In this article we are going to share our list of the 15 best stocks to buy now for beginner investors. Click to skip ahead and see the 5 Best Stocks To Buy Now For Beginner Investors.
You can’t become a top quarterback by watching and imitating Tom Brady. You can’t dunk a basketball the same way Michael Jordan did by watching and imitating Michael Jordan’s old games. Investing isn’t like professional sports. Even beginner investors can invest like seasoned professional money managers simply by imitating the best fund managers’ stock picks.
Insider Monkey has long been a believer of imitating the top stock picks of hedge funds, and this strategy has helped us beat the market consistently over the last several years. Some experts, including billionaire Warren Buffett, gave beginner investors a decent advice: just buy an S&P 500 Index fund and stay invested no matter what happens. This is a decent advice because beginner investors will benefit from the rising markets over the long-term and generate the average return of an average investors. We have a better investment strategy. If you imitate the average stock picks of an average investor, you will definitely generate average returns. If you imitate the best stock picks of the best fund managers, then you are likely to generate much better returns.
Almost all best fund managers are rich and they manage large sums of money for others. The Securities and Exchange Commission requires money managers who invest at least $100 million in U.S. stocks and some other financial instruments to disclose their holdings to the public once a quarter. This means we get to see what these professional money managers invest in and this also gives us the opportunity to imitate their stock picks. One alternative is to identify a legendary investor, like Warren Buffett, who doesn’t make a lot of changes to his/her portfolio and imitate those stock picks. The other alternative is to invest in the stocks that all of these professional money managers agree on.
Warren Buffett
We have been sharing the list of 30 most popular stocks among hedge funds here at Insider Monkey since the end of 2018. Three months ago we shared hedge funds’ top 30 stock picks at the end of September 2020. Three months before that we shared hedge funds’ top 30 stock picks for Q2’20. These top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020. Guess what an average investor investing in average S&P 500 Index fund generated during the last 2 years? Only 55.3%. Warren Buffett wasn’t wrong about index funds. Fifty five percent return in 2 years isn’t too shabby for a beginner investor. However, eighty one percent gain is even better. This quarter’s top 30 stocks returned 9.5% so far in 2021 and outperformed the S&P 500 Index’s 4.5% gain by 5 percentage points.
Since hedge funds top consensus stock picks have been outperforming the market by large margins, we consider them as the “best stocks to buy for beginner investors”. Most of these stocks are well-known blue chip companies with relatively low risk. We aren’t going to ask you to invest in the top 30 stocks. You can get enough diversification by investing in the top 10 or top 15 hedge fund stocks.
Overall, hedge funds’ top 10 stock picks returned 256.6% between 2014 and 2020. S&P 500 ETF (SPY) returned 132.4% during the same 7 year period. If you invested $10000 in hedge funds’ top 10 stock picks at the beginning of 2014, your portfolio would have grown to more than $35000 by the end of 2020. If you had invested in the average stock picks of average investors, your portfolio would have grown to only $23000. That’s the difference.
More than half of all investors invest in dumb index funds because they were made to believe that they can’t outperform the market by stock selection (or they are forced to invest in index funds in their companies’ retirement accounts). We call index fund investing “dumb” because we have been generating much higher returns by investing in hedge funds’ consensus stock picks.
In this article we will share hedge funds’ top 15 stock picks. These stocks returned 98.8% cumulatively in 2019 and 2020.
Every quarter we process more than 800 hedge funds’ 13F filing and identify the top stocks among ALL 800+ hedge funds. The list of top 15 hedge fund stocks don’t change much from quarter to quarter. Insider Monkey’s mission is to identify promising (and also terrible) hedge fund stock pitches and share them with our subscribers. We launched our monthly newsletter’s activist strategy nearly 4 years ago and this strategy’s picks returned 187.5% since then and beat the SPY by 111 percentage points (see the details here).
The best thing about following hedge funds’ top picks on our website is that you don’t need to pay hedge funds an annual 2% fee and 20% of your profits to beat the market. We do that here free of charge using the holdings data from the legally required SEC portfolio disclosures. Our approach is also superior to investing directly into hedge funds because we don’t like to invest in a hedge funds’ 35th best idea when we can invest in only the best stock picks of the best hedge funds.
