In this piece, we’ll take a look at the 5 Best Blue Chip Stocks to Buy According to Phill Gross and Robert Atchinson’s Adage Capital. For more stocks, the risk/reward, and the methodology of this list, head on to 10 Best Blue Chip Stocks to Buy According to Phill Gross and Robert Atchinson’s Adage Capital.
05. Alphabet Inc. (NASDAQ:GOOG)
Adage Capital Management’s Stake Value: $682.261 million
Percentage of Adage Capital Management’s Portfolio: 1.56%
Number of hedge fund holders: 153
As per Insider Monkey’s database, 153 hedge fund portfolios held Alphabet Inc. (NASDAQ:GOOG) at the end of the second quarter, down from 160 in the previous quarter. For Q2, Adage Capital holds 313,070 shares of Alphabet Inc. (NASDAQ:GOOG) worth roughly $682.261 million, comprising 1.56% of its portfolio.
On September 14, the Personal Information Protection Commission of South Korea announced in a statement that it had penalized Alphabet Inc. (NASDAQ:GOOG) $50 million for privacy infractions. The data watchdog asserts that Google did not adequately seek consent from users or fully disclose the reasons for data collection and usage, particularly with regard to the use of behavioral data to forecast consumer interests in marketing and advertising.
Merion Road Capital discussed Alphabet Inc. (NASDAQ:GOOG) in the second quarter investor letter. Here is what the fund specifically said about Alphabet Inc. (NASDAQ:GOOG):
“The Long Only portfolio was down a bit more than 20% during the quarter. Our largest holding, Alphabet Inc. (NASDAQ:GOOG), was unsurprisingly the largest detractor for the period. GOOG needs no introduction as it likely touches all of our lives multiple times a day. The biggest risk to GOOG is their exposure to advertising budgets, a historically cyclical category spend. While GOOG was able to grow their topline during the 2008-2009 period, they did so by taking share from traditional media. Today digital advertising already accounts for ~65% of total US ad spend; therefore, the potential benefits from further share gains are likely to be outweighed by a shrinking pie. Obviously, this is very short term oriented and will be a footnote 5 or 10 years down the road. But even looking at near-term operating performance, it is possible that advertising might prove to be less cyclical than prior periods. With the growing presence of ecommerce and direct to consumer offerings, the “advertising as the new rent” argument makes sense to me.
While their cash cow (search) is an excellent business that would be hard to displace, other assets like Google Cloud and YouTube are deserving of even higher multiples. Furthermore, the company owns several assets that are under-monetized like maps, Android, and Waymo. Equally as important is the increasingly shareholder friendly posture of the company as exemplified by their improved financial disclosure, increasing share repurchases, and pending share split. At 19x trailing earnings ex. cash on the balance sheet (but inclusive of losses incurred in the fast-growing cloud business as well as other “moon shots”), it is hard to think of a more attractive risk-adjusted return.”
04. Royalty Pharma plc (NASDAQ:RPRX)
Adage Capital Management’s Stake Value: $702.397 million
Percentage of Adage Capital Management’s Portfolio: 1.61%
Number of hedge fund holders: 19
Royalty Pharma plc (NASDAQ:RPRX) is a New York-based firm that operates in the pharma sector. Adage Capital Management, although reduced its stake in Royalty Pharma plc (NASDAQ:RPRX) by 33% during Q2, is still the largest shareholder of Royalty Pharma plc (NASDAQ:RPRX), holding 16.7 million shares worth roughly $702.397 million.
The stake comprises 1.61% of Adage Capital’s 13F portfolio.
Hedge fund sentiment around Royalty Pharma plc (NASDAQ:RPRX) has decreased in the second quarter of 2022, with 19 hedge funds long the stock, compared to 32 in Q1 2022. The company posted an EPS of $0.76 in Q2 2022, beating estimates of $0.6 by $0.16.
03. Amazon.com, Inc. (NASDAQ:AMZN)
Adage Capital Management’s Stake Value: $ 967.218 million
Percentage of Adage Capital Management’s Portfolio: 2.21%
Number of hedge fund holders: 252
Amazon.com, Inc. (NASDAQ:AMZN) was in 252 hedge fund portfolios as tracked by Insider Monkey at the end of the second quarter compared to 271 the previous quarter. Adage Capital upped its stake in Amazon.com, Inc. (NASDAQ:AMZN) by 1893% during Q2, holding 9.1 million of its shares having a worth of $967 million.
Baron Funds discussed Amazon.com, Inc. (NASDAQ:AMZN) in the second quarter investor letter. Here is what Baron Funds specifically said about Amazon.com, Inc. (NASDAQ:AMZN) in its Q2 2022 investor letter:
“Amazon.com, Inc. (NASDAQ:AMZN) is the world’s largest retailer and cloud services provider. Shares of Amazon declined 35% in the quarter due to weaker-than-expected profits resulting from an overcapacity of resources coming out of COVID. We expect Amazon to grow into its retail capacity in the quarters to come, which would enable it to improve profitability accordingly. Amazon remains one of our largest holdings due to its durable competitive advantages with a leading position in multiple trillion-dollar markets with a long runway for growth.
