In this article, we discuss the 5 best Dow stocks to buy according to hedge funds. For a detailed analysis of these stocks, go directly to 12 Best Dow Stocks To Buy According To Hedge Funds.
5. The Walt Disney Company (NYSE:DIS)
Number of Hedge Fund Holders: 101
The Walt Disney Company (NYSE:DIS) is an American multinational entertainment and media corporation, founded by Walt Disney in California in 1923. The media giant is popular for its film division, The Walt Disney Studios, which includes flagship media brands like Walt Disney Pictures, Walt Disney Animation Studios, Pixar, and Marvel Studios, among others. Disney World is another production of the media conglomerate that has visitors from around the globe. The Walt Disney Company (NYSE:DIS) has been an immensely popular Dow stock since 1991, and it is highly sought-after by hedge funds.
On November 10, the company posted its Q3 results, announcing an EPS of $0.38, missing estimates by $0.12. The revenue for The Walt Disney Company (NYSE:DIS) totaled $18.53 billion, missing the estimated revenue by $231.82 million.
At the end of September, 101 hedge funds were bullish on The Walt Disney Company (NYSE:DIS), down from 112 funds in Q2.
Wells Fargo analyst Steven Cahall on January 4 noted that the past few months have shown that The Walt Disney Company (NYSE:DIS) will likely face some serious content obstacles if it is to meet its fiscal 2024 subscriber guidance. Given the company’s history in delivering good content, the analyst thinks it’s an attractive setup, naming it his “favorite large-cap growth idea for 2022.” The analyst has an Overweight rating and a price target of $196 on the shares.
Here is what RiverPark Funds has to say about The Walt Disney Company (NYSE:DIS) in its Q2 2021 investor letter:
“DIS shares declined for the quarter, taking a pause after a big fourth quarter and first quarter stock price advance, as Disney+ subscriber numbers were disappointing to investors. Disney+, the company’s DTC streaming business, had blown past previous subscriber projections, having gone from zero to 104 million in 17 months, but investors were now expecting 109 million subscribers. Management still expects significant continued growth to 230-260 million subscribers in 2024.
DIS is blessed with a deep library of unique content that includes both live sports (providing large, non-time shifted audiences) and incomparable brands including Disney, Marvel, Pixar and Lucasfilm, as well as the ABC network. The company also has a wealth of upcoming new content, expecting over 100 original titles per year, including two new Star Wars spin-off series, 10 Star Wars films, 10 Marvel films, 15 Disney and Pixar films and 15 Disney and Pixar series.
Now that the disruption in its theme park, cruise and theatrical businesses appears to be coming to an end, we believe that Disney is among the best-positioned media companies in the new landscape to combine multi-channel and DTC distribution. We also note that DIS has an extremely strong balance sheet and a growing pool of free cash flow to be used both to return to shareholders and to invest in future opportunities.”
4. salesforce.com, inc. (NYSE:CRM)
Number of Hedge Fund Holders: 119
salesforce.com, inc. (NYSE:CRM) is one of the top Dow stocks to buy now, according to hedge funds. salesforce.com, inc. (NYSE:CRM) is a software company from California, recognized for its cloud-based solutions. The company is a customer relationship management (CRM) service, provider. salesforce.com, inc. (NYSE:CRM)’s has applications that offer services including marketing automation, customer service, application development, and data analytics. The acquisition of Slack for $27.7 billion on July 21 was a tactical move on salesforce.com, inc. (NYSE:CRM)’s part, since it greatly contributed to the company’s profit margins.
Out of the 867 hedge funds monitored keenly by Insider Monkey as of Q3 2021, 119 funds were long salesforce.com, inc. (NYSE:CRM), up from 108 hedge funds in the previous quarter.
salesforce.com, inc. (NYSE:CRM) issued its earnings report for the third quarter of 2021 on November 23. The reported EPS was $1.27, beating estimates by $0.35. The company’s revenue of $6.86 billion also exceeded the estimated revenue by $59.66 million.
