In this article, we discuss 5 best wide moat stocks to buy according to hedge funds. If you want to see more best wide moat stocks to buy according to hedge funds, the risk/reward, and methodology of this list, go directly to 12 Best Wide Moat Stocks to Buy According to Hedge Funds.
5. Mastercard Incorporated (NYSE:MA)
Number of Hedge Fund Holders: 146
Mastercard Incorporated (NYSE:MA) has a wide moat given the payments industry is essential a duopoly with Visa Inc. (NYSE:V) being the only other dominant company. With a duopoly, there is opportunity for higher margins and more predictable financial performance. In addition, Mastercard Incorporated (NYSE:MA) benefits from having powerful network effects that help keep many merchants and customers using the payment network.
146 hedge funds in our database owned shares of Mastercard Incorporated (NYSE:MA) at the end of the third quarter, ranking the stock #5 on our list of 12 Best Wide Moat Stocks to Buy According to Hedge Funds.
4. Visa Inc. (NYSE:V)
Number of Hedge Fund Holders: 165
Visa Inc. (NYSE:V) is the leading payments network processor that benefits powerful network effects that has helped the company remain profitable despite the recession in 2009 and 2020. In 2009, for instance, Visa Inc. (NYSE:V) earned $0.51 per share and in 2020, the company earned $4.38 per share.
In terms of the future, analysts estimate Visa Inc. (NYSE:V) will earn $7.42 per share in 2022, $8.30 per share in 2023, $9.62 per share in 2204, and $10.97 per share in 2025.
3. Meta Platforms, Inc. (NASDAQ:META)
Number of Hedge Fund Holders: 177
Meta Platforms, Inc. (NASDAQ:META) has many competitive advantages given its over 3 billion users across its family of apps, its network effects, and its substantial earnings power. In addition, Meta Platforms, Inc. (NASDAQ:META) also has leading AI technology that could potentially help it grow earnings in the future.
ClearBridge Investments commented on Meta Platforms, Inc. (NASDAQ:META) in a Q3 2022 investor letter,
We initiated a new position in Meta Platforms, Inc. (NASDAQ:META), in the communication services sector, which operates the Facebook and Instagram social media platforms and is a leading digital advertising provider. We have been carefully watching the company over the last few quarters and believe headwinds from lower monetizing in Facebook and Instagram Reels and pressures from consumer privacy measures are poised to lessen. We believe the company has begun to fully acclimate to this new environment, will achieve greater effectiveness in Reels monetization and find ways to adapt to new privacy standards which will rebound advertising efficiency. Combined with a greater focus on cost control, we believe these initiatives will help contribute to further margin expansion and leave the company well-positioned moving forward.
2. Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Fund Holders: 269
Amazon.com, Inc. (NASDAQ:AMZN) has substantial scale in e-commerce that’s very difficult for all but the largest retailers to compete with. As of June 2022, Amazon.com, Inc. (NASDAQ:AMZN) had 37.8% of the U.S. e-commerce market which allows the company to realize substantial revenues that management then uses a meaningful percentage to invest in technology and further building its brand.
With better technology and a greater brand, Amazon.com, Inc. (NASDAQ:AMZN) could realize even more profits in the long term.
1. Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders: 269
Even after multiple decades and the entry of free competitors like Linux, Microsoft Corporation (NASDAQ:MSFT)’s Windows still dominates the desktop PC operating system market with 76.33% market share as of June 2022 given its powerful network effects. Because Windows is the most used desktop operating system, more useful apps are built for Windows than for any other operating system. As a result, most buyers want a Windows desktop operating system even if it costs more than Linux.
Similarly, Microsoft Corporation (NASDAQ:MSFT) has a wide moat given its Microsoft Office productivity software, and the company is also growing in the cloud.
With 269 hedge funds owning shares of Microsoft Corporation (NASDAQ:MSFT) at the end of Q3, the stock ranks #1 on our list of 12 Best Wide Moat Stocks to Buy According to Hedge Funds.
Baron Funds commented on Microsoft Corporation (NASDAQ:MSFT) in a Q3 2022 investor letter,
Shares of Microsoft Corporation (NASDAQ:MSFT) pulled back with the overall software industry on the back of macroeconomic issues, including inflation concerns and rising interest rates. The company reported another strong quarter, highlighted by total revenues growing 16% on a constant currency basis and Microsoft Cloud revenues, now 48% of total sales, growing 33%, with Azure (Microsoft’s infrastructure cloud) growing 46%. These results were driven by strong demand for large commercial cloud contracts, as more businesses are standardizing on Microsoft’s platform and the company is signing larger and longer deals. Initial fiscal year 2023 guidance calls for healthy double-digit revenue and operating income growth. Both foreign exchange and personal computer headwinds were contemplated in the guidance and have continued to worsen, but we have conviction in the company’s strong competitive positioning, durable growth drivers, and margin expansion opportunity over the mid- to long term.
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