In this piece, we will take a look at the stocks that hedge funds and mutual funds are in love with and those that they hate according to Goldman Sachs.
The surge in interest surrounding artificial intelligence has meant that the stock market in 2024 has continued to surprise. Just like most Wall Street analysts were left scratching their heads after worries of a recession proved to be unfounded, this year, analysts have continued to revise their year end targets of the flagship S&P index multiple times. Take the example of investment bank Goldman Sachs. Its latest index year end target was released in October, and as of now, the bank believes that the index will close at 6,000 points by the end of this year.
Before the October target, the bank had upped its year end estimate to 5,600 points in June. This was based on optimism for big tech stocks and the rush surrounding AI that continued to fuel them. This had added 400 points to the previous target of 5,200 points which was released in February, and this in turn had added 100 points to the previous upward revision of 5,100 over the first Goldman Sachs S&P year end target of 4,700 points.
Safe to say, the market has beaten expectations in 2024. Its recent value of 5,832 points leaves it just 2.8% shy of Goldman’s latest 2024 estimate. The index is up by 23.6% year to date, and to see just how much its returns have been driven by artificial intelligence, consider the fact that the Philadelphia Stock Exchange’s semiconductor stock index is up 27.8% year to date. AI, and particularly semiconductor stocks, continue to make their mark and the key question now is whether this performance will be sustained after the third quarter earnings season.
The Q2 season was nothing short of fireworks for some of the biggest AI names. Two firms in particular come to mind when we reminisce. The first is Wall Street’s AI darling which is known for making the best AI GPUs in the world, and the second is the firm behind Windows OS that has invested billions of dollars in the AI upstart OpenAI. Both these stocks did well in the first half of 2024 but pared back some of their gains in H2. Starting from the GPU company, its stock is up 186% year to date. However, from the peak in June which had marked 181% in YTD gains back then, the shares are up by a modest 1.84%. For the software company, the shares peaked at 26% year to date returns before the Q2 earnings season, and since the peak, they are down 10.4%.
The difference in their share price appreciation isn’t surprising even though it might appear to be so. Simply put, the reason the GPU maker has posted stronger returns is its products are the immediate need of the AI industry. On the other hand, the software company’s products are part of a later wave of AI which counts upon strong demand for AI products within the business world to enable it to turn a profit. Turning a profit is key since it has already invested billions of dollars into OpenAI. If you’re interested in learning more about the minutiae of AI investing, do check out Goldman Sachs’ Best Phase 2 AI Stocks: Top 24 High Conviction AI Stocks.
Shifting gears, within this dynamic stock market environment, mutual funds appear to be performing well. Research from BofA covering their performance for the first quarter shows that 64% of actively managed large cap US mutual funds beat their benchmarks. This was a sizeable jump over 38% of funds beating the benchmarks last year, with the bank speculating that a broadening of equities performance was part of the reason driving the returns. A study from The Wall Street Journal adds to this. It looks at the performance of large cap growth funds during H1 2024 and shares that the Magnificent 7 stocks drove large cap growth funds to the top of the mutual fund pyramid. The survey looked at 1,218 funds to determine that just 15% were in the red, with the average 12 month return of all the surveyed funds being 16.5%.
While on one end of the spectrum are the risk averse mutual funds, on the other, are hedge funds that chase alpha through leverage. This risk means that the funds can accumulate large losses that take years to recover from. This is the case for some of the funds, according to Goldman’s latest industry report. It shows that Tiger Global, Whale Rock, and Third Point which fell 50%+, 45%, and 21.8% in 2022 still haven’t recovered. In 2023, the three respective funds posted 28.5%, 18%, and 4.1%, while their performance through July was 10.7% and 10.9% for Tiger Global and Third Point and 18.9% through May for Whale Rock.
In fact, GS’ data shows that roughly one third of long-short funds are yet to recover their 2022 losses, as they are joined by 31% of event driven funds and 45% of macro driven funds. However, some of the top performing funds in the first half were Bridgewater Associates and Citadel, which posted 14.1% and 13.7% in returns respectively. The top performer among hedge funds appears to be AQR Capital with its long/short fund delivering 16.3% in returns.
So, with these details in mind, let’s take a look at the stocks that have mutual funds and hedge funds united and those that they love and hate.
A portfolio manager looking over the stock market, contemplating the strength of the publicly traded companies.
Our Methodology
To make our list of stocks that hedge funds and mutual funds love and hate, we divided Goldman’s Hedge Fund Trend Monitor and Mutual Fundamentals report into four categories. These categories are stocks that both avoid, stocks that both love, and stocks favored by one but avoided by the other. Stocks within these categories were ranked by the number of hedge funds that had bought the shares during Q2 2024. To learn more about the number of top hedge fund investments in some of these stocks, you can check out Goldman Sachs’ Best Hedge Fund Stock Picks: Top 20 Stocks.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
28. Moderna, Inc. (NASDAQ:MRNA)
Number of Hedge Fund Holders In Q2 2024: 39
Category: Shorted by HFs and underweight among mutual funds
Moderna, Inc. (NASDAQ:MRNA) is a biotechnology company that is best known for its coronavirus vaccine, Spikevax. However, with the virus now not being as threatening as before, the company is facing pressure to diversify its revenue base and increase global penetration of its existing products. Moderna, Inc. (NASDAQ:MRNA)’s two biggest sales generating products are its coronavirus vaccine and its respiratory tract vaccine mRESVIA. The firm is also developing new vaccines. Some of these include a flu vaccine and a combination flu and COVID vaccine in phase three trials, along with its new COVID vaccine that is also in phase three trials. However, these come at a cost, and as of Q2, Moderna, Inc. (NASDAQ:MRNA)’s research and development expenses sat at a whopping $4.6 billion on a trailing twelve month basis while its revenue was $4.98 billion. Consequently, the pressure to cut costs and break even is also high as the high R&D means that Moderna, Inc. (NASDAQ:MRNA) does not generate profit.
Moderna, Inc. (NASDAQ:MRNA)’s management commented on its cost reduction efforts during the Q2 2024 earnings call:
“You can see in our Q2 results that we had a 19% year-over-year reduction in SG&A spend due to efficiency gains. One of the main drivers for the year-over-year reduction in SG&A is from our commercial and medical affairs group. Over the past year, we have built our internal capabilities, which has allowed us to drive cost efficiencies by reducing our use of external consultants and other purchased services. We’ve also been more focused and targeted on how we invest in these areas to drive the strongest possible return on investment. As the endemic market has been more seasonal, we have shifted more of our commercial spend to the second half of the year. Additionally, our procurement team has successfully driven company-wide cost reductions in the first half of 2024.
Their primary focus has been on reducing third party supplier rates, and we have seen strong progress in contract rates for raw materials, components, clinical, travel, and consulting services. We continue to see strong adoption in artificial intelligence by our employees which will allow us to scale the business in an efficient manner with a digital-first mindset. For example, in the second quarter our HR team launched benefits and equity GPTs. These AI-driven assistants are designed to handle frequently asked questions previously directed to the HR operations team and allow us to scale efficiently.”
27. Chevron Corporation (NYSE:CVX)
Number of Hedge Fund Holders In Q2 2024: 64
Category: Shorted by HFs and underweight among mutual funds
Chevron Corporation (NYSE:CVX) is one of the biggest oil companies in the world. With operations in more than 180 countries and total assets of $260 billion, the firm is a giant in the global oil industry. Consequently, Chevron Corporation (NYSE:CVX)’s hypothesis depends on the trajectory of global oil prices and its ability to maintain production volumes and efficiency due to the presence of equally large rivals in the industry. Two key drivers for Chevron Corporation (NYSE:CVX) on the former front are its ability to generate returns through an oil project in Kazakhstan and the bid to acquire Hess Corporation to solidify its presence in the Permian Basin. Chevron Corporation (NYSE:CVX)’s Kazakhstan project is subject to OPEC production quotas while its Hess deal isn’t expected to close for another year. Therefore, oil prices can play a greater role in Chevron Corporation (NYSE:CVX)’s near term future, with trends in China being particularly important.
