10 Most Popular Stocks Among Hedge Funds (Part 1)

In the presence of burgeoning market uncertainty and innumerable options, it becomes almost impossible for an average investor to decide where to invest in the stock market to reap sizable profits. In fact, even some top money managers are having trouble finding good stocks to invest in, which lead Longleaf Partners to close earlier this year.

That’s where the strategy of mimicking the gurus of the industry can prove valuable. Goldman Sachs recently revealed in a report that investors should pay attention to the $3 trillion hedge fund industry, as its top picks are crushing the market this year. Goldman strategist David Kostin wrote in the report issued to investors last week that the “proverbial” smart money should be followed, because hedge funds’ top picks have generated higher median year-to-date returns than the consensus most out-of-favor stocks.

In this article we’ll share the five most favored stocks among the 676 elite hedge funds that we track at Insider Monkey which filed 13Fs for the first quarter. That’s what we do at Insider Monkey and our flagship strategy has returned 44.2% since February 2016 vs. a 29.6% gain for the S&P 500 index ETF (SPY). Our most recent stock picks, which were disclosed to our subscribers in the middle of February, beat the market by 5 percentage points in the three months that followed and our latest picks were released in the middle of May. Our system is easy for investors to implement, with just a small batch of trades to be executed once per quarter. We are also offering a 14-day money-back guarantee on our premium newsletters, plus you can get $90 off by using this link, so don’t miss this chance to check out our latest picks risk-free and see if Insider Monkey’s simple and effective small-cap strategy would make a good addition to your portfolio.

Taina Sohlman / Shutterstock.com

#5 Microsoft Corporation (NASDAQ:MSFT)

Microsoft kicks off our list, ranking as the fifth-most popular stock among hedge funds. As of the end of the first quarter, 121 hedge funds tracked by Insider Monkey reported owning $18.97 billion worth of Microsoft Corporation (NASDAQ:MSFT) shares, representing 3.70% of the company’s float.

Microsoft Corporation (NASDAQ:MSFT) has gained about 16% in value since the start of the year and is slowly stepping up its game in the search market. Last week, it launched the Bing rewards program in the UK, according to which the company will reward people for using its Bing search engine or Edge browser. Microsoft Corporation (NASDAQ:MSFT) could use LinkedIn’s massive user base of 500 million users to further monetize and expand its footprint. The company’s Azure Cloud platform is another strength, as Microsoft’s Cloud revenue in the first quarter increased by 93% year-over-year. Among the top shareholders of Microsoft is Boykin Curry’s Eagle Capital Management, which owned 25.72 million shares of the company as of the end of the first quarter.

Head to the next page to see which company ranked as the fourth-most popular among hedge funds.

#4 Amazon.com, Inc. (NASDAQ:AMZN)

A total of 129 funds in our database own $15.54 billion worth of Amazon.com, Inc. (NASDAQ:AMZN) shares as of the end of the first quarter, ranking it as the fourth-most popular stock. Amazon hit the $1,000 mark in May and the market thinks there is little chance the stock will stall its upward trend anytime soon. Maxim’s Tom Forte recently upped his price target on Amazon.com, Inc. (NASDAQ:AMZN) to $1,300. Forte thinks that apart from its dominance in e-commerce and Cloud, Amazon has the potential to expand into four new areas where it already has a footprint: Credit, Gas stations, Pharmacy, and Travel. Ken Fisher’s Fisher Asset Management owns 2.02 million shares of Amazon.com, Inc. (NASDAQ:AMZN) as of the end of March.

Frank Gaertner / Shutterstock.com

#3 Alphabet Inc (NASDAQ:GOOGL)

A total of 135 hedge funds in our database are bullish on Alphabet Inc (NASDAQ:GOOGL)’s class A shares as of the end of the first quarter, down from 139 funds a quarter earlier, while 117 are long its class C shares, down from 126. The total value of the positions in both classes of stock stood at $26.2 billion. Alphabet Inc (NASDAQ:GOOGL) is in a process of slashing its dependence on online ad revenue. In the first quarter, Alphabet’s revenue increased by 22% to reach $24.8 billion, but $21.4 billion of that came from its ad revenue. Earlier this week, Alphabet shares broke above $1,000 for the first time in history. On Monday, Pacific Crest analyst Andy Hargreaves suggested that investors should ditch Apple Inc. (NASDAQ:AAPL) and buy Alphabet Inc (NASDAQ:GOOGL) instead.

Copyright: bennymarty / 123RF Stock Photo

#2 Bank of America Corp (NYSE:BAC)

Bank of America Corp (NYSE:BAC) is the second-most popular stock among the 676 hedge funds tracked by Insider Monkey which filed 13Fs for the first quarter, as 138 of them were long the second-largest bank in the country in terms of assets. Bank of America’s CEO recently warned investors of lower-than-expected second-quarter trading revenue. The stock lost steam amid no signs of the much-talked-about tax reform plan promised by President Trump. However, analysts think that Bank of America Corp (NYSE:BAC) is in the best position to leverage the upcoming rate hikes by the Federal Reserve. Of the 32 analysts tracking Bank of America, 23 have a ‘Buy’ rating on it, with an average price target of $26.17 per share, 11.3% above the stock’s current price. Natixis Global Asset Management’s Harris Associates own 94.07 million shares of Bank of America Corp (NYSE:BAC) as of March 31.

Jonathan Weiss/Shutterstock.com

#1 Facebook Inc (NASDAQ:FB)

As of the end of the first quarter of 2017, 155 funds tracked by Insider Monkey were bullish on Facebook Inc (NASDAQ:FB), up from 146 funds a quarter earlier, and ranking it as the most popular stock among hedge funds. Facebook has gained over 33% year-to-date and analysts think that the stock is poised to gain even more value, as the company is now set to tap into the lucrative online video industry. Facebook recently announced its plans to start producing original video content on its platform. That content will include short clips and exclusive shows. Last month, the Wall Street Journal reported that Facebook was looking into deals with e-sports companies, including ESL, to stream live gaming content and competitions on Facebook’s platform. Andreas Halvorsen’s Viking Global owns 15.76 million shares of Facebook Inc (NASDAQ:FB) as of the end of March.

Bloomua / Shutterstock.com

We will review the next five most popular stocks among hedge funds in the second part of this article.

Disclosure: None