15 Best Least Shorted Stocks to Buy Now

Published on February 21, 2024 at 9:04 am by Fahad Saleem in Hedge Funds, News

In this article, we will take a detailed look at some of the least shorted stocks. To read the second part of this article, click 5 Best Least Shorted Stocks to Buy Now.

It’s commonly said among investor circles that short selling is one of the most difficult strategies to make money in the stock market. The events of 2023 showed why. According to S3 Partners, short sellers lost about $178 billion in 2023 amid broader stock market rally driven by the AI boom. Most of these losses for short sellers came from Magnificent Seven stocks. A Yahoo Finance’s analysis of S3 Partners’ data showed that the biggest losses for short sellers came from Tesla, Nvidia, Microsoft, Meta and Apple.

It seems short sellers are experiencing a squeeze from all sides as new regulations and a generally tough environment makes betting against stocks difficult by the day. Last year the SEC finalized new rules that would require hedge funds to tell the SEC which companies they sell short. Institutional money managers with large short positions will have to file forms with details of their short bets with the SEC. The new rules come two years after the 2021 short squeeze drama which saw Redditors band together to boost share prices of companies like AMC Entertainment Holdings Inc (NYSE:AMC) and GameStop Corp (NYSE:GME) that were heavily shorted by major hedge funds.

Short selling remains an important trading activity that, in many cases, puts a much-needed check on companies and provides interesting data points and perspectives for the broader market. That’s why it’s important to keep an eye on short interest of stocks.

Luis Louro / shutterstock.com

Methodology

Last month, BofA published its Managers’ Holdings Update report in which it listed stocks with the least short interest by hedge funds as a percentage of float. For this article we scanned BofA list of least shorted stocks and picked 15 stocks with the highest number of hedge fund investors. These are the best least shorted stocks to buy according to hedge funds.

15. Ecolab Inc (NYSE:ECL)

Number of Hedge Fund Investors: 53

Water treatment services and solutions company Ecolab Inc (NYSE:ECL) ranks 15th in our list of the least shorted stocks to buy according to hedge funds.

Of the 910 hedge funds in Insider Monkey’s database, 53 hedge funds had stakes in Ecolab Inc (NYSE:ECL). The most notable stakeholder of Ecolab Inc (NYSE:ECL) was Michael Larson’s Bill & Melinda Gates Foundation Trust which owns an $884 million stake in Ecolab Inc (NYSE:ECL).

ClearBridge Sustainability Leaders Strategy made the following comment about Ecolab Inc. (NYSE:ECL) in its Q3 2023 investor letter:

“Long-time ClearBridge holding Ecolab Inc. (NYSE:ECL) stands out as a responsible steward of water resources and a company able to reduce impact from use of water across the economy. Ecolab offers water-saving solutions for laundries used by health care, hospitality and food and beverage industries. Products and services include industrial water pre-treatment systems, industrial water reuse, water-efficient conveyor lubrication systems and wastewater treatment. For a major hotel chain, Ecolab’s chemical product delivery service replaces single-use drums of cleaning chemical, reducing waste and improving work safety, while its warewashing and housekeeping solutions reduce wash time, water usage and water temperature for food prep wares as well as plastic packaging used in housekeeping services. Ecolab estimates 57 million gallons of water savings as well as 1,400 metric tons of GHG emissions annually for the hotel chain as a result.

Ecolab has committed to helping its customers conserve 300 billion gallons of water a year, equivalent to the annual drinking water needs of 1 billion people by 2030, through reducing water withdrawal needs in customers’ operations. Separately, Ecolab also has a target to restore >50% of its absolute water withdrawal at high-risk sites through collaboration with NGOs and local communities. Ecolab is also a co-founder of the Water Resilience Coalition, a CEO-led movement and part of the United Nations Global Compact aiming to preserve the world’s freshwater resources through action in water-stressed basins.”

14. Coca-Cola Co (NYSE:KO)

Number of Hedge Fund Investors: 57

With over six decades of dividend increases and a highly resilient business, Coca-Cola Co (NYSE:KO) is one of the best least shorted stocks to buy according to smart money investors.

As of the end of the third quarter of 2023, 57 hedge funds out of the 910 funds tracked by Insider Monkey had stakes in Coca-Cola Co (NYSE:KO).

Unlike AMC Entertainment Holdings Inc (NYSE:AMC) and GameStop Corp (NYSE:GME), Coca-Cola does not have a history of attracting short sellers in the past.

Hayden Capital made the following comment about The Coca-Cola Company (NYSE:KO) in its third 2023 investor letter:

“It’s not just emerging markets either, where one could argue a “scarcity premium” given fewer quality public companies. Even in the US, The Coca-Cola Company (NYSE:KO) trades at ~30x P/E despite having the same earnings as 10 years ago.

