In this article, we discuss 5 best value stocks according to hedge funds. If you want to read about some more stocks that hedge funds like, the risk/reward and methodology of this list, go directly to 10 Best Value Stocks to Buy Now.
5. Johnson & Johnson (NYSE:JNJ)
Number of Hedge Fund Holders: 83
Johnson & Johnson (NYSE:JNJ), a market-leading healthcare conglomerate, is considered a value stock by many investors given its forward P/E ratio of 15.37. Although rising interest rates could lower earnings valuations, Johnson & Johnson (NYSE:JNJ) has pricing power that could increase earnings.
For its fiscal 2022 second quarter results, the company surpassed the Wall Street consensus by $195.47 million and earned revenue of $24.02 billion, an increase of 3.04% year over year. The company’s $2.59 earnings per share beat the forecasts by $0.04.
At the end of the second quarter of 2022, 83 hedge funds were bullish on Johnson & Johnson (NYSE:JNJ) and held stakes worth $6.76 billion.
Here is what asset management firm, Mayar Capital, had to say about Johnson & Johson (NYSE:JNJ) in its second-quarter 2022 investor letter:
J&J is currently our largest position and a long-standing holding. The majority of the group’s sales comes from its collection of pharmaceutical franchises, but a large majority (~45%) comes from its collection of medical device businesses and its consumer brands.
Here’s how JNJ make and spend a dollar of revenues: As of 2021, about 55 cents of that dollar comes from its pharmaceutical sales – sales of drugs to pharmacies and distributors – while 30 cents come from the sale of medical devices, such as surgery equipment and orthopaedics. The rest of that dollar in sales comes from sales of JNJ’s consumer brands such as Listerine mouthwash, Nicorette nicotine tablets and Neutrogena cosmetics.
To make that dollar, however, JNJ typically spends about 25 cents to make the products themselves and another 27 cents on marketing and general administrative functions. This leaves JNJ with about 48 cents on the dollar in profit…(Click here to see the full text).
4. UnitedHealth Group Incorporated (NYSE:UNH)
Number of Hedge Fund Holders: 91
UnitedHealth Group Incorporated (NYSE:UNH) is an American multinational healthcare and insurance company. Although its stock has increased less than 3% year to date, UnitedHealth Group Incorporated (NYSE:UNH) has outperformed the Dow Jones index, which is down more than 13%.
Given the company’s business prospects, many analysts are bullish. Ann Hynes, a Mizuho analyst, maintained a Buy rating on the stock in August and increased the firm’s price target for UnitedHealth Group Incorporated (NYSE:UNH) from $550 to $600 following the company’s ‘strong’ Q2 results.
At the end of Q2 2022, 91 hedge funds held positions in UnitedHealth Group Inc. (NYSE:UNH). The total stakes of these hedge funds amounted to $10.90 billion.
3. Bank of America Corporation (NYSE:BAC)
Number of Hedge Fund Holders: 99
Based in North Carolina, Bank of America Corporation (NYSE:BAC) is a multinational investment bank that offers financial services. Although big banks are sensitive to economic trends such as potential recessions which could send the stock lower in the next few years, Bank of America Corporation (NYSE:BAC) is still considered a value stock in the long term given the company’s market share in banking and its price to book ratio of 1.13.
Many hedge funds like the stock. According to Insider Monkey’s Q2 data, 99 hedge funds had stakes in Bank of America Corporation (NYSE:BAC). Warren Buffett’s Berkshire Hathaway had the largest numbers of shares in Bank of America Corporation (NYSE:BAC) worth $31.44 billion.
2. JPMorgan Chase & Co. (NYSE:JPM)
Number of Hedge Fund Holders: 104
JPMorgan Chase & Co. (NYSE:JPM) is an American global investment bank and financial services holding company.
Although its earnings and stock could decrease if a recession occurs, JPMorgan Chase & Co. (NYSE:JPM)’s long term earnings potential nevertheless makes it a value stock. In July, Peter Richardson of Berenberg wrote that JPMorgan Chase & Co. (NYSE:JPM) shares traded at a 20% discount to their long term average. In July, shares of JPMorgan Chase & Co. (NYSE:JPM) traded for around what they’re trading now.
Given JPMorgan Chase & Co. (NYSE:JPM)’s strong businesses, many hedge funds like the stock. According to Insider Monkey’s Q2 data, 104 hedge funds had stakes in JPMorgan Chase & Co. (NYSE:JPM). The total value of the holdings is $5.80 billion.
Fisher Asset Management is the largest shareholder in JPMorgan Chase & Co. (NYSE:JPM) with shares worth $899.69 million.
1. Berkshire Hathaway Inc. (NYSE:BRK-B)
Number of Hedge Fund Holders: 109
Berkshire Hathaway Inc. (NYSE:BRK-B) is a conglomerate holding company that operates in the industries of insurance, freight rail transportation, and utilities.
Given the company’s CEO, Warren Buffett, is known as the ultimate value investor, many investors also regard Berkshire Hathaway Inc. (NYSE:BRK-B) as a value stock.
Berkshire Hathaway Inc. (NYSE:BRK-B) has many businesses that have pricing power if inflation rises and the company also has many businesses that have strong growth prospects over the next ten years. According to Insider Monkey’s Q2 data, 109 hedge funds had stakes in Berkshire Hathaway Inc. (NYSE:BRK-B). The total value of the holdings is $17.30 billion.
You can also take a look at Simon Sadler’s Segantii Capital is Bullish on These 10 Stocks and 10 Best Stocks to Buy Now According to Billionaire Andreas Halvorsen.
