Right now, the S&P 500 is officially in correction territory, while the Nasdaq Composite is in bear market territory. Judging from the macroeconomic plate of inflation fears, Russia’s invasion of Ukraine, and interest rate hikes, it certainly seems investors are fearful at the moment. On top of that, the CNBC Fear and Greed Index is currently at 18 out of 100, indicating that sentiment toward the market is extremely fearful. However, as Warren Buffett once said, investors should “be fearful when others are greedy, and greedy when others are fearful.”
Despite the poor sentiment toward stocks, institutional investors have been actively picking up shares in companies they find attractive.
Retail investors can learn a lot by looking at the activity of institutional investors. An institutional investor is defined as “a company or organization that invests money on behalf of other people.” This includes hedge funds and investment banks, as well as insurance companies, pension funds and endowment funds. Today, institutional investors make up more than 90% of all stock trading activity.
Institutional investors must submit either a 13D or 13G form when acquiring beneficial ownership of a company of 5% or more. A 13D form signifies that the investor seeks to take an activist position in the acquired company. Meanwhile, a 13G form signifies that the investor seeks to take a passive position in the company.
As retail investors, we can take advantage of the 13D/G forms by seeing what top-performing institutions have been buying.
With that in mind, let’s take a look at five stocks that institutional investors have been buying recently.
- Occidental Petroleum (NYSE:OXY)
- Lyft (NASDAQ:LYFT)
- Nikola (NASDAQ:NKLA)
- Affirm (NASDAQ:AFRM)
- Vistra (NYSE:VST)
Stocks Institutions Are Buying: Occidental Petroleum (OXY)
First on the list of stocks that institutions have been buying is Occidental Petroleum.
The oil and natural gas producer has picked up attention in recent weeks in light of Russia’s invasion of Ukraine. Recently, President Joe Biden announced a ban on all Russian oil imports, which placed pressure on domestic oil companies. In addition, OXY stock has appreciated more than 80% since the start of the year as oil prices trek higher. Now, the oil company has caught the attention of legendary investor Warren Buffett himself.
According to a filing received by the U.S. Securities and Exchange Commission (SEC) on March 4, Berkshire Hathaway (NYSE:BRK-A, NYSE:BRK-B) disclosed that it owns 91.2 million shares of OXY stock, worth more than $5 billion. Out of those 91.2 million shares, 61 million shares were purchased between March 2 and March 4 for prices between $47.07 to $56.45. The remainder was purchased sometime this year on or before March 1. After the purchase, the fund now owns around 9% of all shares outstanding. However, Berkshire Hathaway also owns warrants that were acquired from a transaction with Occidental in 2019. These warrants allow the fund to purchase an additional 83.9 million shares at $59.62. If exercised in full, Berkshire Hathaway would own a little over 17% of all shares outstanding.
On the other hand, famed investor Carl Icahn recently sold his nearly 10% stake in OXY stock. The Wall Street Journal reported that Icahn had made a profit of around $1 billion from the investment. During March 2020, Icahn increased his OXY stake from 2.5% to around 10% after Covid-19 dramatically lowered oil prices.
Since its initial public offering (IPO) in 2019, shareholders of Lyft have been taken on a wild ride.
For starters, the ride-hailing company has lost about 50% of its market capitalization when compared to its IPO price. Furthermore, the company reported disappointing guidance when it disclosed Q4 earnings last month. Lyft estimated that Q1 revenue would fall between $800 million and $850 million, while Wall Street was expecting revenue of $986 million. On top of that, active riders came in at 18.7 million, which was up 49% year-over-year but down about 1% quarter-over-quarter.
However, the quarter wasn’t a complete disaster. Lyft CFO Elaine Paul noted that “revenue per active ride, contribution margin, and adjusted EBIDTA” all achieved record highs during Q4. As a result, it seems the quarter was impressive enough for a major investment bank to pick up shares of Lyft.
In an amended 13G filing received by the SEC on March 9, JPMorgan disclosed that it had purchased an additional 3.7 million shares of Lyft. After the purchase, the bank now owns 34.7 million shares, or 10.2% ownership. This purchase comes after JPMorgan sold more than 50% of its Lyft stake last year. Clearly, it seems the investment bank had a change of heart.
It should be noted that JPMorgan analyst Doug Anmuth has a “buy” rating and a $59 price target for LYFT stock. This price target represents upside of more than 60% from current prices.
