In this article, we discuss the 13 best holding company stocks to invest in. If you want to skip our detailed analysis of these stocks, go directly to 5 Best Holding Company Stocks To Invest In.
The incredible financial stability offered by the post-World War international order has allowed business to thrive across the world, resulting in long-term partnerships spread across countries and continents. The order has led to favorable conditions for the formation of large holding companies. Although holding companies have always been a reality of the business, their definition, motivations for existing, and size have changed dramatically in the past few decades. A holding company usually exists to control other firms.
It is important to take a deeper dive into the exact definition of holding firms to clear ambiguities regarding their existence. Holding companies are formed to control other firms, and do not generally manufacture products, offer day-to-day business services, or carry out any business operations. Although holding firms can hire and fire managers of subsidiaries – the firms the holding company controls – the subsidiaries remain separate entities in terms of their operations. This shields the parent firm from the liabilities of the subsidiary.
Holding companies may also be formed in some cases for tax benefits. For example, if the parent company of a subsidiary is located in a lower tax region, it would help avoid higher taxes on the parent even if the subsidiary were located in another region. Other benefits offered by holding firms include central management for better control, branding appeal, and flexibility in terms of financial investments. Some of the top holding companies in the world today include Bank of America Corporation (NYSE:BAC), JPMorgan Chase & Co. (NYSE:JPM), and Berkshire Hathaway Inc. (NYSE:BRK-B).
The incredible rise of holding firms can be better understood in the context of Berkshire Hathaway Inc. (NYSE:BRK-B), a multinational conglomerate led by veteran investor Warren Buffett that has a market capitalization of close to $800 billion. Over the past five years, the shares of the firm have returned more than 89% to investors, closely mirroring the returns of the benchmark S&P 500 that has returned 90% to investors during the same time period. During a recent earnings call, the company urged investors to look past fluctuations in the portfolio.
“The amount of investment gains/losses in any given quarter is usually meaningless and delivers figures for net earnings (losses) per share that can be extremely misleading to investors who have little or no knowledge of accounting rules. To varying degrees, our operating businesses have been impacted by government and private sector actions to mitigate the adverse economic effects of the COVID-19 virus and its variants as well as by the development of geopolitical conflicts, supply chain disruptions and government actions to slow inflation. The economic effects from these events over longer terms cannot be reasonably estimated at this time.”
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Our Methodology
The companies that operate as holding corporations were selected for the list and ranked according to hedge fund sentiment. In order to provide readers with some context for their investment choices, the analyst ratings for the stocks are also discussed. Data from around 900 elite hedge funds tracked by Insider Monkey in the third quarter of 2023 was used to identify the number of hedge funds that hold stakes in each firm.
Best Holding Company Stocks To Invest In
13. NatWest Group plc (NYSE:NWG)
Number of Hedge Fund Holders: 8
NatWest Group plc (NYSE:NWG) provides banking and financial products and services to personal, commercial, corporate, and institutional customers. On November 30, investment advisory JPMorgan upgraded NatWest Group plc (NYSE:NWG) stock to Overweight from Neutral and raised the price target to GBP 280 from GBP 230, noting recent underperformance of shares reflect company-specific challenges.
At the end of the third quarter of 2023, 8 hedge funds in the database of Insider Monkey held stakes worth $1.3 million in NatWest Group plc (NYSE:NWG), compared to 9 the preceding quarter worth $3.5 million.
Just like Bank of America Corporation (NYSE:BAC), JPMorgan Chase & Co. (NYSE:JPM), and Berkshire Hathaway Inc. (NYSE:BRK-B), NatWest Group plc (NYSE:NWG) is one of the best holding company stocks to invest in.
12. Huntington Bancshares Incorporated (NASDAQ:HBAN)
Number of Hedge Fund Holders: 27
Huntington Bancshares Incorporated (NASDAQ:HBAN) operates as a bank holding firm. On December 8, investment advisory Piper Sandler maintained a Neutral rating on Huntington Bancshares Incorporated (NASDAQ:HBAN) stock and raised the price target to $12 from $11, noting recent intra-quarter updates from large banks were constructive.
At the end of the first quarter of 2023, 27 hedge funds in the database of Insider Monkey held stakes worth $537 million in Huntington Bancshares Incorporated (NASDAQ:HBAN), compared to 30 in the preceding quarter worth $448 million.
11. M&T Bank Corporation (NYSE:MTB)
Number of Hedge Fund Holders: 32
M&T Bank Corporation (NYSE:MTB) operates as a bank holding company. On December 14, Bank of America analyst Ebrahim Poonawala maintained a Buy rating on M&T Bank Corporation (NYSE:MTB) stock and raised the price target to $157 from $141, noting that the increased expectations for Fed rate cuts should drive bank stocks higher.
Among the hedge funds being tracked by Insider Monkey, London-based investment firm Marshall Wace LLP is a leading shareholder in M&T Bank Corporation (NYSE:MTB) with 715,397 shares worth more than $90 million.