Carillon Tower Advisors mentioned Chevron Corporation (NYSE:CVX) in its Q4 2023 investor letter. Here is what the fund said:
“Chevron traded lower, along with oil prices, and issued a disappointing earnings announcement due to overseas refining losses. Separately, the company announced an agreement to buy another energy company with operations offshore of Guyana, as well as in North Dakota, the Gulf of Mexico, and the Gulf of Thailand. This is a strategic acquisition for very little takeout premium.”
26. Intel Corporation (NASDAQ:INTC)
Number of Hedge Fund Holders In Q2 2024: 75
Category: Shorted by HFs and underweight among mutual funds
Intel Corporation (NASDAQ:INTC) is the iconic American chip manufacturing giant that is widely heralded for having introduced the microprocessor to consumer markets. It is one of the oldest firms of its kind, but 2010 and onward have seen it struggle to compete globally. Intel Corporation (NASDAQ:INTC) is currently one of 2024’s worst performers as its shares are down 51% year to date. The drop has come on the back of lower profits, a dividend suspension, and an eager technology roadmap that is expected to yield results only in 2025 or beyond. Additionally, while semiconductor stocks have seen AI induced tailwinds, Intel Corporation (NASDAQ:INTC)’s lack of a strong GPU product to compete with either NVIDIA or AMD has left the firm struggling to retain investor attention. Consequently, investors are now focused on Intel Corporation (NASDAQ:INTC)’s efforts to woo big ticket firms like NVIDIA with its contract manufacturing subsidiary and the firm’s 18A manufacturing process which promises to be the most advanced in the world once it launches.
ClearBridge Investments mentioned Intel Corporation (NASDAQ:INTC) in its Q3 2024 investor letter. Here is what the fund said:
“While the market environment clearly was a headwind in the third quarter, several of our large positions also faced challenging conditions, which negatively impacted results. In the information technology (IT) sector, Intel Corporation (NASDAQ:INTC) has come under additional pressure due to continued softness in the company’s core PC and server markets as well as concerns on the company’s longer-term competitive position. While Intel’s turnaround is not happening overnight, we are constructive on the outlook into 2025: the company’s product positioning should be much improved and it should be positioned to gain market share in a cyclical upswing in which it has strong earnings power. A somewhat adverse spending environment due to AI myopia has weighed on shares, but we still think the market is undershipping PCs and general servers following a COVID normalization period that saw demand get pulled ahead and then languish as companies froze IT budgets. The installed base is now getting older, and we expect a strong refresh cycle into next year. The delay is actually beneficial to Intel, whose product positioning will be all the more improved. While our investment case is not predicated on an M&A transaction, and we believe one is unlikely, the expression of interest in the company speaks to the value of the assets, which we think still trade at a meaningful discount to fair value.”
25. Tesla, Inc. (NASDAQ:TSLA)
Number of Hedge Fund Holders In Q2 2024: 85
Category: Shorted by HFs and underweight among mutual funds
Tesla, Inc. (NASDAQ:TSLA) is the world’s biggest pure play electric vehicle company. This means that the firm is significantly ahead of rivals when it comes to manufacturing efficiencies, but it also means that Tesla, Inc. (NASDAQ:TSLA) is at the mercy of electric vehicle demand. This effect is pronounced as 84% of the firm’s revenue comes through EV sales, and it makes it unsurprising that Tesla, Inc. (NASDAQ:TSLA)’s shares are down 11.78% year to date. Additionally, the narrative surrounding the firm has now diversified from simple manufacturing advantages to its ability to produce a low cost EV (dubbed the Model 2 or 2.5 by the market), its plans for FSD, and the Cybercab. Tesla, Inc. (NASDAQ:TSLA) needs to convince Wall Street that its plans have solid financial footing, or the shares could see more turbulence as they did after the firm’s We, Robot event which led to the stock tumbling by 8.8% as investor thirst for financial specifics was not quenched.
Baron Funds mentioned Tesla, Inc. (NASDAQ:TSLA) in its Q2 2024 investor letter. Here is what the fund said:
“As discussed in the Fund’s prior shareholder letter, the fears about Tesla’s products were misplaced. Instead of the company being exclusively dependent on limited vehicle models and software advancement, the company announced it will more rapidly introduce products that appeal to a wider audience. It also demonstrated that its price reductions were the result of efficiencies rather than only to spur demand. Margins exceeded expectations. And the company’s integration of its hardware with proprietary AI software should facilitate full self-driving capabilities and subsequent new revenue streams. This integration of hardware with software creates a dynamic growth company as it more fully explores its potential with Optimus, humanoid robotics. The combination of these catalysts resulted in Tesla’s stock increasing meaningfully and rapidly in the second half of the quarter. This stock price momentum has continued into the next period.”
24. eBay Inc. (NASDAQ:EBAY)
Number of Hedge Fund Holders In Q2 2024: 38
Category: Shorted by HFs and overweight among mutual funds
eBay Inc. (NASDAQ:EBAY) is one of the original eCommerce companies that were set up during the dotcom era of the 1990s. Unlike larger rival Amazon, the firm also sells novelty and other items on its platform. The high volume dependent nature of the eCommerce industry means that firms like eBay Inc. (NASDAQ:EBAY) are stressed for margins. Consequently, it has been unable to scale up to meet Amazon’s size especially since the latter has also benefited from the margin friendly revenue nature of the software and cloud computing industry. However, eBay Inc. (NASDAQ:EBAY)’s shares are nevertheless up by 54% year to date as the firm undertakes a new strategy to beef up volume and margins. This is its Focus Categories strategy that aims to attract high spenders via specific products and then try to make them spend on other categories.
On the topic of cost control, here’s what eBay Inc. (NASDAQ:EBAY)’s management shared during the Q2 2024 earnings call:
“Shifting to profitability, non-GAAP gross margin declined roughly 30 basis points year-over-year in Q2 due to tax-related matters, including Canadian digital sales tax expenses recognized retroactively in 2022, traffic acquisition costs associated with a ramp in offsite [ph] ads, and foreign exchange headwinds. These headwinds were partly offset by operational efficiencies, including lower cost of payments and lower depreciation expenses.
Non-GAAP operating margin was 27.9% in the quarter, improving 1 point year-over-year, as operational efficiencies, including our structured cost program, more than offset the higher cost of revenue of foreign exchange headwind of approximately 40 basis points and reinvestments in our full frontal marketing initiatives. As a result, non-GAAP operating income grew 5% year-over-year in Q2, and non-GAAP earnings per share grew by nearly 15% to $1.18.”
23. Cencora (NYSE:COR)
Number of Hedge Fund Holders In Q2 2024: 47
Category: Shorted by HFs and overweight among mutual funds
Cencora (NYSE:COR) is one of the biggest pharmacy distributors in America. Its heft is evident by the fact that the firm’s trailing twelve month revenue sits at $283 billion while it ended its latest quarter with cash and equivalents of $3.3 billion. Cencora (NYSE:COR)’s business model means that it is reliant to a large extent on some of the biggest pharmacy chains in America for its business. Its contracts expire annually, and Cencora (NYSE:COR) is also dependent on the state of the US pharmacy industry as well as new drugs entering the market and patent expiration leading to generics. As an example, Cencora (NYSE:COR)’s shares fell by 6% in May after a weight loss drug shortage meant that it was deprived of high volumes that are necessary to drive margins. Conversely, the shares jumped by 7% in July after the firm bumped its adjusted 2024 EPS guidance to a midpoint of $13.60 from an earlier $13.45 on the back of rising specialty drug and biosimiliar sales. Therein also lie the key drivers of Cencora (NYSE:COR)’s stock.
