In this article, we will take a look at the 10 most widely held stocks by hedge funds.
Two 25 Point Cuts May be the Most Likely Outcome
The last trading day of September is upon us and so are many questions about the market. On September 30, Dana D’Auria, Envestnet Solutions co-CIO and group president, appeared in an interview on Yahoo Finance to discuss the financial market.
D’Auria regards employment data to be a major concern at the moment. Since inflation rates are subsiding, employment data is something investors should be on the lookout for, along with other data points including GDP and consumer confidence. She suggests that to ensure a soft landing, the Fed must initiate larger rate cuts, and that recessionary conditions are out of the picture.
September is notoriously volatile along with October, and, with elections in another 35 days, the conditions may be slightly different or even more turbulent. According to D’Auria, the 50 basis point cut is a catch-up for July, and expecting a 50 basis point cut in November is borderline questionable.
Overall, she believes that the market has been overshooting and we may have to settle for two 25 basis point cuts before the end of 2024. She reiterates that the job market is crucial and investors must get out of their comfort zone to invest in non-cash opportunities. Investors concerned about low-risk options may consider equities in the defensive sectors that are innately low volatile.
The Market is Broadening
Wall Street is heading to close September and Q3 on a high note and stocks have experienced their best September in over a decade. On September 30, Kevin Gordon, harles Schwab’s Director and Senior Investment Strategist, appeared in an interview on Yahoo Finance to discuss his market thesis.
Gordon believes that stocks in the utilities and defensive sectors have caught up to tech stocks amid the AI boom, compared to their financials at the end of FY 2023. However, he does acknowledge that sectors like industrials, financials, and materials are performing relatively well, calling it a case of market broadening.
In terms of market breadth, most sectors are experiencing an upward trajectory. Almost 81% of the S&P 500 members are experiencing an uptrend, despite the quality bias investors may have towards certain stocks. According to Gordon, large-cap quality stocks will continue to perform well despite the volatility and the Fed’s decisions. Speaking of smaller-cap stocks, he believes that some stocks may struggle a bit especially when it comes to earnings growth.
Now, let’s take a look at the 10 most widely held stocks by hedge funds.
A portfolio manager studying various stocks and other securities on a tablet.
Our Methodology
To come up with the 10 most widely held stocks by hedge funds, we sifted through Insider Monkey’s database that tracks over 900 hedge funds, as of Q2 2024. We ranked the top 10 stocks that were the most widely held by hedge funds in ascending order of their hedge fund sentiment.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
10 Most Widely Held Stocks by Hedge Funds
10. Mastercard Incorporated (NYSE:MA)
Number of Hedge Fund Holders: 142
Mastercard Incorporated (NYSE:MA) is a multinational payment services corporation in the United States. It facilitates electronic funds transfers through branded debit cards and credit cards. The company provides financial services to large companies, small to medium-sized enterprises, banks, credit unions, and the public sector.
In the second quarter of 2024, Mastercard Incorporated (NYSE:MA) grew its revenue by 13% and net income by 24% year-over-year. During the same quarter, the company managed $2.4 trillion in payment volume, up by 50% from five years ago. The company is also venturing into value-added services like data analytics, fraud prevention, and cybersecurity solutions, which posted an 18% increase in sales in the previous quarter.
Mastercard Incorporated (NYSE:MA) aims to bring 1 billion people into the digital economy by 2025. Earlier in August, Mastercard Incorporated (NYSE:MA) launched an Open Banking program to facilitate lending via digital verification of income and employment. During the same month, Mastercard Incorporated (NYSE:MA) launched its payment passkey service in India to improve security and payment speed. Recently, the company ventured into artificial intelligence by launching a system to help banks protect consumers from scams and fraud in real time. In addition to that, the company also acquired Recorded Future, a cybersecurity company, to enhance its position on digital payments.
While the macroeconomic environment is uncertain, the company does hold a strong position in the industry and has strategic initiatives locked in solidifying its future growth potential. Analysts are bullish on MA and their 12-month median price target of $530 points to a 7% upside from current levels. According to the Insider Monkey database, 142 hedge funds held stakes in Mastercard Incorporated (NYSE:MA) in the second quarter, with positions worth $15.34 billion.
L1 Capital’s L1 Capital International Fund stated the following regarding Mastercard Incorporated (NYSE:MA) in its Q2 2024 investor letter:
“The share prices of Mastercard Incorporated (NYSE:MA) and Visa, both long term Fund investments, have both drifted down over recent months. There have been no dramatic developments, but there has been a general slight softening in the rate of growth of consumer spending in the U.S. and globally, a court decision rejecting Mastercard and Visa’s proposed settlement of a long-lasting dispute with U.S. merchants as well as other modest adverse regulatory developments. We continue to view Mastercard and Visa as two of the highest quality businesses in the world, and both are well placed to continue to deliver attractive, risk adjusted returns to shareholders over time.”