Rishi Jaluria, an RBC Capital analyst, kept an Outperform rating on salesforce.com, inc. (NYSE:CRM) on September 24. He raised the price target to $325 from $310. According to Jaluria, salesforce.com, inc. (NYSE:CRM) is a market leader in several areas, and Dreamforce and Slack will add to its next year’s margins significantly.
RV Capital Management mentioned salesforce.com, inc. (NYSE:CRM) in its Q2 2021 investor letter. Here is what they had to say:
“Part 5: A New Investment in Salesforce.com
The assertion that mega caps can also be mispriced is a good segue to our second new investment in Salesforce.com. Salesforce is one of the largest software companies in the world with a market value of around US$ 250 bn. It is best known for its customer relationship management or “CRM” solution, known as its Sales Cloud. It has three additional clouds (“Service,” “Marketing” and “Commerce”) as well as a thriving platform business with both owned and 3rd party software solutions.
I first came across Salesforce in 2013. I was invested in Bechtle, a German company that provides companies with their in-house IT. I kept hearing about a strange new concept called “the Cloud” and wanted to get up to speed on the topic in case it was a risk to Bechtle. As a result, I picked up a copy of “Behind the Cloud”. It documents how Salesforce.com pioneered cloud-based software and revolutionised the software industry.
Since then, I have followed Salesforce from a distance and visited it several times in San Francisco. I did not consider it seriously as an investment though as for much of the period, I had not yet overcome my aversion to loss-making companies.
This changed in December last year when Salesforce announced the acquisition of Slack (a former investment of the Business Owner Fund, described in my 2020 half-year letter) for US$ 27 bn. On the date of announcement, Salesforce’s market value fell by around US$ 20 bn. Effectively, the market was saying that Slack was almost worthless, which, as an enthusiastic owner of Slack, I disagreed with. Initially, I decided to keep our Slack stock and roll it into Salesforce (as part of the consideration was in Salesforce’s own stock). As Salesforce’s price fell further in the subsequent months, I bought its stock directly to make it a full-size position post the closing of the Slack acquisition…” (Click here to see the full text)
3. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 120
Apple Inc. (NASDAQ:AAPL) is the next stock on our list of the best Dow stocks to buy according to hedge funds. Apple Inc. (NASDAQ:AAPL) is an American multinational tech company, which is also the most valuable brand worldwide as of 2021. It is one of the Big Five Tech companies in the US, along with Amazon.com, Inc. (NASDAQ:AMZN), Alphabet Inc. (NASDAQ:GOOG), Facebook, Inc. (NASDAQ:FB), and Microsoft Corporation (NASDAQ:MSFT). Apple Inc. (NASDAQ:AAPL) offers consumer electronics, computer software, and online services.
The tech giant is widely favored by smart money. 120 hedge funds tracked by Insider Monkey were bullish on Apple Inc. (NASDAQ:AAPL) at the end of September, down from 138 in the previous quarter.
The company reported earnings for Q3 on October 28. The quarterly EPS for Apple Inc. (NASDAQ:AAPL) totaled $1.27, in line with analysts’ estimates. The revenue for the tech giant was $83.36 billion, missing estimates by $1.62 billion.
On October 15, Amit Daryanani, an Evercore ISI analyst, kept an Outperform rating on Apple Inc. (NASDAQ:AAPL), setting a price target of $180. He stated that Apple Inc. (NASDAQ:AAPL) had true potential to expand in the digital advertising market in the near future.
ClearBridge Investments mentioned Apple Inc. (NASDAQ:AAPL) in its Q1 2021 investor letter. Here is what they said:
“As we actively manage holdings and position sizes, we look to regularly recycle capital into more compelling opportunities. Maintaining our valuation discipline, we sharply reduced our position in Apple, whose shares more than doubled following our initial purchase in mid-2019 with an earnings multiple rising from the low-to-mid teens to nearly 30x.”
2. Visa Inc. (NYSE:V)
Number of Hedge Fund Holders: 143
Visa Inc. (NYSE:V) is an American multinational financial services company from California. It enables the transfer of funds digitally on a global level, via Visa Inc. (NYSE:V) credit cards, debit cards, and prepaid cards. Visa Inc. (NYSE:V) is one of the world’s most valuable companies that was launched by the Bank of America in 1958. Visa Inc. (NYSE:V) is traded as a S&P 100 and DJIA Component, and is one of the most popular Dow stocks among hedge funds.