Cencora (NYSE:COR)’s management commented on the specialty and biosimilar markets during the Q3 2024 earnings call:
“I am particularly proud of our specialty distribution and services offering. For close to three decades, we have been a leader and innovator in this space. Importantly, we continue to make forward-thinking investments that position us to capitalize on addressing the complexities these products pose in handling and distribution, and connect us with downstream providers where we are positioned to equip practices with offerings that advance the strength of their business.
As specialty continues to grow across all therapeutic areas, we are able to expand and develop the partnerships we have with customers, furthering our leading market position. Our leadership in specialty remains a key tenant of our long-term growth and strategy. We make forward-thinking investments in our infrastructure and emerging technologies to position Cencora as the best partner to address our customers’ current and future needs.”
22. Target Corporation (NYSE:TGT)
Number of Hedge Fund Holders In Q2 2024: 52
Category: Shorted by HFs and overweight among mutual funds
Target Corporation (NYSE:TGT) is a discount retailer with close to two thousand stores in the US. This makes it a classic defensive stock that tends to hedge its losses in case of an economic downturn. Target Corporation (NYSE:TGT)’s size also means that the retailer has to ship high product volumes to ensure it can maintain its margins to fund operations. Additionally, the firm is also dependent on consumer spending trends in America, and with inflation dropping, it has seen sizeable tailwinds this year. For instance, Target Corporation (NYSE:TGT)’s shares jumped by 10% in August after its $24.45 billion in Q2 revenue and $2.57 in EPS beat analyst estimates of $25.21 billion and $2.18 on the back of price cuts made to more than 5,000 items. If inflation continues to drop and consumers find more room in their budget for discretionary spending, Target Corporation (NYSE:TGT) could see more tailwinds despite increased cost pressures stemming from high quality goods.
Target Corporation (NYSE:TGT)’s management commented on discretionary spending during its Q2 2024 earnings call. Here is what they said:
“Within our assortment in Q2, we saw notable areas of strength in both discretionary and frequency categories. As Brian highlighted, discretionary trends have been improving for a full year now, and combined discretionary comps were down only slightly in Q2. This momentum was most evident in our apparel assortment, which delivered low single-digit comp growth driven by newness in combination with strong everyday value, both in-stores and online. Comps were led by a performance category in the low double-digits as guests loved our latest designs and unbeatable prices in our All in Motion brand. Women’s apparel saw growth in the low to mid-single-digits with particular strength in our young contemporary owned brand Wild Fable. And a recent relaunch of our intimate and sleepwear brand, Auden, has seen a strong guest reaction out of the gate, offering high quality and comfortable items at compelling price points, like $15 bras and $20 pajama sets.
These results demonstrate the broad-based improvements that we’re seeing in apparel, a trend we are eager to build on in the coming quarters and years.”
21. Marvell Technology, Inc. (NASDAQ:MRVL)
Number of Hedge Fund Holders In Q2 2024: 74
Category: Shorted by HFs and overweight among mutual funds
Marvell Technology, Inc. (NASDAQ:MRVL) is a specialty semiconductor company that focuses primarily on meeting the needs of the data center industry. It does this by selling products such as signal processors, network adapters, storage controllers, and switches. Consequently, as Marvell Technology, Inc. (NASDAQ:MRVL)’s products are key in setting up AI data centers, it’s unsurprising that the stock is up 33.5% year to date. Marvell Technology, Inc. (NASDAQ:MRVL) also benefits from the fact that it develops application specific integrated circuits (ASICs). These are programmable chips that are tailored to run custom workloads, and they are used in AI use cases. Marvell Technology, Inc. (NASDAQ:MRVL) is already working with three customers for its custom AI accelerator chip and could see tailwinds if it expands this particular line of business.
During the Q2 2025 earnings call, Marvell Technology, Inc. (NASDAQ:MRVL)’s management shared details for the custom chips:
“Our AI custom silicon programs are progressing very well, with our first two chips now ramping into volume production.
Development for new custom programs we have already won, including projects with a new Tier 1 AI customer we announced earlier this year, are also tracking well to key milestones. Looking ahead to the third quarter of fiscal 2025 for our data center end market, we are forecasting revenue growth to accelerate into the high teens sequentially on a percentage basis. We expect the largest contributor to this growth will be our AI custom silicon programs as they begin to ramp meaningfully in the third quarter, further augmented by ongoing growth from our optics portfolio.”
19. GE Aerospace (NYSE:GE)
Number of Hedge Fund Holders In Q2 2024: 86
Category: Most popular with HFs and underweight among mutual funds
GE Aerospace (NYSE:GE) is the aerospace and defense spin out of the industrial equipment giant General Electric. The firm’s stature in the industry along with its sizeable resources as evident through cash and equivalents of $12 billion mean that it operates at the forefront of one of the most capitally and technologically intensive industries in the world. GE Aerospace (NYSE:GE) also operates in the commercial aviation industry, and the turmoil falling out from Boeing’s production woes has also impacted the firm. Yet, it has benefited from business diversification, as while lower aircraft production has led to slower jet engine demand, GE Aerospace (NYSE:GE) has been able to cater to the growing industry demand for spares, refurbishment, and after sales service. The firm also benefits from heightened global political tensions which ensure that governments continue to spend on defense products to remain prepared for conflict.
During the Q2 2024 earnings call, GE Aerospace (NYSE:GE)’s management shared insights on how it’s experiencing a changing business environment because of commercial aviation disruptions:
“No, no, you’re right. I mean, we had a good second quarter on orders. We had a good first half. I mean services orders were kind of, as you said, mid-30s for the second quarter, up 30% or so for the first half. Strong book-to-bill here in the first half of the year on top of a good book-to-bill we saw in 2023. So the momentum is definitely there on the services side. And as you look at the back half of the year, we are expecting the services growth to be a little bit higher in the second half than in the first half, right, both the shop visits and on spare parts on a year-over-year basis. So we delivered 9% internal shop visit growth in the first half of the year. And if you look at our low to mid-teens guidance on shop visits, that would imply that shop visits will be closer to high teens in the second half of the year on a year-over-year basis.
So that’s what we are projecting. But overall, it’s mid-teens services growth, and that is consistent with what we think the future years will look like. I think that we had – when we look at our 2025 outlook, we were projecting continuous strong services growth. So it’s good to see the strong orders growth, good to see, as Larry said earlier, LEAP gaining share on the overall air traffic departure side as well.”
20. Dell Technologies Inc. (NYSE:DELL)
Number of Hedge Fund Holders In Q2 2024: 88
Category: Shorted by HFs and overweight among mutual funds
Dell Technologies Inc. (NYSE:DELL) is one of the biggest consumer hardware companies of its kind and a well known brand name in its industry. The firm has a diversified business model which is exposed to consumer and enterprise spending. Dell Technologies Inc. (NYSE:DELL) sells laptops and other computing equipment to consumers, and networking hardware such as racks to businesses. Its shares are up by a strong 72% year to date primarily due to the firm’s enterprise exposure. This exposure places Dell Technologies Inc. (NYSE:DELL) in a favorable place to exploit business AI spending as its servers and other products are essential to building data centers to compute AI workloads. Additionally, Dell Technologies Inc. (NYSE:DELL) also benefits from non AI enterprise IT spending which has been depressed in the high interest rate era. Yet, if AI revenues disappoint, then the stock is vulnerable as was the case in May after shares dropped by 20% as Dell Technologies Inc. (NYSE:DELL)’s guidance missed by 13%.
