its three-year revenue growth rate clocked in at 44.1%, beating out over 91% of its rivals. It’s also undervalued against book, trading at 2.23X the aforementioned metric. Best of all, hedge funds have been paying attention, pushing sentiment to very positive. Specifically, exposure to SQ stock increased by a nearly 17% magnitude between Q2 and Q3 last year.

Overall, analysts rate shares a consensus strong buy with an average price target of $78.81. Further, the high-side target hits $100, implying 54% upside potential.

ConocoPhillips (COP)

Rise in gasoline prices concept with double exposure of digital screen with financial chart graphs and oil pumps on a field. Oil prices and oil price predictions
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A hydrocarbon energy giant, ConocoPhillips (NYSE:COP) primarily specializes in the exploration and production (upstream) component of the value chain. At first glance, COP might not appear a relevant enterprise. After all, we’ve seen gasoline prices fall at the pump as coordinated production cuts have failed to yield upside results. Still, with the economy booming, you’ve got to imagine that consumption will too.

And let’s not forget that the world continues to run on oil. It may be a while before it runs on electrons. So, the broader narrative for ConocoPhillips remains intact. Plus, with the geopolitical realm so fraught with high tension, any spark could see a return to high oil prices. Unsurprisingly in my view, COP ranks as one of the hedge fund favorite stocks, with sentiment hitting very positive.

While there was a hiccup in terms of exposure, these institutional players have generally been acquiring shares since Q4 2021. Just as well, analysts peg COP a consensus strong buy with a $138.56 price target, projecting over 23% upside.

Alibaba (BABA)

baba value stocks
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An e-commerce and technology juggernaut, Alibaba (NYSE:BABA) effectively serves as China’s flagship enterprise. However, that’s not necessarily a good thing in contemporary contexts. In the trailing one-year period, BABA gave up more than 37% of its equity value. Not only that, it’s been off to a choppy start to the new year. Unfortunately, deep-seated questions about China’s economy cloud BABA. However, that also makes it a contrarian opportunity.

At the moment, shares trade hands at just over 7X forward earnings. That puts it below 89% of its peers in the retail cyclical industry. And despite its recent woes, overall, the company enjoys a robust three-year revenue growth rate of 20.6%. Also, it’s consistently profitable, something that hedge funds have picked up on. Featuring positive sentiment, these institutions have steadily built their position northward since Q1 2023.

On a parting note, Wall Street analysts rate BABA stock a consensus strong buy with a $118.60 price target. That implies 60% upside potential, making Alibaba a tempting idea for hedge fund favorite stocks.

On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. Tweet him at @EnomotoMedia.

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