Below we listed the 15 most popular stocks among hedge funds at the end of December 2020. We believe these are the 15 best stocks a beginner investor can buy today:
15. Sea Limited (NYSE: SE): $267.50
Number of Hedge Funds: 115 (2020Q4)
Number of Hedge Funds: 95 (2020Q3)
Total Dollar Amount of Long Hedge Fund Positions: $10.9 billion
Percent of Hedge Funds with Long Positions: 13%
First Quarter Return (through February 18): 34.4%
Popularity Ranking (2020Q3): 20
Popularity Ranking (2020Q2): 38
Noteworthy Hedge Fund Shareholders: Tiger Global Management LLC
Chase Coleman of Tiger Global
14. Netflix, Inc. (NASDAQ: NFLX): $548.22
Number of Hedge Funds: 116 (2020Q4)
Number of Hedge Funds: 104 (2020Q3)
Total Dollar Amount of Long Hedge Fund Positions: $15.6 billion
Percent of Hedge Funds with Long Positions: 13.1%
First Quarter Return (through February 18): 1.4%
Popularity Ranking (2020Q3): 18
Popularity Ranking (2020Q2): 13
Noteworthy Hedge Fund Shareholders: Fisher Asset Management, Lone Pine Capital
Netflix ranked 14th on our list of the best stocks to buy for beginner investors. Legendary value investor Bill Miller initiated a new position and talked about Netflix in his Q4 investor letter.
13. Bristol-Myers Squibb Company (NYSE: BMY): $61.02
Number of Hedge Funds: 131 (2020Q4)
Number of Hedge Funds: 124 (2020Q3)
Total Dollar Amount of Long Hedge Fund Positions: $6.1 billion
Percent of Hedge Funds with Long Positions: 14.8%
First Quarter Return (through February 18): -1.6%
Popularity Ranking (2020Q3): 11
Popularity Ranking (2020Q2): 10
Noteworthy Hedge Fund Shareholders: Jim Simons, Warren Buffett
12. Uber Technologies, Inc. (NYSE: UBER): $59
Number of Hedge Funds: 135 (2020Q4)
Number of Hedge Funds: 100 (2020Q3)
Total Dollar Amount of Long Hedge Fund Positions: $10.1 billion
Percent of Hedge Funds with Long Positions: 15.2%
First Quarter Return (through February 18): 15.7%
Popularity Ranking (2020Q3): 19
Popularity Ranking (2020Q2): 25
Noteworthy Hedge Fund Shareholders: Altimeter Capital Management, Tiger Global Management LLC
GongTo/Shutterstock.com
11. The Walt Disney Company (NYSE: DIS): $183
Number of Hedge Funds: 144 (2020Q4)
Number of Hedge Funds: 112 (2020Q3)
Total Dollar Amount of Long Hedge Fund Positions: $16.42 billion
Percent of Hedge Funds with Long Positions: 16.2%
First Quarter Return (through February 18): 1.0%
Popularity Ranking (2020Q3): 14
Popularity Ranking (2020Q2): 18
Noteworthy Hedge Fund Shareholders: Philippe Laffont’s Coatue Management, Ken Fisher’s Fisher Asset Management
Disney ranks 11th on our list of the best stocks to buy now for beginner investors. Here is what Ruane, Cunniff & Goldfarb has to say about The Walt Disney Company in their Q4 investor letter:
“Disney is on the global trend toward subscription-based streaming video consumption, which we think is still in its early innings. As people increasingly watch their TV and movies via apps instead of cable bundles, we expect a relatively egalitarian media ecosystem that historically supported many winners to become much more elitist. The streaming model heavily favors scaled early movers, who benefit from a virtuous cycle in which massive content investment attracts incremental subscribers and revenues, which enable further content investment, which yields still more subscriber growth.
Disney is investing heavily to drive this virtuous cycle, which is depressing their current profits, but people can only watch so much TV and wrap their arms around so much selection, which means that the growth of programming spend will eventually have to slow. If the world’s two most compelling collections of streamed video content continue to attract incremental subscribers amidst a moderating pace of investment, then content cost per subscriber will begin to fall, widening competitive gaps that are already very substantial by layering a cost advantage on top of a product quality advantage. As a result of this dynamic– which we think competitors will struggle to replicate– we believe that the leaders of the video entertainment industry’s streaming era will be far larger and more profitable than those of the cable era. While this possibility is by no means lost on the stock market, we invested in Disney because we believed their prices still failed to discount the degree to which we expect a small handful of victors to take most of the streaming era’s significantly greater spoils.”
10. Apple Inc. (NASDAQ: AAPL): $129.71
Number of Hedge Funds: 146 (2020Q4)
Number of Hedge Funds: 134 (2020Q3)
Total Dollar Amount of Long Hedge Fund Positions: $141.8 billion
Percent of Hedge Funds with Long Positions: 16.5%
First Quarter Return (through February 18): -2.1%
Popularity Ranking (2020Q3): 9
Popularity Ranking (2020Q2): 11
Noteworthy Hedge Fund Shareholders: Berkshire Hathaway
9. PayPal Holdings, Inc. (NASDAQ: PYPL): $290.81
Number of Hedge Funds: 147 (2020Q4)
Number of Hedge Funds: 150 (2020Q3)
Total Dollar Amount of Long Hedge Fund Positions: $15.96 billion
Percent of Hedge Funds with Long Positions: 16.6%
First Quarter Return (through February 18): 24.2%
Popularity Ranking (2020Q3): 8
Popularity Ranking (2020Q2): 9
Noteworthy Hedge Fund Shareholders: Philippe Laffont, Christopher Lyle, Fisher Asset Management
PYPL ranks 9th on our list of the best stocks to buy now for beginner investors. Paypal Holdings Inc. (NASDAQ:PYPL) has been around since 2000. It started as an online payment platform for sending and receiving money. It gained popularity in a short span of time, becoming one of the world’s biggest online payment processors. Paypal has been enjoying tremendous growth lately, especially during 2020, with the stock gaining more than 120 percent during the past 12 months.