Scout Investments mentioned Dell Technologies Inc. (NYSE:DELL) in its Q2 2024 investor letter. Here is what the fund said:
“Dell Technologies was a top contributor despite reporting disappointing first-quarter earnings results, because investors looked through the near-term disappointment and expected strong growth from AI-related servers and personal computers. We expect Dell to participate in the growth of artificial intelligence hardware, especially as enterprises invest more aggressively. We like the company’s depth and breadth of products and services, as well as its focus on keeping costs low.”
18. Eli Lilly and Company (NYSE:LLY)
Number of Hedge Fund Holders In Q2 2024: 100
Category: Most popular with HFs and underweight among mutual funds
Eli Lilly and Company (NYSE:LLY) is a pharmaceutical giant that is known for its insulin and more recently, its weight loss drugs. The firm’s shares are 55% year to date as it has become one of the leading players in the global weight loss drug market. Yet, the tail end of 2024 has seen an evolved weight loss drug market. This is because some of the earliest GLP weight loss products were introduced in 2014, meaning that their patents are about to expire. For pharmaceutical firms, expired patents increase the number of generics in the market which increases competition. Consequently, firms like Eli Lilly and Company (NYSE:LLY) which are market leaders have to either reduce prices for existing drugs or introduce better products to ensure that the revenue continues to flow. As for Eli Lilly and Company (NYSE:LLY), it is currently ramping up a skin disease drug and targeting new treatments for diabetes, obesity, cancer, Alzheimer’s, and other ailments.
Baron Funds mentioned Eli Lilly and Company (NYSE:LLY) in its Q2 2024 investor letter. Here is what the fund said:
“In biopharmaceuticals, we remain bullish on the market opportunity for new diabetes and obesity medicines. In June at a medical meeting, the principal investigators of the SURMOUNT-OSA trial presented the full data which demonstrated that Eli Lilly and Company’s Tirzepatide reduced obstructive sleep apnea in adults with obesity by up to 62.8%, and up to 51.5% of participants met the criteria for disease resolution. This impressive data set paves the way for Tirzepatide to be used as a treatment for obstructive sleep apnea in overweight and obese individuals.”
17. JPMorgan Chase & Co. (NYSE:JPM)
Number of Hedge Fund Holders In Q2 2024: 111
Category: Most popular with HFs and underweight among mutual funds
JPMorgan Chase & Co. (NYSE:JPM) is the biggest publicly traded bank in the world in terms of assets. As of its latest quarter, the bank had total assets of $4.1 trillion, which makes it the most important bank in the world. JPMorgan Chase & Co. (NYSE:JPM)’s heft also means that the US government has designated it as a GSIB, which allows the bank to rely on government support in case it faces trouble. At the same time, its size increases the capital allocation scrutiny that the bank faces. 2024 has been an important year for the banking industry since banks have had to contend with new rules that increase their allocation burden. However, JPMorgan Chase & Co. (NYSE:JPM) might be the best positioned to navigate these changes by covering the new allocations in the shortest time period. Yet, it could see pressure if the Fed tweaks GSIB surcharges, and tailwinds from growing capital markets activity as the bank earned $12.7 billion in revenue from investment banking and asset management in H1 2024.
Carillon Tower Advisors mentioned JPMorgan Chase & Co. (NYSE:JPM) in its Q1 2024 investor letter. Here is what the fund said:
“JPMorgan Chase contributed positively to performance following solid financial results and positive guidance for the remainder of 2024. Moreover, growing chatter around rising capital markets activity likely contributed to the stock’s strong performance relative to other banks. Recall that JPMorgan has a robust capital markets franchise.”
16. Berkshire Hathaway Inc. (NYSE:BRK-B)
Number of Hedge Fund Holders In Q2 2024: 120
Category: Most popular with HFs and underweight among mutual funds
Berkshire Hathaway Inc. (NYSE:BRK-B) is the world’s most well known investment management company since it is the primary investing vehicle of Warren Buffet. However, while the firm makes the news mostly because of Wall Street, an indispensable part of Berkshire Hathaway Inc. (NYSE:BRK-B)’s business is insurance. It is one of the largest car insurers in America courtesy of its GEICO business which also allows the company to cross sell home insurance products to its car insurance customers. As of Q2, $26 billion of Berkshire Hathaway Inc. (NYSE:BRK-B)’s $93 billion in revenue came from insurance and the firm held a whopping $234 billion in short term investments. Berkshire Hathaway Inc. (NYSE:BRK-B) is also a diversified company, and it has operations in the railroad, renewable energy, broader energy, construction products, and industrial industries. Consequently, the stock is exposed to economic headwinds and broader economic growth.
The London Company mentioned Berkshire Hathaway Inc. (NYSE:BRK-B) in its Q1 2024 investor letter. Here is what the firm said:
“Insurance was once again a bright spot in Berkshire Hathaway Inc. (BRK.B)’s 4Q earnings; GEICO showed meaningful margin improvement. The company once again sold some securities in the quarter, resulting in near all-time highs in the balance of cash & short-term investments. Overall, we continue to appreciate BRK.B for their financial strength, investment acumen, and disciplined management.”
15. Broadcom Inc. (NASDAQ:AVGO)
Number of Hedge Fund Holders In Q2 2024: 130
Category: Most popular with HFs and underweight among mutual funds
Broadcom Inc. (NASDAQ:AVGO) is a diversified hardware and software company. On the hardware front, it is primarily a semiconductor designer that sells chips such as modems, network controllers, and ASICs. Its network processors and ASICs expose Broadcom Inc. (NASDAQ:AVGO) to revenue from the AI industry on multiple fronts. The processors are used in data center connectivity and the firm benefits from the growth in data centers stemming from higher AI use. Additionally, Broadcom Inc. (NASDAQ:AVGO)’s ASIC division means that it is able to design and sell chips tailor made for custom use cases. These are important in the AI era as well, especially since the industry’s mainstay GPUs from NVIDIA are in short supply and costly. Subsequently, Broadcom Inc. (NASDAQ:AVGO) can benefit from a growth in industry interest towards developing custom AI chips. On the software front, the firm benefits from high margin revenue through its cybersecurity division. Broadcom Inc. (NASDAQ:AVGO)’s fiscal Q3 saw software revenue jump by 300% due to its VMWare acquisition.
Baron Funds mentioned Broadcom Inc. (NASDAQ:AVGO) in its Q2 2024 investor letter. Here is what the firm said:
“Broadcom Inc. is a global technology leader that designs, develops, and supplies a broad range of semiconductor and infrastructure software solutions. The stock rose during the quarter as it reported strong earnings on the back of its two key growth drivers, AI semiconductors and its acquired VMware software business. The company once again increased its outlook for AI-related revenue, now expecting $11 billion or more this year (versus prior guidance for $10 billion), on the back of strength in both hyperscale custom compute and networking chips, where Broadcom maintains dominating share. In networking, Broadcom’s solutions are critical to enabling AI training factories to scale towards 100,000 chip clusters in the near term and 1 million chip clusters over the coming years. In AI custom compute, Broadcom designs custom accelerators for large consumer- internet AI companies (such as Google and Meta), who are building increasingly large AI clusters to drive improvements in user engagement and targeted advertising on their consumer media platforms. VMware remains on track to continue rapid sequential growth while simultaneously reducing operating expenses, driving faster-than-expected margin expansion and accretion, as management has simplified the product offering and is converting customers from a license model to subscriptions. We believe VMware will grow beyond the $4 billion near-term quarterly target, well above current analyst expectations. These two factors combined have caused a re-rating to the growth profile for the overall company. To quote CEO Hock Tan, “there is only one Broadcom. Period.”