10. United Airline Holdings, Inc. (NASDAQ:UAL)
Number of Hedge Fund Holders: 34
United Airline Holdings, Inc. (NASDAQ:UAL) provides air transportation services. On October 19, investment advisory Raymond James maintained an Outperform rating on United Airlines Holdings, Inc. (NASDAQ:UAL) stock and lowered the price target to $68 from $70, citing Q3 results and reduced capacity outlook as some of the reasons behind the target decrease.
At the end of the third quarter of 2023, 34 hedge funds in the database of Insider Monkey held stakes worth $735 million in United Airlines Holdings, Inc. (NASDAQ:UAL), compared to 40 in the previous quarter worth $995 million.
9. MetLife, Inc. (NYSE:MET)
Number of Hedge Fund Holders: 37
MetLife, Inc. (NYSE:MET) is a financial services firm with core interests in insurance. On November 16, investment advisory Barclays reinstated coverage of MetLife, Inc. (NYSE:MET) stock with an Overweight rating and a price target of $71, noting the firm was well positioned to benefit within the US benefits business thanks to strong growth, good persistency and favorable loss experience.
At the end of the third quarter of 2023, 37 hedge funds in the database of Insider Monkey held stakes worth $1.5 billion in MetLife, Inc. (NYSE:MET), compared to 40 in the previous quarter worth $1.1 billion.
8. American International Group, Inc. (NYSE:AIG)
Number of Hedge Fund Holders: 42
American International Group, Inc. (NYSE:AIG) is a New York-based insurance firm. On November 30, Citi analyst Michael Ward maintained a Buy rating on American International Group, Inc. (NYSE:AIG) stock and raised the price target to $74 from $70, noting that sustainable value creation from capital deployment and multiple expansion were being overlooked at current share levels.
Among the hedge funds being tracked by Insider Monkey, California-based investment firm First Pacific Advisors LLC is a leading shareholder in American International Group, Inc. (NYSE:AIG) with 6.3 million shares worth more than $381 million.
In its Q3 2023 investor letter, Diamond Hill Capital, an asset management firm, highlighted a few stocks and American International Group, Inc. (NYSE:AIG) was one of them. Here is what the fund said:
“Insurance company American International Group, Inc. (NYSE:AIG) was also among our top contributors. The company’s most recent operating results outperformed expectations, as it reported robust earnings with improving underwriting margins in the property and casualty business. AIG’s strategic initiatives also added to the positive sentiment. The company made further progress in separating its Life & Retirement unit by selling additional shares via a secondary offering. Furthermore, AIG announced the sale of its reinsurance business to RenaissanceRe at an attractive valuation, a move that will further reduce volatility in AIG’s continuing operations.”
7. Morgan Stanley (NYSE:MS)
Number of Hedge Fund Holders: 59
Morgan Stanley (NYSE:MS) is a financial holding company that provides various financial products and services to corporations, governments, financial institutions, and individuals. On December 14, investment advisory Bank of America maintained a Buy rating on Morgan Stanley (NYSE:MS) stock and raised the price target to $95 from $90.
Among the hedge funds being tracked by Insider Monkey, Texas-based investment firm Fisher Asset Management is a leading shareholder in Morgan Stanley (NYSE:MS) with 19 million shares worth more than $1.6 billion.
6. The Charles Schwab Corporation (NYSE:SCHW)
Number of Hedge Fund Holders: 77
The Charles Schwab Corporation (NYSE:SCHW) provides wealth management and other financial services. On December 12, UBS analyst Brennan Hawken maintained a Buy rating on The Charles Schwab Corporation (NYSE:SCHW) stock and raised the price target to $82 from $72, noting that November signaled an earlier than anticipated inflection in transactional cash balances, the first monthly increase this hiking cycle.
At the end of the third quarter of 2023, 77 hedge funds in the database of Insider Monkey held stakes worth $4.6 billion in The Charles Schwab Corporation (NYSE:SCHW), compared to 88 in the previous quarter worth $4 billion.
Along with Bank of America Corporation (NYSE:BAC), JPMorgan Chase & Co. (NYSE:JPM), and Berkshire Hathaway Inc. (NYSE:BRK-B), The Charles Schwab Corporation (NYSE:SCHW) is one of the best holding company stocks to invest in.
In its Q3 2023 investor letter, Weitz Investment Management, an asset management firm, highlighted a few stocks and The Charles Schwab Corporation (NYSE:SCHW) was one of them. Here is what the fund said:
“Lastly, we decided to sell our shares of The Charles Schwab Corporation (NYSE:SCHW) during the first quarter as the regional banking crisis unfolded. The decision effectively locked in Schwab’s negative impact on Fund performance but has no bearing on forward-looking returns. Nevertheless, it is likely Schwab will remain on our detractors list for the balance of 2023.”
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Disclosure. None. 13 Best Holding Company Stocks To Invest In is originally published on Insider Monkey.