In this article, we discuss the 10 blue chip stocks hedge funds love. In order to skip our detailed analysis of blue chip stocks and the current market situation, go directly to 5 Blue Chip Stocks Hedge Funds Love.
Blue chip stocks are market leaders with varied streams of revenue, and the highest possible chances of successfully navigating an economic downturn. They also often pay dividends, sweetening the deal with the possibility of capital gains and dividend income. These companies have proven track records and a history of outperformance, and are considered no-brainer stocks to hold.
But what must one make of the fact that some of the best blue chip stocks in the market have seen terrible beatings in recent months? As the global economy reels from high inflation, sky-high energy prices and Russia’s war antics upsetting the geopolitical scene, shares of companies such as Apple Inc. (NASDAQ:AAPL), Alphabet Inc. (NASDAQ:GOOG) and Amazon.com, Inc. (NASDAQ:AMZN) are down 18.6%, 18.8% and 28.9% in the year to date respectively. This slump does not represent any fundamental issues with these firms’ business models, rather it points to the abysmal macro setup where investors are abandoning growth stocks in exchange for value stocks, most notably in the sectors of energy, financials and consumer goods. Dan Ives, managing director at Wedbush Securities, thinks that the current market downturn presents a ‘generational buying opportunity’ for the right stocks.
When market leaders are trading 20-30% below recent highs, it presents eager investors an excellent opportunity to initiate or increase their positions in companies that are considered one step above the rest.
Pixabay/Public Domain
Our Methodology
We picked the top 10 blue chip stocks in the database of Insider Monkey, which tracks more than 900 hedge funds as of the end of the first quarter of 2022. To quantify each stock’s popularity among investors, we’ve mentioned the hedge fund sentiment, as well as analyst ratings and latest quarterly results.
Blue Chip Stocks Hedge Funds Love
10. The Walt Disney Company (NYSE:DIS)
Number of Hedge Fund Holders: 113
The Walt Disney Company (NYSE:DIS) is an entertainment giant with interests in media and theme parks. It operates popular streaming platform Disney+, and produces motion pictures under the Walt Disney Pictures, Marvel, Pixar, and Twentieth Century Studios brands.
On May 24, Daiwa analyst Jonathan Kees kept a ‘Buy’ rating on The Walt Disney Company (NYSE:DIS) shares, and lowered the price target to $151 from $201. He attributed the price target drop to the recent contractions in market multiples, but remains convinced that Disney+ will attain its subscriber target for FY2024.
For Q1 2022, The Walt Disney Company (NYSE:DIS) reported an EPS of $1.08, falling short of analysts’ expectations by $0.11. Quarterly revenue also fell below estimates by $788.5 million, coming in at $19.25 billion.
Hedge funds warmed up to The Walt Disney Company (NYSE:DIS) stock in the end of the first quarter, where 113 owned positions in the company worth $5.16 billion. This is in comparison to 111 hedge funds a quarter earlier with $6.94 billion worth of stakes in the entertainment giant. As of June 8, shares of The Walt Disney Company (NYSE:DIS) have slumped 39.12% in the last 12 months amid inflationary pressures and travel restrictions hurting its theme park business.
ClearBridge Investments, an investment firm, talked about The Walt Disney Company (NYSE:DIS) in its Q4 2021 investor letter, stating:
“The communication services sector was a weak spot in both the benchmark and the portfolio in the fourth quarter. Disney announced lower than expected streaming subscriber growth to the company’s Disney+ offering, attributable primarily to the content release schedule. Disney has been ramping up content spending given strong global response to Disney+, although production capability was temporarily impacted by COVID-19. We still believe Disney is on track to reach the subscriber outlook outlined at its December 2020 analyst day, driven by a very robust slate of content releases, particularly in the 2022–2024 time period.”
In addition to Apple Inc. (NASDAQ:AAPL), Alphabet Inc. (NASDAQ:GOOG) and Amazon.com, Inc. (NASDAQ:AMZN), The Walt Disney Company (NYSE:DIS) is one of the most prominent blue chip stocks on the radar of investors on Wall Street.
9. salesforce.com, inc. (NYSE:CRM)
Number of Hedge Fund Holders: 114
salesforce.com, inc. (NYSE:CRM) deals in the provision of cloud-based customer relationship management software. It is the leading firm in the space, and ranks among the most popular blue chip stocks that investors are buying. A total of 114 hedge funds reported ownership of positions in salesforce.com, inc. (NYSE:CRM) at the end of March, up from 110 hedge funds a quarter ago.
Stifel analyst J. Parker Lane on June 1 lowered the firm’s price target on salesforce.com, inc. (NYSE:CRM) to $250 from $300 and reiterated a ‘Buy’ rating on the company shares. The analyst noted that the firm “delivered a solid start to the year,” and expressed confidence that its products and geographic diversification give it some protection against a weakening macro backdrop. As part of the broader market sell-off in tech, shares of salesforce.com, inc. (NYSE:CRM) have shed 25.77% so far in the year as of June 8.
salesforce.com, inc. (NYSE:CRM), for the first quarter, posted earnings per share of $0.98, outperforming estimates by $0.04. Growing 24.28% from the year-ago period, the firm’s revenue for the quarter stood at $7.41 billion, exceeding analysts’ expectations by $29.45 million.