14. Alphabet Inc. (NASDAQ:GOOG)
Number of Hedge Fund Holders In Q2 2024: 165
Category: Most popular with HFs and underweight among mutual funds
Alphabet Inc. (NASDAQ:GOOG) is a mega cap technology giant. It is a well diversified technology company that continues to depend on the search engine business for most of its revenue. Alphabet Inc. (NASDAQ:GOOG)’s resources, as evidenced by $111 billion in cash and equivalents have also enabled it to establish a leading role in the global AI industry. So much so that not only does it have access to a foundational AI model through Gemini, but unlike some other major AI players, Alphabet Inc. (NASDAQ:GOOG) is also able to offer AI computing resources to other companies courtesy of its tensor processing unit (TPU) chips. These make it a diversified company, and the firm is expanding its AI plans by aiming to build 1GW AI data centers powered by nuclear and other renewable energy sources. However, potential headwinds from the DOJ accelerating its action against the firm or by AI creating new avenues for search remain.
Patient Capital Management mentioned Alphabet Inc. (NASDAQ:GOOG) in its Q2 2024 investor letter. Here is what the fund said:
“Alphabet Inc. (GOOGL) was a top contributor in the second quarter, finally catching up to its peers in the Magnificent 7. The company gained 20.8% in the period following strong first quarter earnings, a new $70B repurchase program (3% of shares outstanding) and the initiation of a cash dividend ($0.20 per share; 0.42% yield). We continue to believe the market underappreciates Google’s exposure to AI with its Gemini model being integrated into search results, YouTube advertising and its cloud offering. We continue to think that the cloud players will be the AI winners in the long-term, with Google being well positioned to take advantage. While the company trades at 24x 2024 earnings, if you remove the money-losing and under-earning businesses, you realize that you are paying below a market multiple for the core Google business. We do not believe there are many other AI winners trading at such an attractive multiple.”
13. NVIDIA Corporation (NASDAQ:NVDA)
Number of Hedge Fund Holders In Q2 2024: 179
Category: Most popular with HFs and underweight among mutual funds
NVIDIA Corporation (NASDAQ:NVDA) is the leading semiconductor designer in the world courtesy of its AI chips. These have propelled the firm to become the most valuable semiconductor company on the planet courtesy of its latest market capitalization of $3.21 trillion. NVIDIA Corporation (NASDAQ:NVDA)’s Blackwell chips are the hottest product in the semiconductor industry and have seen their capacity booked out months in advance. NVIDIA Corporation (NASDAQ:NVDA) also benefits from its CUDA software which allows users to tightly control their chip use for accelerated computing. Accelerated computing is at the heart of NVIDIA Corporation (NASDAQ:NVDA)’s hypothesis, with CEO Jensen Huang believing that even if the AI market slows down, the world’s data centers will nevertheless have to spend $1 trillion to upgrade existing infrastructure. High prices, product delays, lower AI monetization, and a greater shift towards custom AI chips carry the potential to detract NVIDIA Corporation (NASDAQ:NVDA).
Baron Funds mentioned NVIDIA Corporation (NASDAQ:NVDA) in its Q2 2024 investor letter. Here is what the firm said:
“More recently, however, we’ve entered the period of doubts and questioning, some of which is real and normal in the first stages of a new paradigm, and some of which is prompted by short sellers. Given the explosive returns of NVIDIA and other AI leaders, AI bears and fear mongers have been comparing the current AI market winners with the internet bubble of the late 1990s/early 2000s, and NVIDIA’s stock move today with Cisco’s back then. First, while many stocks were trading at nosebleed valuations and on made up metrics (such as price per eyeballs) before the bursting of the internet bubble, as we’ve said many times, the internet proved to transform our world and create the digital age we are now living in. Second, while NVIDIA’s stock price inflection has been nothing short of unprecedented for a company of its size, it was fueled almost entirely by explosive growth in revenues, earnings, and cash flows– not multiple expansion. Over the last 12 months, NVIDIA’s stock has eectively tripled, but its forward P/E multiple has remained essentially flat, because NVIDIA blew away Wall Street expectations despite being covered by over 60 sell-side analysts, who have increased their forward projections every single quarter. In my career, the only comparative analogue is when Apple first introduced the iPhone and stunned Wall Street with its growth. In contrast, most of Cisco’s move in the late 1990s was due to multiple expansion. At its peak, Cisco traded at a P/E ratio over 130 times, more than quadruple its five-year average of 37 times. At the end of the second quarter, NVIDIA traded at a P/E ratio of 40 times, equal to its five-year average, and at a P/E to growth (or PEG) ratio for 2025 of 0.8 times, as consensus expectations are for NVIDIA to grow earnings per share 40% next year.
Moreover, investor concerns have arisen about the financial impact AI is having and whether surging capital expenditures (capex) across the technology landscape, particularly the large cloud players (Microso, Google, Amazon, and Meta), known as the hyperscalers, will be justified and earn reasonable returns on invested capital (ROIC). First, the adoption and penetration of new technology typically traces a classic S-curve–or more precisely, in our view, a series of S-curves or phases. For at least the past year and a half, we’ve been in what might be called the AI infrastructure- build phase – building the AI factories, as NVIDIA CEO Jensen Huang has articulated it, and this phase has been dominated by the infrastructure- layer players – the accelerated computing chips suppliers like NVIDIA and Broadcom, as well as data center, cloud infrastructure and energy companies. The hyperscalers, other enterprises, and sovereign entities investing ahead understand that if you want to be in the AI game, you must invest now – build the infrastructure, build the factories – or else you’ll find yourselves disrupted on the sidelines or playing catch up in the biggest game, the most important race in a technology generation. Only those who invest today even have the chance to be the winners of the future.”
12. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders In Q2 2024: 184
Category: Most popular with HFs and underweight among mutual funds
Apple Inc. (NASDAQ:AAPL) is the world’s most valuable consumer technology company. In today’s AI wave, this has allowed the firm to retain its valuation as software companies with enterprise AI exposure falter. Apple Inc. (NASDAQ:AAPL)’s shares are up 27% year to date and have outpaced Microsoft’s 12.6% gains. This is because the latter’s shares have lost 10.5% since July as Wall Street ponders the firm’s ability to quickly monetize AI. On the flip side, Apple Inc. (NASDAQ:AAPL)’s stock has avoided these drops and is flat since July. iPhone sales form the backbone of its hypothesis, with $155 billion of the firm’s $296 billion nine month revenue ending in July coming from the smartphone. Investors bet on Apple Inc. (NASDAQ:AAPL)’s 1.5 billion users regularly upgrading their devices, and any weakness also leads to tailwinds for the stock.
Baron Funds mentioned Apple Inc. (NASDAQ:AAPL) in its Q2 2024 investor letter. Here is what the firm said:
“Recent Activity This quarter we re-initiated a position in Apple Inc., a leading technology company known for its innovative consumer electronics products like the iPhone, MacBook, iPad, and Apple Watch. Apple is a leader across its categories and geographies, with a growing installed base that now exceeds 2 billion devices globally. The company’s attached services – including the App Store, iCloud, Apple TV+, Apple Music, and Apple Pay – provide a higher margin, recurring revenue stream that both enhances the value proposition for its hardware products and improves the financial profile. Apple now has well over 1 billion subscribers paying for these services, more than double the number it had just 4 years ago. The increasing services mix has led to healthy operating margin improvement, providing more free cash flow for Apple to reinvest in the business and to distribute to shareholders. Throughout its 48-year history, Apple has successfully navigated and capitalized on major technological shis, from PCs to mobile to cloud computing. We believe the company’s leading brand and device ecosystem position it to do equally well in the AI age, and this was the driver of our decision to re-invest. “Apple Intelligence” – the AI strategy unveiled at Apple’s recent Worldwide Developer Conference – leverages on- device AI and integrations with tools like ChatGPT to enhance user experiences across its ecosystem. The AI suite enables users to create new images, summarize and generate text, and use Siri to perform actions across their mobile applications, all while maintaining user privacy and security. We think Apple Intelligence can drive accelerated product upgrade cycles and higher demand for Apple services. The combination of growth re-acceleration, increasing services contribution, and thoughtful capital allocation should continue driving long-term shareholder value.”