The growth in recent months has mainly been driven by the Covid-19 pandemic, which has greatly changed the way people work, shop, and transact. The lockdown restrictions fueled the use of digital payment methods, ultimately helping online payment processing companies such as Paypal.
The company announced record quarterly results for the quarter ended Dec. 31. It reported earnings of $1.57 billion, or $1.32 per share for the fourth quarter, translating to a surge of nearly 3 folds from the comparable period of 2019. On an adjusted basis, profit rose to $1.08 per share, easily beating the consensus forecast of $1 per share.
CEO Dan Schulman said in a statement, “PayPal delivered record performance in 2020 as businesses of all sizes have digitized in the wake of the pandemic. In this historic year, we released more products than ever before and have dramatically scaled our acceptance worldwide, giving our 377 million consumer and merchant accounts even more reasons to use our platform.”
Revenue came in at $6.12 billion, up 23 percent from $4.96 billion in the year-ago quarter. Analysts on average were expecting Paypal to post revenue of $6.09 billion. Processed payments for the quarter climbed 39 percent to $277.1 billion. Moreover, net new active accounts in the quarter climbed by 16 million. Comparatively, Venmo’s active accounts jumped 32 percent to 70 million.
8. Mastercard Incorporated (NYSE: MA): $338.46
Number of Hedge Funds: 154 (2020Q4)
Number of Hedge Funds: 133 (2020Q3)
Total Dollar Amount of Long Hedge Fund Positions: $18 billion
Percent of Hedge Funds with Long Positions: 17.4%
First Quarter Return (through February 18): -5.1%
Popularity Ranking (2020Q3): 10
Popularity Ranking (2020Q2): 7
Noteworthy Hedge Fund Shareholders: Akre Capital Management, Berkshire Hathaway
Valeri Potapova / Shutterstock.com
7. Alibaba Group Holding Limited (NYSE: BABA): $264.51
Number of Hedge Funds: 156 (2020Q4)
Number of Hedge Funds: 166 (2020Q3)
Total Dollar Amount of Long Hedge Fund Positions: $17.9 billion
Percent of Hedge Funds with Long Positions: 17.6%
First Quarter Return (through February 18): 13.7%
Popularity Ranking (2020Q3): 4
Popularity Ranking (2020Q2): 5
Noteworthy Hedge Fund Shareholders: Ken Fisher
BABA ranks 7th on our list of the best stocks to buy for beginner investors. Polen Capital explained why they believe Alibaba will deliver large long-term returns in its Q4 investor letter:
“One of our largest detractors during the quarter was Alibaba Group Holding Limited. Alibaba Group’s stock declined by over 20% during the fourth quarter. China delayed the Ant Financial initial public offering (IPO) and launched an anti-trust investigation into alleged anticompetitive practices by Alibaba. Many speculate that this was a strong signal from the government in response to comments made by Alibaba founder Jack Ma.
Regardless of the reason, while we acknowledge that operating in China is different than in the U.S., we also recognize Alibaba’s dominance and importance to China’s long-term goals. As China reorients its economy from export-driven to domestic consumption, Alibaba’s platforms—Taobao and Tmall—are arguably the very best tools to achieve this. Alibaba enables commerce throughout the country from tier one cities to rural areas. Its competitive advantages, tailwinds in digital payments, e-commerce, and cloud technologies are poised for continued growth even with potential government penalties in the future. It remains one of our highest conviction positions.”
6. Alphabet Inc. Class C (NASDAQ: GOOG): $2,117.20
Number of Hedge Funds: 157 (2020Q4)
Number of Hedge Funds: 150 (2020Q3)
Total Dollar Amount of Long Hedge Fund Positions: $20.6 billion
Percent of Hedge Funds with Long Positions: 17.7%
First Quarter Return (through February 18): 20.9%
Popularity Ranking (2020Q3): 7
Popularity Ranking (2020Q2): 8
Noteworthy Hedge Fund Shareholders: Boykin Curry
Click to continue reading and see the 5 Best Stocks To Buy Now For Beginner Investors.
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Disclosure: None. 15 Best Stocks To Buy For Beginner Investors is originally published at Insider Monkey.