As of the end of the third quarter, 143 hedge funds in Insider Monkey’s database of 867 elite funds reported owning stakes in Visa Inc. (NYSE:V), worth $26.1 billion. This is compared to 162 funds holding stakes valued at $27.6 billion in Visa Inc. (NYSE:V) in the preceding quarter
On October 26, Visa Inc. (NYSE:V) posted its Q3 financial results, announcing earnings per share of $1.62, up $0.08 as compared to estimates. Visa Inc. (NYSE:V)’s revenue came in at $6.56 billion, exceeding estimates by $45.89 million.
UBS analyst Rayna Kumar on November 17 assumed coverage of Visa Inc. (NYSE:V) with a Buy rating and a $275 price target. The analyst noted that Visa Inc. (NYSE:V) trades at an attractive valuation and has a leading position in mature areas, along with share gains in many markets that will “drive low teens revenue growth and high teens EPS gains”.
Here is what Qualivian Investment Partners has to say about Visa Inc. (NYSE:V) in its Q3 2021 investor letter:
“What Attracts Us
Superior Business:
- Wide moat business with high barriers to entry:
− Duopoly with top 2 players (Mastercard/VISA) owning 68% share of credit and 94% of debit transactions
− A double sided financial transaction network with scale on each end
- High returns on equity (21.8%) and low levels of capital expenditure compared to sales (3.4%)
- Recurring revenue stream:
⎼ Toll booth based on transaction volumes
- Top security platform versus cyber fraud
Superior Reinvestment Opportunities:
- Long Runway: Secular cash to electronic payment trends supporting double digit growth in demand for the foreseeable future
Superior Management / Capital Allocation:
- Consistent deployment of excess cash flow towards value accretive acquisitions (V Europe), dividends and opportunistic share repos…” (Click here to see the full text)
1. Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders: 250
Microsoft Corporation (NASDAQ:MSFT) is an American multinational tech corporation, popular for its computer software, consumer electronics, personal computers, and related services. The company is widely recognized for Microsoft Windows, the Microsoft Office suite, Internet Explorer, and Microsoft Edge browsers.
Out of the 867 hedge funds monitored by Insider Monkey’s extensive database, 250 funds were long Microsoft Corporation (NASDAQ:MSFT) in the third quarter, with stakes totaling $65.8 billion, up from 238 funds in the previous quarter, with stakes amounting $62.4 billion.
Microsoft Corporation (NASDAQ:MSFT) announced its Q3 results on October 26, posting an EPS of $2.27, exceeding estimates by $0.19. Revenue for the quarter totaled $45.32 billion, outperforming estimates by $1.33 billion.
Jefferies analyst Brent Thill on January 6 raised the price target on Microsoft Corporation (NASDAQ:MSFT) to $400 from $375 and kept a Buy rating on the shares.
Baron Opportunity Fund mentioned Microsoft Corporation (NASDAQ:MSFT) in its Q2 2021 investor letter. Here is what the fund said:
“Shares of Microsoft Corporation, a cloud-software leader and provider of software productivity tools and infrastructure, rose during the quarter following a strong earnings report highlighting solid demand for its broad product stack and continued momentum migrating its business to the cloud. Microsoft was a top contributor in the period because it trades at reasonable free cash flow and earnings valuations, has cloud and digital transformation tailwinds at its back, reported a solid March quarter, and beat Street expectations by a wide margin. Microsoft’s results continued to be strong across the board, with Azure cloud computing revenues up 46% in constant currency (“cc”) terms and commercial cloud bookings growth of 38% cc, the best in years. Microsoft also reported robust profitability growth, with operating income expanding 31% and GAAP earnings up 45%. We believe the company is well positioned for continued solid growth and profitability through market share gains as more companies look to transform and digitize their businesses as they move operations to the cloud.”
You can also take a look at 12 Best Long-Term Dividend Stocks To Buy Now and 10 Best Stocks to Buy According to Peter Lewis’ LFL Advisers.