11. Meta Platforms, Inc. (NASDAQ:META)
Number of Hedge Fund Holders In Q2 2024: 219
Category: Most popular with HFs and underweight among mutual funds
Meta Platforms, Inc. (NASDAQ:META) is another mega cap technology giant. The firm is among a handful of companies in the world which have access to foundational AI models and sufficient cash resources to fund development. Meta Platforms, Inc. (NASDAQ:META) had $32 billion in cash and equivalents as of its latest quarter. The firm enjoyed a 3.2 billion user base as of March, and this means that its primary line of revenue comes from advertisers. Subsequently, Meta Platforms, Inc. (NASDAQ:META) is benefiting from its ability to push AI features to advertisers. The firm is enabling advertisers to rely on AI for customer support and marketing. Additionally, Meta Platforms, Inc. (NASDAQ:META)’s sizeable user base also creates the potential to provide consumers with AI features. Some features that the firm offers are photo editing, imaging editing, and others. Consequently, Meta Platforms, Inc. (NASDAQ:META) has one of the broadest AI platforms in the industry.
Polen Capital mentioned Meta Platforms, Inc. (NASDAQ:META) in its Q2 2024 investor letter. Here is what the fund said:
“Meta Platforms delivered robust results in the period, with revenue growth accelerating in the first quarter. However, revenue comparisons for Meta will become more difficult from here, and its guidance for 2Q revenue fell below market expectations. After the company’s “year of efficiency,” where it cut costs in its core business, management is now indicating another ramp-up in GenAI and metaverse spending, spurring concerns about future profit margins. Metaverse spending, by our calculations, is now over $20 billion per year with little to no expected return on the foreseeable horizon.”
10. Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders In Q2 2024: 279
Category: Most popular with HFs and underweight among mutual funds
Microsoft Corporation (NASDAQ:MSFT) is the penultimate mega cap technology giant on our list. The firm’s Windows operating system is the most widely used product of its kind in the world. Microsoft Corporation (NASDAQ:MSFT) also enjoys a key position in the cloud computing industry through its Azure cloud computing platform. Consequently, as cloud computing accounted for $28.5 billion of Microsoft Corporation (NASDAQ:MSFT)’s $64 billion in FYQ4 revenue, it plays a central role in its hypothesis. Additionally, as it has invested billions of dollars into OpenAI, investors are also on the watch out for Microsoft Corporation (NASDAQ:MSFT) being able to generate profit from the AI products that it sells to businesses through its enterprise software division. This has also led to a 10.7% share price drop since July which accelerated after Microsoft Corporation (NASDAQ:MSFT)’s latest earnings report.
Baron Funds mentioned Microsoft Corporation (NASDAQ:MSFT) in its Q2 2024 investor letter. Here is what the firm said:
“Microsoft Corporation is the world’s largest software and cloud computing company. Microsoft was traditionally known for its Windows and Oice products, but over the last five years it has built a $135 billion run-rate cloud business, including its Azure cloud infrastructure service and its Oice 365 and Dynamics 365 cloud-delivered applications. The stock contributed to performance because of continued strong operating results and investor enthusiasm regarding Microsoft’s leadership across the secular megatrends of AI and cloud computing. Recent business momentum continued to show evidence of the strength and attractiveness of Microsoft’s product portfolio among its customer set: (1) Azure OpenAI – its suite of AI services – is now used by 65% of the Fortune 100 and contributed 7% of Azure revenue (an annualized run rate of $5.2 billion); (2) GitHub Copilot – its AI code writing service – is bending the productivity curve for developers (reports of 40%- plus improvements in developer efficiency) and now has 1.8 million paid subscribers, with growth accelerating to over 35% quarter-over-quarter; and (3) Copilot Studio – its AI application service that makes it easier for anyone to build an application, automate a workflow, or create a Copilot using natural language. 30,000 organizations across every industry have used Copilot Studio to customize Copilot for Microsoft 365 or build their own, up 175% quarter-over- quarter. In the March quarter, Microsoft again reported better-than-expected financial results, highlighted by Microsoft Cloud growing 23% year- over-year, with the fastest commercial bookings in six quarters, and Azure accelerating to 31% constant currency growth, up from 28% in the previous quarter. June quarter guidance came in-line with consensus, but the company provided higher guidance for the most important segment, Intelligent Cloud, on the back of continued strong trends across Azure and Azure OpenAI. We remain confident that Microsoft is one of the best- positioned companies across the overlapping software, cloud computing, and AI landscapes.”
9. Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Fund Holders In Q2 2024: 308
Category: Most popular with HFs and underweight among mutual funds
Amazon.com, Inc. (NASDAQ:AMZN) is the biggest eCommerce retailer in the world. It is also one of the biggest players in the cloud computing industry courtesy of its Amazon Web Services (AWS) business division. Consequently, the firm benefits from high volume top line revenue through its eCommerce business and high margin and recurring revenue via AWS. These provide Amazon.com, Inc. (NASDAQ:AMZN) with one of the widest moats in the business, and it makes it unsurprising that the stock is quite popular among hedge funds. Amazon.com, Inc. (NASDAQ:AMZN) also plays a key role in the AI industry via its partnership with Anthropic which provides it access to a foundational AI model. Its eCommerce platform which enjoys 3.25 billion users also creates a market for Amazon.com, Inc. (NASDAQ:AMZN) to sell its AI advertising and other services to businesses. The firm also benefits from providing an AI platform for application development to enterprises via AWS.
Patient Capital Management mentioned Amazon.com, Inc. (NASDAQ:AMZN) in its Q2 2024 investor letter. Here is what the fund said:
“Amazon.com Inc. (AMZN) moved higher throughout the second quarter as AI demand helped to reaccelerate growth in their AWS business. It looks as though the cloud business is finally past the customer cost optimization period with customers restarting their cloud migrations as well as expanding spend on AI projects. Despite the top and bottom-line improvement seen in the first quarter, the company is significantly underearning its long-term potential as it continues to reinvest aggressively in the business. With 80% of global retail sales still being done in physical stores and 85% of global IT spending still on-premises, we see a long-run way for the dominant player in the cloud, retail, and increasingly logistics and advertising space.”
8. Fiserv, Inc. (NYSE:FI)
Number of Hedge Fund Holders In Q2 2024: 73
Category: Most popular with HFs and overweight among mutual funds
Fiserv, Inc. (NYSE:FI) is a financial technology company that caters to the needs of banks and credit unions to enable ATM functions, payment processing, remittances, prepaid services, and other operations. It is one of the few companies of its kind in the industry, which provides it with a wide moat. Fiserv, Inc. (NYSE:FI)’s exposure to consumer spending and payment processing also means that the firm does well when markets are booming and interest rates are low. As a result, the shares have gained a strong 11.35% since the Fed cut interest rates by 50 basis points in September, Fiserv, Inc. (NYSE:FI) is also exposed to small businesses through its Clover platform, which increases its exposure to cyclical trends. However, there is some stability as well due to deals such as the one with Wells Fargo providing Fiserv, Inc. (NYSE:FI) with a large market. The firm is also targeting businesses with new products such as cash flow management software to further penetrate the financial software market.