Investment firm Oakmark Fund, in its Q1 2022 investor letter, talked about the market position and future prospects of salesforce.com, inc. (NYSE:CRM). Here’s what the fund said:
“Over the past 20 years, Salesforce (NYSE:CRM) has become a dominant global player in sales, customer service, commerce and marketing software. CRM earns 80% gross margins, grows 20% organically and virtually all of its revenue is recurring. It’s a great business that we’ve admired from afar for a long time. More recently, the organization has made some changes at the top that prompted us to take a closer look at the stock. New CEO Bret Taylor and CFO Amy Weaver are bringing a culture of financial discipline. We believe this renewed focus on profitability, combined with Salesforce’s strong underlying business characteristics, will yield strong results. The current valuation of 5x next year’s revenues represents a significant discount compared to publicly traded comparables and private market values in the software space. We view this discount as an opportunity to invest in a great business at a good value.
8. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 131
Then there’s Apple Inc. (NASDAQ:AAPL), a diversified technology company based in California. 131 hedge funds from the Q1 database of Insider Monkey reported ownership of stakes in the company, with a combined value of $182 billion. Warren Buffett’s Berkshire Hathaway held more than 890 million shares of Apple Inc. (NASDAQ:AAPL) priced at $155.56 billion, making it the firm’s most prominent shareholder.
On June 7, Morgan Stanley analyst Katy Huberty kept an ‘Overweight’ rating on Apple Inc. (NASDAQ:AAPL) shares and a price target of $195. The firm recently debuted many software and hardware upgrades to its product lineup at its keynote Worldwide Developers Conference. These included updates to the iOS 16 software, a new M2 chip and new versions of the MacBook Air and MacBook Pro laptops. The analyst notes that the annual event “played out largely as we expected,” allowing Apple Inc. (NASDAQ:AAPL) to display its “innovation engine at full throttle.” She thinks that the company’s most attractive feature is its focus on in-house hardware and software innovation.
For the first quarter, Apple Inc. (NASDAQ:AAPL) posted an EPS of $1.52, beating consensus estimates by $0.09. The company’s revenue for the quarter was reported at $97.3 billion, also outperforming estimates by $3.3 billion.
In its Q4 2021 investor letter, ClearBridge Investments talked about many stocks and Apple Inc. (NASDAQ:AAPL) was one of them. The fund said:
“Despite these mixed emerging growth results, the ClearBridge Global Growth Strategy outperformed the benchmark due to resilience among our secular and structural growth holdings. The bulk of these contributions came from U.S. mega-cap growth stocks Apple and Microsoft which continued to uniquely act both offensively and defensively as they have through most of the pandemic.”
7. Mastercard Incorporated (NYSE:MA)
Number of Hedge Fund Holders: 136
Mastercard Incorporated (NYSE:MA) is a technology firm which provides digital payment solutions and products to clients in the United States and around the world. Goldman Sachs analyst Will Nance on May 17 initiated coverage of Mastercard Incorporated (NYSE:MA) with a ‘Buy’ rating and a $460 price target, implying 38% upside from current levels. He sees the firm continuing to deliver “best-in-class” earnings growth, supported by “strong secular tailwinds, and strong operating leverage as the company continues to add scale.”
For the first quarter, Mastercard Incorporated (NYSE:MA) disclosed earnings per share of $2.76, beating Street estimates by $0.60. $5.17 billion in revenue for the quarter also beat analysts’ forecasts by $267.59 million, and represented year-on-year growth of 24.36%.
A detailed study of the 900+ hedge funds in the Q1 database of Insider Monkey found that 136 hedge funds were stakeholders in Mastercard Incorporated (NYSE:MA), down from 144 hedge funds a quarter earlier. With a massive $2.09 billion stake, Akre Capital Management ranked as the top shareholder of the company in the first quarter of 2022.
Here is what investment firm Ensemble Capital had to say about Mastercard Incorporated (NYSE:MA) in its Q1 2022 investor letter:
“Mastercard (7.6% weight in the Fund): This company literally earns a percent based fee on dollars spent. When inflation increases the prices of goods across the economy, Mastercard’s revenue increases along with inflation. Thus, the company in some respects is perfectly hedged against inflation with their revenue accelerating automatically when inflation surges.”
6. Uber Technologies, Inc. (NYSE:UBER)
Number of Hedge Fund Holders: 144
Uber Technologies, Inc. (NYSE:UBER) provides ride-hailing and delivery services in approximately 72 countries around the globe. 144 hedge funds owned positions in the company at the end of the first quarter, with a collective price tag of $8.48 billion. In comparison, 153 hedge funds owned stakes in the firm a quarter earlier. Billionaire Ken Fisher’s Fisher Asset Management was the top shareholder of Uber Technologies, Inc. (NYSE:UBER) in the first quarter, with a stake consisting of 23.79 million shares worth $849.07 million.
Bernstein analyst Nikhil Devnani on May 23 assumed coverage of Uber Technologies, Inc. (NYSE:UBER) with an ‘Outperform’ rating and a revised price target of $35, down from $45. The analyst sees significant long-term potential in the Uber platform given its scale and market leadership across both delivery and mobility. Devnani sees the firm building momentum after posting solid results for three quarters in a row.
Uber Technologies, Inc. (NYSE:UBER) announced its Q1 earnings on May 4, and posted year-on-year growth of 136.1% in its quarterly revenue to post a figure of $6.85 billion, which beat consensus estimates by $754.2 million. The firm’s EPS also came in above Street forecasts by $0.02.
Investment firm ClearBridge Investments mentioned Uber Technologies, Inc. (NYSE:UBER) in its Q3 2021 investor letter. The fund said:
“We have also been looking for multiyear secular trends outside of the IT and Internet sectors to help us maintain a portfolio that can perform well in markets with varied sector or factor leadership. In particular, electrification of the global economy and the transition to electric vehicles (EVs) are areas where we continue to add exposure. We are investing in the brains behind EVs through NXP in the control center and Aptiv for safety features. Global rideshare leader Uber Technologies, Inc. (NYSE:UBER) will also be a key player in the transition from internal combustion engines to EVs.”
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