Below we present the list of 5 Best Spring Stocks To Buy Now. For our methodology and a more comprehensive list please see 12 Best Spring Stocks To Buy Now.
5. The Charles Schwab Corporation (NYSE:SCHW)
Number of Hedge Fund Shareholders: 89
The Charles Schwab Corporation (NYSE:SCHW) reached a new all-time high in hedge fund ownership during Q1 among the select group of funds tracked by Insider Monkey. The company has become increasingly more popular with hedge funds over the years and now ranks ahead of industry titans like Citigroup and Wells Fargo as a result.
The Charles Schwab Corporation (NYSE:SCHW) shares are down by 38% this year, largely on fears that the brokerage firm would follow in the path of SVB Financial and Signature Bank due to clients migrating their cash to institutions seen as bigger and safer. While Charles Schwab’s deposits did shrink by 11% in the first quarter, the company nonetheless grew revenue by 10% and net income by 14% year-over-year during the quarter, as its strong brokerage activity more than outweighed the drop in its personal banking segment.
Baron Asset Fund believes The Charles Schwab Corporation (NYSE:SCHW) is well positioned to continue growing earnings long-term, as outlined in its Q1 2023 investor letter:
“Shares of online brokerage firm The Charles Schwab Corporation (NYSE:SCHW) declined during the quarter following the failure of SVB that led to weakness in Financials generally and particularly in regional banks. We do not believe Schwab is at any risk of a potential solvency issue (or run on the bank). Despite running a much different business than SVB, Schwab is facing near-term deposit pressure through cash sorting in the wake of SVB’s collapse. As interest rates rose, Schwab customers continued to move their uninvested cash balances into higher-yielding money market funds. As cash balances at Schwab decrease, the company may need to raise short-term external funding, which is more costly than the customer cash balances being depleted. This trend has pressured its earnings estimates and contributed to the recent share price weakness. Nevertheless, we retain long-term conviction in the value of Schwab’s franchise. Despite dislocation in the financial system, Schwab saw accelerating net inflows year-to-date, gathering over $75 billion in new assets in just the first two months of 2023. We remain encouraged by the firm’s exceptional client loyalty levels, robust organic growth, and industry-leading operating expense per client assets. Schwab remains well positioned to retain client assets and increase long-term earnings growth, in our view.”
4. Bank of America Corporation (NYSE:BAC)
Number of Hedge Fund Shareholders: 95
Bank of America Corporation (NYSE:BAC) is only about half as popular among hedge funds as it was six years, but has maintained relatively flat levels of hedge fund ownership over the past three years. Warren Buffett’s Berkshire Hathaway and Ric Dillon’s Diamond Hill Capital are two of biggest Bank of America shareholders in our database, with Berkshire owning over 1.03 billion shares.
According to Bank of America Corporation (NYSE:BAC)’s Q1 2023 Earnings Call Transcript, payments from customers’ accounts grew by 9% in March and by 8% during Q1, and the investment bank characterized their financial position as relatively healthy. The bank’s overall revenue rose by 13% during Q1, while its net interest income was up by 25%. In contrast to the small deposit flight from Charles Schwab in Q1, Bank of America further noted that about 80% of its deposit balances in the U.S. are held by customers who’ve been with the company for at least a decade.
Oakmark Equity and Income Fund believes Bank of America Corporation (NYSE:BAC) to be one of the best managed companies in the finance sector, as it revealed in its Q1 2023 investor letter:
“The Oakmark Equity and Income Fund has 29% of its equity portfolio in financials. This made the March sell-off painful, but we do not believe that this has meaningfully changed the value of most of our financial equity holdings. In fact, we were adding to financial positions throughout March. We believe that one way to analyze our financial holdings is to look at them in different buckets given their various business models and risk profiles. Almost 30% of our financial exposure is in insurance companies and insurance brokers. Insurance companies have very stable liability profiles, so the main risk is a change in asset values. We are comfortable with their investment portfolios and think these stocks are quite attractive. Around 5% of our financials are asset managers. This leaves a little over 40% of the financials exposure in a varied group of banks and lenders. About 5% of that portfolio is in Bank of America Corporation (NYSE:BAC) and State Street. These two banks are designated as Systematically Important Financial Institutions and are held to higher regulatory standards. Our largest single financials holding is Bank of America, which has grown deposits during March, and we believe it is one of the best managed companies in the sector.”
3. PayPal Holdings, Inc. (NASDAQ:PYPL)
Number of Hedge Fund Shareholders: 102
PayPal Holdings, Inc. (NASDAQ:PYPL) is another stock that’s lost a lot of hedge fund ownership in recent years. 160 funds were long PYPL in Q3 of 2022, which had fallen to just 102 by the first quarter of this year. With the pandemic-related e-commerce tailwinds having subsided and mounting concerns about consumer spending in the near-term, it’s not surprising that many funds have been looking to park their money elsewhere for now.