Broyhill Asset Management mentioned Fiserv, Inc. (NYSE:FI) in its Q2 2024 investor letter. Here is what the fund said:
“Fiserv is the premier provider of financial technology services, supporting banks, credit unions, and financial institutions with innovative banking solutions, payment processing, and data analytics to streamline and secure financial transactions. The company’s shares slid 7% during the quarter before rallying 10% in July to fresh all-time highs. Clover remains the company’s crown jewel, generating over $300 billion in annualized GPV (Gross Payment Volume) with better monetization, driving 28% revenue growth in the recently reported quarter, and three new hardware products plus pilot programs in Mexico and Brazil going live in the coming months. Simply put, there are few businesses in this industry executing even close to the same level, and fewer still with Fiserv’s scale, distribution, and collection of assets. In our initial write-up, we highlighted the embedded distribution advantages often enjoyed by incumbents, noting that “Fiserv can cross-sell products through its large, engrained distribution channels, driving faster growth than even its most rapidly growing peers. And with Clover and Square accounting for less than 10% of a fragmented market, we think there is plenty of room for both to run.” Notably, Jack Dorsey, Chief Block Head, Square Head, Chairman, and Cofounder, recently came to the same conclusion, admitting as much on the company’s most recent earnings call: “I would state that our product quality is far above the majority of our competitors. Where we have been weaker in the past is how we mirror that with our go-to-market strategy and just updating our approach there, especially given what our competitors have done.“ We wonder which competitors come to mind.”
7. CRH plc (NYSE:CRH)
Number of Hedge Fund Holders In Q2 2024: 75
Category: Most popular with HFs and overweight among mutual funds
CRH plc (NYSE:CRH) is one of the biggest construction material providers in the world. Its products include beams, pipes, aggregates, and other construction materials. This means that CRH plc (NYSE:CRH)’s performance is tied closely to the real estate industry – a sector that thrives when interest rates are low. The firm is also more exposed to the North American industry as 75% of its revenue is from the region. As a result, CRH plc (NYSE:CRH)’s shares have gained 4% since the Federal Reserve’s interest rate cut since the cut improves the outlook for the construction sector. Additionally, its exposure to North America also means that the firm is well positioned for multi billion dollar government investments into infrastructure via roads, bridges, semiconductor manufacturing plants, and other projects.
L1 Capital mentioned CRH plc (NYSE:CRH) in its Q2 2024 investor letter. Here is what the firm said:
“In our view, measuring the performance of investments over short time horizons such as three months is meaningless. While CRH and Eagle Materials detracted from the Fund’s returns this quarter, they were both leading positive contributors in the prior quarter. Since Inception of the Fund over 5 years ago, both companies have been top ten contributors to the Fund’s returns.
Recently, there has been some negative data that is causing a sell-off in the share price of CRH and Eagle Materials. Both these companies supply building products to the infrastructure, residential and commercial construction sectors. CRH has around 75% exposure to North America, with the remainder principally Europe (CRH has also recently acquired the majority of Adbri in Australia). Eagle Materials solely operates in the U.S.
Demand from the U.S. infrastructure sector is likely to remain robust for the medium term due to increased Federal and State spending, supported by the $1.2 trillion Infrastructure Investment and Jobs Act. Short term activity has been disrupted by bad weather – we think this is complete noise and is just slightly delaying projects, although CRH and Eagle Materials’ June 2024 quarterly results will likely be impacted.
Housing activity has recently softened a little, with affordability remaining an issue. Demand for housing remains strong, and the housing construction industry is responding through incentives such as subsidising mortgage rates for buyers, and building slightly smaller, cheaper homes.
While there will always be short term fluctuations in activity levels and we do expect softening in apartment construction, over time we expect solid new housing construction as well as repair and renovation activity levels to support demand for CRH and Eagle Materials’ products, with potential for meaningful upside in a lower interest rate environment. Commercial activity remains mixed, with pockets of strength such as data center construction and resilient areas such as hospital and education construction, offset by weakness in areas such as office construction.
In our view the market is not always efficient. Back in our December 2022 Quarterly Report we were pounding the table on Amazon.com (Amazon), stating that the share price had been oversold and offered compelling value. Since then, Amazon’s share price has increased nearly 140%. Over recent months, the share price of Eagle Materials and CRH have fallen 20% and 15% respectively from their recent highs. Now trading on a P/E ratio of 13x to 14x, we consider both companies are trading at attractive valuations for investors with a longer-term investment horizon, willing to look through short term pressures.”
6. Workday Inc. (NYSE:WDAY)
Number of Hedge Fund Holders In Q2 2024: 86
Category: Most popular with HFs and overweight among mutual funds
Workday Inc. (NYSE:WDAY) is a software as a service (SaaS) company that enables businesses to manage their financial and human resource management operations. Since the firm generates revenue by operating in the human resources market, it’s unsurprising that its shares are down by 9.5% year to date. This is because high rates and a tight economy have constrained business budgets which carries a two fold disadvantage for Workday Inc. (NYSE:WDAY). On one front, slower hiring means that its product is used less, while the second front sees businesses closely monitor their spending to save money. In fact, the ‘tighter scrutiny’ was at the heart of Workday Inc. (NYSE:WDAY)’s 15% share price drop in May as it outlined in its SEC filing that it had experienced “a moderation of revenue growth rates due to increased deal scrutiny and the lengthening of certain sales cycles, particularly within net new opportunities, and reduced growth in headcount level commitments upon renewals of existing customers.” However, Workday Inc. (NYSE:WDAY)’s 12.5% share price jump in August when not only did its Q2 revenue of $2.085 billion and EPS of $1.75 beat analyst estimates of $2.071 billion and $1.65 but it also added five percentage points to its 2027 margin goal for a 30% target value. Margins are key for SaaS stock valuation, and Workday Inc. (NYSE:WDAY) future is tied to hiring performance and its ability to meet its goals.
Parnassus Investments mentioned Workday Inc. (NYSE:WDAY) in its Q2 2024 investor letter. Here is what the fund said:
“Workday, Inc. (NASDAQ:WDAY), a provider of human capital and financial management software, warned of slower growth in subscription revenue even as first-quarter revenue and earnings topped expectations. We added to our position as it fell to a valuation that we believe does not reflect its revenue growth and increasing operating margins.”
5. The Progressive Corporation (NYSE:PGR)
Number of Hedge Fund Holders In Q2 2024: 89
Category: Most popular with HFs and overweight among mutual funds
The Progressive Corporation (NYSE:PGR) is an American auto and homeowner insurance company. Since it’s a pure play insurance company, the firm’s performance depends on its expense ratio, investment income, and premium growth. As a result, The Progressive Corporation (NYSE:PGR) has to focus on its expenses quite a bit since premiums have already grown lately and lower interest rates mean that its investment income also falls. Additionally, the firm is also spending heavily on marketing which is stressing its expense ratio. This might force The Progressive Corporation (NYSE:PGR) to hike premiums in the future and lead to customer losses. However, the market is quite optimistic about the company, as its shares are up 56.8% year to date and 61% over the past twelve months. In a September analyst note, Goldman increased The Progressive Corporation (NYSE:PGR)’s share price target to $280 from $262 and kept a Buy rating on the stock. It highlighted that the firm’s auto policies in force and improving loss ratios for the segment, but cautioned about growing expenses.