Both of these companies actually have lower revenues than 10 – 15 years ago too, indicating that their profit growth is mostly from margin expansion. This can only last for so long before there’s no more excess expenses left to cut.

I find it ironic that all these companies trade as “bond-equivalents” in the minds of investors – even commanding lower yields than US treasuries, the safest security in the world. But it’s clear that their businesses are not nearly as safe. Coca-Cola is facing disruption risk from consumers shifting to new, heathier beverage brands.

But these companies are ~35% more expensive than US Treasuries, despite the heightened risk. On a risk-adjusted basis, one could argue the implied premium is even higher.”

Perhaps the explanation is simply the price volatility difference between these stocks and treasuries over the last two years. For example, 10-year Treasury bonds are down ~-20% since the beginning of 2022. By comparison, KO and PG are remarkably down only -4 – 6% over that time frame.”

13. Medtronic PLC (NYSE:MDT)

Number of Hedge Fund Investors: 59

Medical device company Medtronic PLC (NYSE:MDT) shares have gained about 4.7% year to date in 2024 through February 6.

Out of the 910 hedge funds tracked by Insider Monkey, 59 hedge funds out of the 910 funds tracked by Insider Monkey had stakes in Medtronic PLC (NYSE:MDT). The biggest stakeholder in Medtronic PLC (NYSE:MDT) was Jean-Marie Eveillard’s First Eagle Investment Management which owns a $477 million stake in Medtronic PLC (NYSE:MDT).

12. Philip Morris International Inc. (NYSE:PM)

Number of Hedge Fund Investors: 62

BofA’s research shows Philip Morris International Inc. (NYSE:PM) had just 0.54% short interest as a percentage of float, which makes it one of the least shorted stocks.

Of the 62 hedge funds in Insider Monkey’s database that had stakes in Philip Morris International Inc. (NYSE:PM) as of the end of the third quarter, Terry Smith’s Fundsmith LLP had a $1.4 billion stake in Philip Morris International Inc. (NYSE:PM).

11. Boston Scientific Corporation (NYSE:BSX)

Number of Hedge Fund Investors: 65

BofA’s research shows that Boston Scientific Corporation (NYSE:BSX) is one of the least shorted stocks on the Wall Street, with just 0.64% short interest as a percentage of float. Last month, Piper Sandler added to the stock to its high conviction stocks list. Piper Sandler said the stock scores well on profitability, earnings growth and free cash flow generation.

Out of the 910 hedge funds tracked by Insider Monkey, 65 hedge funds had stakes in Boston Scientific Corporation (NYSE:BSX) as of the end of the third quarter. The biggest stake in Boston Scientific Corporation (NYSE:BSX) is owned by Ken Griffin’s Citadel Investment Group which owns a $1.1 billion stake.

Baron Health Care Fund stated the following regarding Boston Scientific Corporation (NYSE:BSX) in its fourth quarter 2023 investor letter:

“We added to our position in Boston Scientific Corporation (NYSE:BSX), a global developer, manufacturer, and marketer of medical devices that are used in a broad range of interventional medical specialties. We believe Boston Scientific can grow revenue in the high single digits, driven by differentiated products used to treat atrial fibrillation, such as pulsed field ablation, among others. The company held an Investor Day in September at which management established financial targets for the 2024 to 2026 period calling for an organic sales CAGR of 8% to 10%, 150 basis points of margin expansion, and strong double-digit adjusted EPS growth and improved free-cash-flow conversion. We think this growth profile makes Boston Scientific a compelling name within the large medical device universe.”

10. Abbott Laboratories (NYSE:ABT)

Number of Hedge Fund Investors: 69

Abbott Laboratories (NYSE:ABT) is one of the top least shorted stocks to buy now according to hedge funds. Last month Abbott Laboratories (NYSE:ABT) posted fourth quarter results. Adjusted EPS in the period came in at $1.19 meeting estimates. Revenue in the quarter jumped 1.4% year over year to $10.24 billion, surpassing estimates by $50 million.

As of the end of the third quarter of 2023, 69 hedge funds out of the 910 funds tracked by Insider Monkey had stakes in Abbott Laboratories (NYSE:ABT). The biggest stakeholder of Abbott Laboratories (NYSE:ABT) during this period was Ken Fisher’s Fisher Asset Management which owns a $939 million stake in Abbott Laboratories (NYSE:ABT).