That said, PayPal Holdings, Inc. (NASDAQ:PYPL) is starting to look more attractive from a valuation perspective, with the stock now being 80% off its all-time highs. It may no longer be a high-growth stock, forecasting for just 7% revenue growth in Q2, but it does generate a solid amount of free cash flow, with a FCF yield that stands at 6%.
The Renaissance Large Cap Growth Strategy likes the easier upcoming comps for PayPal Holdings, Inc. (NASDAQ:PYPL), as it discussed in its Q4 2022 investor letter:
“Another underperformer in the quarter was PayPal Holdings, Inc. (NASDAQ:PYPL). Despite reporting solid third quarter operating results and announcing new payment agreements with both Apple and Amazon.com, the company guided for a slowdown in e-commerce activity, partly reflecting weakened consumers who are dealing with heightened inflation. However, we still expect growth in PayPal’s core payments platforms to improve in upcoming quarters, driven by easier year-over-year comparisons.”
2. JPMorgan Chase & Co. (NYSE:JPM)
Number of Hedge Fund Shareholders: 118
Hedge fund ownership of JPMorgan Chase & Co. (NYSE:JPM) rose by 15% during Q1, vaulting the company into second place on our list of the best spring stocks to buy now. JPMorgan has had remarkably steady levels of hedge fund ownership over the years, with no less than 92 and no more than 132 funds long the stock during any quarter over the past ten years.
One of the 15 Most Acquisitive Public Companies in the US, JPMorgan Chase & Co. (NYSE:JPM) has made more than 160 acquisitions since 2000, with its latest being the acquisition of First Republic after the lender was seized by regulators and sold to the investment bank. JPMorgan snagged a great deal in the FDIC’s rush to unload First Republic, acquiring about $18 billion in net assets for the $10.6 billion sticker price.
Giverny Capital made no qualms about JPMorgan Chase & Co. (NYSE:JPM) being the best-managed bank in America in its Q1 2023 investor letter:
“This quarter marked the end of our third year in business. It has been a wild ride – launching at the start of the pandemic, watching a bubble in low-quality stocks and cryptocurrencies inflate and deflate, and generally living with a high level of volatility. On April 14, our holding JPMorgan Chase & Co. (NYSE:JPM) announced nice earnings for the first quarter and the stock rose 7%. In a truly efficient market, the largest, best-managed bank in America would not rise or fall 7% on a single data point. Yet, we see it regularly.”
1. Mastercard Incorporated (NYSE:MA)
Number of Hedge Fund Shareholders: 140
Mastercard Incorporated (NYSE:MA) is one of hedge funds’ ten favorite stocks and another favorite of Warren Buffett. The Oracle of Omaha’s $1.45 billion stake in the company is outdone only by Charles Akre’s Akre Capital Management, which has a $2.13 billion position in Mastercard and nearly 19% exposure to the stock in the fund’s 13F portfolio.
Mastercard Incorporated (NYSE:MA) continues to grow at an impressive clip, with processed gross volume dollar growth at 15% in Q1, down only slightly from 17% a year earlier. That lead to net revenue growth of 11% year-over-year at $5.7 billion, despite a 3 percentage point impact from unfavorable exchange rates. And with the global digital payments market expected to grow by more than 50% to $14.8 trillion by 2027, there’s no indication that Mastercard will slow down anytime soon.
Polen Global Growth Strategy considers Mastercard Incorporated (NYSE:MA) a high conviction position, as it revealed in its Q1 2023 investor letter:
“We trimmed Mastercard Incorporated (NYSE:MA) and Visa to equal weights of the Portfolio. Mastercard and Visa operate as a duopoly in a large and growing market. Over the last 50 years, global personal consumer expenditures (PCE) has grown 7-9% annualized. We expect 4-5% long-term PCE growth going forward. Additionally, the shift from cash to credit continues unabated, with a total credit penetration of only approximately 50% globally.3 This shift provides Visa and Mastercard with another ~4-6% of growth. When combined with PCE, this gives both companies high-single-digit to low-double-digit revenue growth opportunities. This growth estimate is before accounting for growth amplifiers like the acceleration of e-commerce, the shift from offline to online, and additional services. Both companies enjoy extremely strong network effects that provide strong competitive advantages.
We have trimmed Visa and Mastercard because their combined weight grew to over 12% of the Global Growth Portfolio because of their recent performance and to fund our increase in Amazon’s position size. We added to both positions when their prices were depressed due to cross-border transactions deteriorating materially from the pandemic. Cross-border volumes came roaring back when travel corridors reopened, and although we are several quarters removed from the cross-border nadir, Visa still grew volumes >30% in 1Q23. Total cross-border volumes are now 132% of 2019 levels. At 4.5% each, both companies remain high conviction positions for Global Growth.”
Insider Monkey focuses on uncovering the best investment ideas of hedge funds and insiders. Please subscribe to our free daily e-newsletter to get the latest investment ideas from hedge funds’ investor letters by entering your email address below. For more of the latest stock picks worth considering for your portfolio, check out Top Supersonic Travel Companies in the World and Top 20 Online Shopping Websites in USA in 2023.
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