According to the U.S. Census Bureau, domestic e-commerce was only 14.3% of retail as of the first quarter of 2022. Internationally, the opportunity is even earlier as Amazon has still less than 2% market share of international retail spending. Its advertising share is roughly 3% and growing, underpinned by its structural closed loop, which enables accurate targeting and measurement.
Lastly, Amazon Web Services or AWS, remains the leading cloud provider, while cloud computing still represents only 9.5% out of the $4.3 trillion of global IT spending according to Gartner. Areas such as logistics and health care present additional optionality.”
02. Microsoft Corporation (NASDAQ:MSFT)
Adage Capital Management’s Stake Value: $2,037.649 million
Percentage of Adage Capital Management’s Portfolio: 4.67%
Number of hedge fund holders: 258
As of Q2, Microsoft Corporation (NASDAQ:MSFT) comprises 4.67% of Adage Capital’s 13F portfolio. It holds 7.9 million Microsoft Corporation (NASDAQ:MSFT) shares worth roughly $2.03 billion. For Q2, Ken Fisher’s Fisher Asset Management is the largest shareholder holding 28.69 million Microsoft Corporation (NASDAQ:MSFT) shares valued at $7.36 billion. At the end of the second quarter of 2022, 258 hedge funds in the database of Insider Monkey held stakes in Microsoft Corporation (NASDAQ:MSFT) worth roughly $56 billion, compared to 259 in the preceding quarter worth around $66 billion.
John DiFucci, an analyst with Guggenheim, began covering Microsoft Corporation (NASDAQ:MSFT) on August 11 with a Neutral rating and a $292 price target. While he sees potential for growth in Azure and Office Commercial 365 to sustain Microsoft Corporation’s (NASDAQ:MSFT) revenue and free cash flow, he also sees an ongoing decline in Windows users that is “not fully reflected in consensus estimates.”
In its Q2 2022 investor letter, Baron Durable Advantage Fund mentioned Microsoft Corporation (NASDAQ:MSFT) and explained its insights for the company. Here is what the fund said:
“Shares of Microsoft Corporation, a leading global provider of software solutions, declined 16.6% in the quarter along with the broader software group as well as due to growing concerns of a potential macro-driven slowdown. This is despite the company posting strong quarterly financial results and successfully absorbing headwinds from the war in Ukraine. The company had 21% revenue growth, 23% operating income growth, and 35% growth in Microsoft Cloud (all year-over-year in constant currency), which now represents 47% of total revenues.
As discussed above, we continue to believe Microsoft remains a durable and growing business as companies across all industries look to digitally transform, taking advantage of the continuously expanding solution set Microsoft has to offer.”
01. Apple Inc. (NASDAQ:AAPL)
Adage Capital Management’s Stake Value: $2,174.211 million
Percentage of Adage Capital Management’s Portfolio: 4.98%
Number of hedge fund holders: 128
According to Insider Monkey’s Q2 data, Apple Inc. (NASDAQ:AAPL) was found in the public stock portfolios of 128 hedge funds, with collective stakes in the company worth $143 billion. This is compared to 131 hedge funds holding a stake in Apple Inc. (NASDAQ:AAPL), worth roughly $182 billion in the previous quarter. Warren Buffett’s Berkshire Hathaway is the largest shareholder of Apple Inc. (NASDAQ:AAPL), holding 894 million of its shares worth $122 billion. As of Q2, 2022, Adage Capital holds 15.9 million shares of Apple Inc. (NASDAQ:AAPL), valued at $2.17 billion. The stake comprises 4.98% of its 13F portfolio.
On September 20, following the company’s study of around 4,000 people indicating their plans to purchase an iPhone, Evercore ISI analyst Amit Daryanani increased his price target on Apple to $190 from $185 and kept an Outperform rating on the shares. According to the poll, demand for high-end models is “notably higher” than it was in previous years, according to Daryanani, who is raising his iPhone revenue projections for the following four quarters in light of the survey’s findings of stronger than anticipated average selling prices. Although he anticipates “modest unit upside” in comparison to low-single digit Street predictions, Daryanani warned that average selling prices “could surprise materially.”
In the second quarter investor letter, Alger Capital discussed Apple Inc. (NASDAQ:AAPL). Here is what the fund said:
“Apple Inc. (NASDAQ:AAPL) is a leading technology provider in telecommunications. computing and services. Apple’s iOS operating system is the company’s unique intellectual property and competitive strength. This software drives extremely tight engagement with consumers and enterprises. The engagement is fostering the growing purchase of high-margin services like music, apps, and apple pay. Apple’s shares detracted from performance as management lowered its guidance for the second quarter due to headwinds from the war in Ukraine, adverse foreign currency shifts, and dampened consumer demand associated with the coronavirus in China. Additionally, many investors were concerned that lockdowns implemented to curtail the spread of COVID-19 would impact the production of apple products, however, the manufacturing facilities have resumed activity.”
You can also take a look at 10 High-Yield Dividend Stocks for Stable Income and 10 Dividend Stocks to Buy According to Billionaire Cliff Asness.
