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5. The Procter & Gamble Company (NYSE:PG)
Number of Hedge Fund Holders: 69
The Procter & Gamble Company (NYSE:PG) makes and sells branded household products. Investors have been gravitating towards the safe haven offered by firms like The Procter & Gamble Company (NYSE:PG) as growth stocks undergo a prolonged period of turmoil. Jon Moeller, the CEO of the firm, said during the fourth quarter earnings call that strong demand and pricing power were driving growing revenues for the company.
Top hedge funds have consistently backed The Procter & Gamble Company (NYSE:PG) as a consumer defensive play. Among the hedge funds being tracked by Insider Monkey, London-based investment firm Cedar Rock Capital is a leading shareholder in The Procter & Gamble Company (NYSE:PG), with 7.4 million shares worth more than $1 billion.
4. NIKE, Inc. (NYSE:NKE)
Number of Hedge Fund Holders: 70
NIKE, Inc. (NYSE:NKE) makes and sells athletic products. The company has an impressive dividend history of 32 consecutive years of payouts to shareholders. The payout has grown consistently for the past nine years. On February 10, the firm declared a quarterly dividend of $0.305 per share, in line with previous. The forward yield was 0.84%.
NIKE, Inc. (NYSE:NKE) is one of the top sports stocks on Wall Street. Among the hedge funds being tracked by Insider Monkey, London-based investment firm Fundsmith LLP is a leading shareholder in NIKE, Inc. (NYSE:NKE), with 8.7 million shares worth more than $1.2 billion.
In its Q4 2020 investor letter, Dynamo Cougar, an asset management firm, highlighted a few stocks and NIKE, Inc. (NYSE:NKE) was one of them. Here is what the fund said:
“Nike used to have a very traditional IT infrastructure, which was the starting point for their transformation. Back in 2013 the company had most of their IT in one data center and two distinct IT and software development teams. The infrastructure was organized in a way that all IT solutions, such as Nike.com and Nike apps, were running on the same servers and databases. The result was that any change had to be approved and then deployed with the next release. It was a very manual process, depended on a number of different vendors, and had to be approved by a waterfall process involving both the software and the IT teams. As of 2018, the company has four AWS regions, 150 software engineers, three development locations, and multiple data center locations. In the process, the company decided that they would not just lift and shift their existing applications from their own servers to the public cloud, but instead decided to rethink every single component of their IT organization. The results show that this transformation worked. The organization went from one software deployment every two months to 2.6 deployments per day. Nike went from 90% manual software testing to 100% automated testing, which freed up a lot of developer time. They managed to reduce the time to make small changes on the website and apps from 3 hours to 5 seconds, which means they could react to sports and similar live events. In the past it took more than six months to add a new experience to their digital services, and today it takes one day. In the past they would have a 3-month lead time for new hardware and today they can scale and deploy without any lead time.5 The IT infrastructure now supports 50+ commerce countries versus 6 in 2012, supports 25 languages versus 7, and enables the e-commerce site to access the inventory of 500+ retail stores.
The early move to the cloud and the willingness to adapt to the new environment also allowed Nike to benefit from some significant learnings. For instance, the company first used the Cassandra database when they moved to the cloud. However, due to many technical limitations, it would not allow them to scale for peak demand. Peak demand was becoming a big problem because the Nike SNKRS App would launch products with very limited availability, which meant that millions of people would access the app at the same time. Nike then decided to move to the AWS DynamoDB database (a platform offering), which allowed them to scale up prior to these launches, and thereby spend 98% less than with Cassandra, while offering the same service. In addition, they managed to monitor the launches in real time, which allowed them to react to problems and error messages within seconds. The vast amount of data that is generated within this very short period is now analyzed with machine learning techniques to improve the stability, reliability, and optimization of future launches. The company is working on a number of other efforts that benefit from the cloud environment, such as the implementation of RFID whose data output is managed through the AWS IoT offering.
The benefits of this transformation to the consumer are clear. Nike can now deal with higher demand, deal with sudden spikes in orders, offer better product recommendations, offer more customization, provide better product fulfillment, and more. In addition, the company benefits from a leaner and more efficient IT organization, better product conversion, more feedback data from customers, social integration into products, and ultimately a more satisfied costumer. We think Nike’s continued investment into their modern IT stack will be a key differentiator for their competitive positioning.”
3. Walmart Inc. (NYSE:WMT)
Number of Hedge Fund Holders: 71
Walmart Inc. (NYSE:WMT) owns and runs retail stores. Elite hedge funds hold large stakes in the company. Among the hedge funds being tracked by Insider Monkey, Washington-based firm Bill & Melinda Gates Foundation Trust is a leading shareholder in Walmart Inc. (NYSE:WMT), with 7.6 million shares worth more than $1 billion.
On January 27, RBC Capital analyst Steven Shemesh initiated coverage of Walmart Inc. (NYSE:WMT) stock with an Outperform rating and a price target of $160, noting that consumer demand for 2022 will remain “elevated” and the firm was also well-positioned to offset inflation.
2. Merck & Co., Inc. (NYSE:MRK)
Number of Hedge Fund Holders: 77
Merck & Co., Inc. (NYSE:MRK) is a New Jersey-based healthcare firm. Among the hedge funds being tracked by Insider Monkey, Boston-based investment firm Arrowstreet Capital is a leading shareholder in Merck & Co., Inc. (NYSE:MRK), with 6.5 million shares worth more than $493 million.
Merck & Co., Inc. (NYSE:MRK) recently posted earnings for the fourth quarter of 2021, reporting earnings per share of $1.80, beating market estimates by $0.28. The revenue over the period was $13.5 billion, up over 23% year-on-year.
In its Q1 2021 investor letter, Artisan Partners highlighted a few stocks and Merck & Co., Inc. (NYSE:MRK) was one of them. Here is what the fund said:
“In Q1, we initiated a position in Merck, a provider of health care solutions including prescription medicines, vaccines, biologic therapies, animal health and consumer care products. We purchased Merck when the stock came under pressure in part on concerns that the newly minted Biden administration could implement regulatory changes and lower drug costs in the pharmaceutical industry. Recent, but anticipated changes to Merck’s management team have also weighed on shares, as have concerns over the company’s heavy reliance on immunotherapy treatment Keytruda. Notably, Merck is not getting much credit from investors for the 60+ programs it has in clinical development, despite having several solid and large new product opportunities. Additionally, the company’s strong balance sheet and robust free cash flow provide it multiple options for future partnerships and acquisitions. While Merck is undergoing a period of transition, we think the company’s fundamentals are strong and believe changes to management should be a catalyst for improvement.”
1. Johnson & Johnson (NYSE:JNJ)
Number of Hedge Fund Holders: 88
Johnson & Johnson (NYSE:JNJ) makes and sells healthcare products. On January 26, Raymond James analyst Jayson Bedford maintained an Outperform rating on the stock and raised the price target to $185 from $178, noting that strong 2022 guidance had trumped “softish” fourth quarter results for the firm.
Several top hedge funds hold bullish positions in Johnson & Johnson (NYSE:JNJ). At the end of the third quarter of 2021, 88 hedge funds in the database of Insider Monkey held stakes worth $6.8 billion in Johnson & Johnson (NYSE:JNJ), the same as in the previous quarter worth $7 billion.
You can also take a peek at 10 Companies that Benefit From Crypto Mining and 12 Best Artificial Intelligence Stocks To Invest In Right Now.
