In this article, we will take a look at the 12 best blue chip stocks to invest in according to short sellers.
“Investors Need a Reason to Buy”
While economic data may be scarce, every data point gives a new angle to the ever-uncertain economic conditions in the US. On September 12, Jason Draho, UBS Global Wealth Management Head of Asset Allocation, appeared in an interview on Yahoo Finance to discuss the market moves after the consumer price index (CPI) report was released on Wednesday.
Draho suggested how regular intra-day moves did not hold enough weight to impact or influence the Fed’s decision. However, he did acknowledge that the inflation data and Wall Street’s reaction to it make the case for a 25-basis cut, or more, in the upcoming Fed meeting.
Draho then hinted that investors are hoping for a soft landing and are looking for stronger reasons or economic cues to hold back, given that bad economic news, as of now, has not triggered investors as much. He also emphasized the need for more financial data and clarity on whether the Fed would be proactive with its rate cuts for further analysis.
Contrary to what investors wish, he believes the Fed will be rather hawkish than proactive with its rate-cutting cycle. He adds that while the market calls for 100 basis points in rate cuts by the end of this year, he does expect the Fed to signal way less.
He then shed light on supply challenges in the technology sector, hinting that demand is not the issue at the moment. He was particularly impressed by the earnings posted by AI companies. Draho expects tech companies to have strong balance sheets and strong earnings power by the end of 2024, making them attractive stocks despite the economic turmoil.
“Volatility Over the Last Several Weeks is Unwarranted”
On September 13, Andrew Krei, Crescent Grove Advisors co-chief investment officer, appeared in an interview on Yahoo Finance to share his bullish outlook on the economy and financial markets. Krei discussed the labor market trends and how they may impact the Fed’s decisions in the upcoming meeting.
Krei pressed that despite the “unwarranted” volatility over the past few weeks, the economic outlook remains favorable, with credit markets showing close to no signs of stress. Krei also shed light on the global economic backdrop, suggesting that international markets, especially Europe, Japan, and China were showing strong signs of recovery in trade and manufacturing.
As far as investment goes, Krei suggests that while mega-cap tech stocks have shown promising results, he is more bullish on stocks outside of the magnificent 7. He was particularly inclined to companies in healthcare, finance, and industrials, hinting that these sectors will benefit immensely from the easing cycle. He then suggested that investors must shift their focus to diversified stocks with lower valuations and relatively stronger risk-adjusted returns.
Whatever the state of the economy, some stocks are notorious for their strong and consistent financial results. With that, let’s take a look at the 12 best blue chip stocks to invest in according to short sellers. You can also read our piece on the best stocks to buy with little money according to analysts.
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Our Methodology
To come up with the 12 best blue chip stocks to invest in according to short sellers, we first went over multiple similar rankings, our own rankings, and ETFs to compile a list of blue chip stocks. We then found the companies with the lowest short float and ranked the top 12 with the largest number of hedge fund holders and lowest short float percentage. The stocks are sorted in descending order of their short interest.
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)
12 Best Blue Chip Stocks To Invest In According to Short Sellers
12. Merck & Co., Inc. (NYSE:MRK)
Number of Hedge Fund Holders: 96
Short % of Shares Outstanding: 0.98%
Merck & Co., Inc. (NYSE:MRK) is the 12th best blue chip stock to invest in according to short sellers. Merck & Co., Inc. (NYSE:MRK), a pharmaceutical giant in the United States, specializes in the production of vaccines and the provision of hospital care services.
Merck’s (NYSE:MRK) new drug, a pneumococcal conjugate vaccine for adults recently received approval from the FDA, a medical breakthrough for patients. The company also closed its acquisition of EyeBio, expanding its presence in the ophthalmology industry. The acquisition will help the company invent a treatment for retinal conditions. Its Animal Health segment also closed the acquisition of Elanco’s aqua business, presenting Merck & Co., Inc. (NYSE:MRK) as a leader in the animal health business.
The company benefited from its launches in the international market. In the second quarter of 2024, the company’s Human Health business grew by 11%, its Animal Health segment saw a 6% increase in sales, and its star cancer drug went up by 21% hitting $7.3 billion in sales.
Merck & Co., Inc.’s (NYSE:MRK) commitment to innovation is its competitive advantage. Earlier this year, the company launched a new vaccine for adult patients with pulmonary arterial hypertension. The vaccine was only approved by the FDA in March and reported $70 million in sales during the quarter.
Analysts are bullish on MRK and their 12-month median price target of $140 points to a 21% upside from current levels. In Q2 2024, there were 96 hedge funds that held positions in the stock with total stakes amounting to $7.76 billion. As of June 30, Fisher Asset Management was the largest shareholder with a position worth $1.77 billion.
Baron Funds’ Baron Health Care Fund stated the following regarding Merck & Co., Inc. (NYSE:MRK) in its first quarter 2024 investor letter:
“Global pharmaceutical company Merck & Co., Inc. (NYSE:MRK), Inc. contributed on the continued growth of Keytruda, the company’s key asset and the leading immuno-oncology agent used to treat a variety of cancers. The FDA’s late March approval of pulmonary arterial hypertension drug sotatercept, also drove share gains. We retain conviction as Merck has started to transition from prioritizing its Keytruda franchise to building a more diversified business, with a focus on the Gardasil vaccine, pneumococcal vaccine development, and cardiovascular drug development, well in advance of the scheduled expiration of patent protection/exclusivity rights.”
11. The Home Depot, Inc. (NYSE:HD)
Number of Hedge Fund Holders: 86
Short % of Shares Outstanding: 0.96%
The Home Depot, Inc. (NYSE:HD) is a home improvement retailer based in the United States. The company sells tools, construction products, and appliances. The company was founded in 1979 and now owns over 2,300 stores that are located across North America.
The company vouched to expand the day it was brought to life. Its initial stores were sized at an average of 60,000 square feet and today, its stores are 105,000 square feet on average. Additionally, customers can choose from over 35,000 products in stores and 1 million products online at Home Depot, Inc. (NYSE:HD).
The company has over 475,000 associates who enable the smooth running of the company. To keep up with the industry requirements, Home Depot, Inc. (NYSE:HD) improved the tools its associates use for selling. The advancements allow associates to view customers’ activity and experience at Home Depot. Home Depot, Inc. (NYSE:HD) also launched another platform allowing associates and store leaders to have a quick digital view of a customer’s journey. As a result, associates are better able to understand the behaviors of customers, their likes and dislikes, and their buying patterns.
In the second quarter of 2024, Home Depot, Inc. (NYSE:HD) logged $43.2 billion in sales, up by 0.6% year-over-year. 86 hedge funds held the stock at the end of Q2 2024, of which, Fisher Asset Management was the largest shareholder, as of June 30. Analysts are bullish on the stock, and that may be because of the stock’s consistent financial performance.