In this article, we discuss 5 best blue chip stocks to buy according to hedge funds. If you want to see more best blue chip stocks to buy according to hedge funds, the risk/reward, and methodology of this list, go directly to 10 Best Blue Chip Stocks to Buy According to Hedge Funds.
5. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 135
Apple Inc. (NASDAQ:AAPL) is the world’s largest tech company by market capitalization that is held by 135 hedge funds in our database at the end of Q4, down from 140 at the end of Q3. Although it isn’t as popular with hedge funds in our database as some of other big tech stocks, Apple Inc. (NASDAQ:AAPL) nevertheless has substantial competitive advantages given its strong brand, financial strength, profitability, and substantial user base that could allow it to do well in the long term if it maintains its market share. In the middle of March, Bloomberg reported Apple Inc. (NASDAQ:AAPL) is delaying some bonuses and also expanding cost reduction efforts.
4. Alphabet Inc. (NASDAQ:GOOG)
Number of Hedge Fund Holders: 152
Alphabet Inc. (NASDAQ:GOOG) is a big tech company that is facing more competition as a result of Microsoft incorporating AI into Bing. Although AI makes mistakes, many users nevertheless find the new AI Bing useful. In response, Alphabet Inc. (NASDAQ:GOOG) is expected to launch multiple AI products this year, including the now open to beta testers Bard Chatbot. Given the more competition, Alphabet Inc. (NASDAQ:GOOG) is arguably the riskiest stock on our list even though it has great AI technology and a forward P/E of 17.27 as of March 21.
L1 Capital International Fund commented on Alphabet Inc. (NASDAQ:GOOG) in a Q3 2022 investor letter,
“Two companies, Amazon.com (Amazon) and Alphabet Inc. (NASDAQ:GOOG), detracted more than 0.5% (in AUD) from the Fund’s returns. Both companies reported Q3 2022 quarterly results that were modestly below our expectations. Alphabet’s share price was impacted by concerns that macroeconomic pressures will impact advertising spend, increased commentary that Alphabet’s core search business could be disrupted by open artificial intelligence technologies, particularly from OpenAI’s ChatGPT chatbot (Microsoft is rumoured to be investing $10 billion in OpenAI with the aim of incorporating the technology into Bing, Word and email). Alphabet’s growth in employee numbers is also expected to pressure profitability in a more subdued economic environment.
We have allowed for a softening in advertising in our base case expectations and believe Alphabet’s management will be under increasing pressure to take action to manage its cost base, as many other technology businesses have already done, including Amazon. Disruption to search remains an issue to monitor. However, we consider Alphabet to be at the forefront of developments in artificial intelligence and well placed to defend its core franchise.”
3. Meta Platforms, Inc. (NASDAQ:META)
Number of Hedge Fund Holders: 194
Meta Platforms, Inc. (NASDAQ:META) is a social media giant that could benefit if TikTok is forced to sell itself as that would cause a distraction for TikTok management. Although it is still committed to investing tens of billions in the future in building a metaverse, Meta Platforms, Inc. (NASDAQ:META) has nevertheless cut costs with layoffs of around 10,000 people and the closing of 5,000 additional open roles the company hasn’t filled yet. After the restructuring, however, the company plans to lift its hiring and transfer freezes. 194 hedge funds in our database owned shares of Meta Platforms, Inc. (NASDAQ:META) at the end of Q4, ranking the stock #3 on our list of 10 Best Blue Chip Stocks to Buy According to Hedge Funds.
2. Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Fund Holders: 240
Amazon.com, Inc. (NASDAQ:AMZN) is the second most popular hedge fund stock in our database with 240 hedge funds holding shares in the e-commerce and cloud computing giant at the end of Q4. Although 269 hedge funds in our database owned shares of the company at the end of Q3, Amazon.com, Inc. (NASDAQ:AMZN) nevertheless has substantial growth potential in the future as AI processing will likely increase cloud processing demand. In the future, Amazon.com, Inc. (NASDAQ:AMZN) could also make more of its own computing chips for AWS that could help it save more money and offer more value. Like several other big tech companies, Amazon.com, Inc. (NASDAQ:AMZN) has also recently trimmed some of its workforce with around 9,000 more layoffs expected.
1. Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders: 259
Microsoft Corporation (NASDAQ:MSFT) ranks #1 on our list of 10 Best Blue Chip Stocks to Buy According to Hedge Funds given 259 hedge funds in our database owned shares of the software company at the end of Q4. Although AI is still flawed in many instances, OpenAI’s ChatGPT is wildly popular and demand for the chatbot has grown substantially. Given it reportedly owns 49 percent of OpenAI, Microsoft Corporation (NASDAQ:MSFT) has incorporated ChatGPT into Bing and the company will incorporate AI into many of its products in the future as well. With more AI products, Microsoft Corporation (NASDAQ:MSFT)’s products could be more useful, and the company’s cloud division could also benefit from more processing demand.
Insider Monkey focuses on uncovering the best investment ideas of hedge funds and insiders. Please subscribe to our free daily enewsletter to get the latest investment ideas from hedge funds’ investor letters by entering your email address below. You can also take a look at 14 Best American Dividend Stocks to Buy Now and 10 Most Advanced Countries in Nuclear Fusion.