Diamond Hill Large Cap Strategy made the following comment about Abbott Laboratories (NYSE:ABT) in its Q3 2023 investor letter:

“Health care facilities operator HCA Healthcare and medical device company Abbott Laboratories (NYSE:ABT) were also among our bottom contributors. Abbott Labs was impacted by concerns about potential threats to its diabetes franchise from new drugs. A majority of Abbott’s continuous glucose monitor (CGM) customers rely on insulin for their treatment, which means their disease will not respond to the newer medications. This concern negatively impacted investor sentiment and, in turn, Abbott’s share price, leading to underperformance in the recent quarter.”

9. Procter & Gamble Co (NYSE:PG)

Number of Hedge Fund Investors: 75

Consumer goods giant Procter & Gamble Co (NYSE:PG) has a very low short interest as the Wall Street views it as a defensive and safe play to buy, thanks to its diversified business and over six decades of consistent dividend increases.

Insider Monkey’s database of 910 hedge funds shows that 75 hedge funds out of the 910 funds had stakes in Procter & Gamble Co (NYSE:PG). The biggest stake in Procter & Gamble Co (NYSE:PG) is owned by Ken Fisher’s Fisher Asset Management which owns a $1.5 billion stake in Procter & Gamble Co (NYSE:PG).

While AMC Entertainment Holdings Inc (NYSE:AMC) and GameStop Corp (NYSE:GME) have a history of attracting short bets from hedge funds, it’s a rarity to see money managers going against established giants like Procter & Gamble.

Madison Sustainable Equity Fund stated the following regarding The Procter & Gamble Company (NYSE:PG) in its fourth quarter 2023 investor letter:

“We sold The Procter & Gamble Company (NYSE:PG). After two years of strong pricing growth, the company is facing slower market growth in both the US and Europe. China, the company’s second largest individual market, is facing a protracted downturn with poor visibility on when fundamentals will improve.”

8. Walmart Inc (NYSE:WMT)

Number of Hedge Fund Investors: 80

Walmart Inc (NYSE:WMT) is one of the top least shorted stocks to invest in according to hedge funds. As of the end of the September 2023 quarter, 80 hedge funds out of the 910 funds tracked by Insider Monkey had stakes in Walmart Inc (NYSE:WMT).

Citi recently published its list of top large-cap stock recommendations. Walmart Inc (NYSE:WMT) made it to the list. Citi estimates EPS of Walmart Inc (NYSE:WMT) to come in at $7.32 this year while P/E is expected to be at 22.

7. Johnson & Johnson (NYSE:JNJ)

Number of Hedge Fund Investors: 84

With decades of consistent dividend increases and strong fundamentals, Johnson & Johnson (NYSE:JNJ) ranks seventh in our list of the best least shorted stocks to buy according to hedge funds.

Last month Johnson & Johnson (NYSE:JNJ) posted fourth quarter results. Adjusted EPS in the quarter came in at $2.29, beating estimates by $0.01. Revenue in the period jumped 73% year over year to $21.4 billion.

Of the 910 hedge funds in Insider Monkey’s database, 84 hedge funds had stakes in Johnson & Johnson (NYSE:JNJ).

ClearBridge Large Cap Value Strategy made the following comment about Johnson & Johnson (NYSE:JNJ) in its Q3 2023 investor letter:

“The health care space provided some opportunities in the quarter, as we increased our exposure to medical device company Becton, Dickinson as well as large cap pharmaceutical company Johnson & Johnson (NYSE:JNJ). Johnson & Johnson recently spun out its consumer health care business, becoming a more focused yet broadly diversified pharmaceutical and medtech company.”

6. Oracle Corp (NYSE:ORCL)

Number of Hedge Fund Investors: 88

Despite weak earnings posted in December 2023, Oracle is one of the least shorted stocks to buy according to hedge funds. As of the end of the third quarter of 2023, 88 hedge funds tracked by Insider Monkey had stakes in Oracle Corp (NYSE:ORCL).

Madison Sustainable Equity Fund stated the following regarding Oracle Corporation (NYSE:ORCL) in its fourth quarter 2023 investor letter:

“Oracle Corporation (NYSE:ORCL) reported a disappointing second quarter due to supply constraints. Cloud revenue was below expectations as Oracle made planning decisions to accommodate some large-scale Oracle Cloud Infrastructure (OCI) clients that take longer to bring online. We continue to believe that Oracle has a unique position in Generative AI workloads and continue to like its position and strategy.”

Click to continue reading and see 5 Best Least Shorted Stocks to Buy Now.

AI Fire Sale: Insider Monkey’s #1 AI Stock Pick Is On A Steep Discount

Published on October 30, 2024 at by Inan Dogan, PhD

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A New Dawn is Coming to U.S. Stocks

Published on November 16, 2024 at by Insider Monkey Staff

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Click to continue reading…

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