Stocks Institutions Are Buying: Nikola (NKLA)
Electric vehicle maker Nikola has had its fair share of controversy since it completed its special purpose acquisition company (SPAC) merger in 2020, and even before that as well. For starters, Nikola posted a video in 2018 that seemingly showed its Nikola One semi-truck driving down a hill. CEO Trevor Milton was also recorded as saying “This thing fully functions and works, which is really incredible.”
However, short seller Hindenburg Research then released a short report accusing Nikola of simply rolling the truck down the hill. In Nikola’s response, the company admitted that it had towed the truck to the top of a hill and then rolled it down. The controversy eventually led to Milton resigning as CEO. In addition, a grand jury also charged Milton with two counts of securities fraud and one count of wire fraud. Nikola was also charged by the SEC with defrauding investors.
Nikola settled its case with the SEC last year by agreeing to pay $125 million. However, the EV company did not admit or deny the SEC’s claim that it had defrauded investors. Meanwhile, Milton is scheduled to go on trial on April 4.
Upon Milton’s departure, Mark Russell took over as CEO and was tasked with turning around the company. Since Russell started, the company has signed several letter of intents (LOIs) with companies such as USA Truck (NASDAQ:USAK), Saia (NASDAQ:SAIA) and Covenant Logistics (NASDAQ:CVLG). As a result, the company’s recent momentum has attracted the attention of a central bank.
Based on a 13G filing, Norges Bank purchased 3.8 million shares of NKLA stock on March 2. Norges Bank is the central bank of Norway and manages the country’s government pension fund as well. After the purchase, the central bank now owns 20.8 million shares, or a 5.05% stake in Nikola. Furthermore, the bank manages $486 billion in 13F securities, with a goal to “promote economic stability and manage substantial assets on behalf of the Norwegian people.”
Buy now, pay later (BNPL) stocks have experienced major setbacks this year. Affirm has not been able to escape the havoc, as shares are down more than 70% year to date.
Making matters worse, the company recently had a major public relations fumble. On Feb. 10, an employee of Affirm tweeted out the company’s earnings results early, causing the stock to plummet. Affirm attributed the mishap to “human error.”
While revenue came above expectations, investors were most concerned about a growing net loss. The BNPL company reported a net loss of $159.7 million, which was over 6x the YOY net loss of $26.6 million. Despite the early release, Affirm was able to report several positive key metrics. The company issued full-year guidance between $1.29 billion and $1.31 billion, beating expectations of $1.27 billion. Furthermore, gross merchandise volume rose 115% YOY, while active customers grew 150% YOY. Based on Affirm’s results, BNPL isn’t going anywhere. Now, a fund with $452 billion in managed 13F securities is taking notice.
On March 10, Capital Research Global Investors filed an amended 13G form to the SEC. The form disclosed that the fund had purchased an additional 4.4 million shares of AFRM stock. After the purchase, Capital Research now owns 23.8 million shares, or 10.6% of all Affirm shares outstanding.
According to WhaleWisdom, Capital Research has an average holding period of 16.54 quarters, or a little more than 4 years. Based on the fund’s average holding period, it seems that Capital Research expects long-term upside from Affirm.
Stocks Institutions Are Buying: Vistra (VST)
Last on the list of stocks that institutions have been buying is Vistra.
Vistra operates as an electricity and power generation company that seeks to supply energy to customers. Vistra also sells electricity and natural gas to residential, commercial and industrial customers. It operates in 20 U.S. states, with a focus on generating clean energy. Furthermore, Vistra employs over 5,400 employees and has decreased its greenhouse gas emissions by 45% since 2010.
The energy company disclosed its earnings last month and reported net income of $731 million. Vistra also reported a full-year 2021 net loss of $1.26 billion. After “five consecutive years of outperformance,” CEO Curt Morgan attributed the subpar year to an “unprecedented weather event in early 2021, exposing unexpected risks in the integrated Texas natural gas and electric system.” However, the company reiterated its 2022 ongoing operations adjusted earnings before interest, taxes, deductions, and amortizations (EBIDTA) guidance to be between $2.8 billion and $3.3 billion.
With the “challenging year” in hindsight, a major investment firm has decided to pick up shares of VST stock.
According to an amended 13G filing received by the SEC on March 9, Vanguard purchased 1.4 million shares of Vistra. After the purchase, Vanguard now owns 48 million shares, giving it a 10.7% stake in VST stock. Like Capital Research, Vanguard has an extremely long average holding period of 38.62 quarters. Based on this, it can expected that Vanguard will hold VST stock for the long term.
On the date of publication, Eddie Pan did not hold (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.