Middle Coast Investing mentioned The Progressive Corporation (NYSE:PGR) in its Q3 2024 investor letter. Here is what the fund said:
“Progressive Insurance (NYSE:PGR) is the best example of both a macro and micro transition. Used car repair cost inflation (macro) hurt its profitability. It was early in raising prices to deal with that, and has been growing new policies in force much faster than competitors. As it has overcome the cost inflation issue, its profits have soared, and should continue to grow. The stock price has doubled in the last 14 months.”
4. UnitedHealth Group Incorporated (NYSE:UNH)
Number of Hedge Fund Holders In Q2 2024: 114
Category: Most popular with HFs and overweight among mutual funds
UnitedHealth Group Incorporated (NYSE:UNH) is one of the biggest health insurance companies in America. The firm serves the needs of roughly 50 million people according to estimates. This means that UnitedHealth Group Incorporated (NYSE:UNH) can benefit from the rapidly evolving pharmaceutical and biotechnology industry which is pushing out revolutionary new treatments such as Sickle Cell Disease and weight loss drugs. However, stable volumes are key for UnitedHealth Group Incorporated (NYSE:UNH) as its $381 billion revenue means that the firm has to keep margins under tight control. The need to control costs was also evident in the firm’s shares before its second quarter earnings. By then, UnitedHealth Group Incorporated (NYSE:UNH)’s stock had dropped by 2.1% year to date as a cyberattack worried investors that costs would rise. However, the earnings report saw the firm report $6.80 in EPS to beat analyst estimates of $6.66, and consequently, the shares shot up by 11% in the days after.
UnitedHealth Group Incorporated (NYSE:UNH)’s management believes it can grow its customer base. It shared during the Q2 2025 earnings call that:
“We’re also well positioned for growth in 2025. In the selling season to date, the most sophisticated thoughtful buyers of health benefits and services in the US, such as large employers, unions, states, seniors, all continue to choose the offerings of UnitedHealth Group, when they’re looking for managed care, pharmacy services or a Medicare Advantage plan that provides the best value. This consistent growth reflects customers’ recognition of the need for a company like ours. As you know, UnitedHealth Group strives to help reduce the fragmentation and lack of coordination that drives up costs and erodes care outcomes in the $5 trillion US healthcare marketplace. We aim to better coordinate and align incentives among caregivers, payers, and pharmacy, enabling us to focus on the whole patient throughout their health journey.
We believe this increases value for customers and consumers, improves people’s experience and health, reduces redundancies and waste, and ultimately leads to a more sustainable health system. For example, the proven health and economic value to consumers and taxpayers of Medicare Advantage. A recent study by Milliman found that the cost of taxpayers of Medicare Advantage is 4% less than traditional fee-for-service Medicare. At the same time, Medicare Advantage provides seniors well over $2,000 per year in additional value through lower out-of-pocket cost and important services like dental, vision and hearing, none of which fee-for-service Medicare covers. That means a lot to the majority of the people Medicare Advantage serves, who have limited economic resources and otherwise would lack access to such services.”
3. Mastercard Incorporated (NYSE:MA)
Number of Hedge Fund Holders In Q2 2024: 142
Category: Most popular with HFs and overweight among mutual funds
Mastercard Incorporated (NYSE:MA) is the second major payment processing platform provider in the US. It controls 24% of the US credit card market, which means that along with its larger rival, the firm controls 76% of the US market. The smaller position means that Mastercard Incorporated (NYSE:MA) has to be on the watch out for other companies to take away its market share. This is key in today’s rapidly dynamic financial technology market as technology creates room for alternative payment service providers to target merchants and users to potentially eat market share away from Mastercard Incorporated (NYSE:MA). Along with Visa, the firm has agreed to a $30 billion settlement to settle merchant worries about higher fees, but the deal was stopped by a court earlier this year. In fact, the tide is shifting particularly after the Justice Department sued Visa in September and alleged a debit card monopoly.
L1 Capital mentioned Mastercard Incorporated (NYSE:MA) in its Q2 2024 investor letter. Here is what the firm said:
“The share prices of Mastercard and Visa, both long term Fund investments, have both drifted down over recent months. There have been no dramatic developments, but there has been a general slight softening in the rate of growth of consumer spending in the U.S. and globally, a court decision rejecting Mastercard and Visa’s proposed settlement of a long-lasting dispute with U.S. merchants as well as other modest adverse regulatory developments. We continue to view Mastercard and Visa as two of the highest quality businesses in the world, and both are well placed to continue to deliver attractive, risk adjusted returns to shareholders over time.”
2. Uber Technologies, Inc. (NYSE:UBER)
Number of Hedge Fund Holders In Q2 2024: 145
Category: Most popular with HFs and overweight among mutual funds
Uber Technologies, Inc. (NYSE:UBER) is the dominant player in the US ride sharing industry. According to Bloomberg, the firm commanded 76% of US ride sharing spending as of March 2024, for a wide lead over its closest rival Lyft’s share of 24%. Its commanding presence means that Uber Technologies, Inc. (NYSE:UBER) enjoys a wide moat both in terms of the number of users that it can reach and also through brand recognition. These advantages can prove to be quite important in the next phase of ride sharing, a.k.a., automation. Autonomous ride sharing is all the hype in the technology industry these days, and Uber Technologies, Inc. (NYSE:UBER) has already joined forces with General Motors to launch a program in 2025. The firm is also aggressively expanding and targeting growth markets such as urban air mobility and has piloted a New York airport shuttle service.
RiverPark Advisors mentioned Uber Technologies, Inc. (NYSE:UBER) in its Q1 2024 investor letter. Here is what the fund said:
“UBER remains the undisputed global leader in ride sharing, with a greater than 50% share in every major region in which it operates. The company is also a leader in food delivery, where it is number one or two in the more than 25 countries in which it operates. Moreover, after a history of losses, the company is now profitable, delivering expanding margins and substantial free cash flow. We view UBER as more than a ride sharing and food delivery service; we also see it as a global mobility platform with 142 million users (by comparison, Amazon Prime has 200 million members) and the ability to penetrate new markets of on-demand services, such as package and grocery delivery, travel, and hourly worker staffing. Given its $5.4 billion of unrestricted cash and $4.8 billion of investments, the company today has an enterprise value of $165 billion, indicating that UBER trades at 21x our estimates of next year’s free cash flow.”
1. Visa Inc. (NYSE:V)
Number of Hedge Fund Holders In Q2 2024: 163
Category: Most popular with HFs and overweight among mutual funds
Visa Inc. (NYSE:V) is the biggest payment processing company in the world. It is the dominant player in the US payment industry since it commands 52% of the US credit card market and 47% share of outstanding balances. Consequently, its commanding position in the credit card market is key to Visa Inc. (NYSE:V)’s hypothesis. The firm, along with smaller rival Mastercard, has agreed to a historic $30 billion settlement to assuage retailer concerns about high transaction fees. But the matter took another turn earlier this year when the court stopped the deal. The main threat to Visa Inc. (NYSE:V) comes from merchant dissatisfaction which makes them open up to additional payment platforms. On this front, the firm’s 30 day liability protection has also created friction with merchants, but Visa Inc. (NYSE:V) is also expanding its presence in international markets and new features for automatic payments to generate tailwinds.
Aoris Management mentioned Visa Inc. (NYSE:V) in its Q2 2024 investor letter. Here is what the firm said:
“Visa operates the world’s largest payments network, which facilitates the movement of money between merchants, financial institutions, consumers, businesses, and governments.
The company is best known for enabling consumers to make debit and credit card payments. In the year to September 2023, 4.3 billion Visa cardholders made 213 billion transactions on its network, to a total value of US$12.1 trillion.
Compared to cash and cheques, which are still widely used around the world, Visa’s network is a more convenient, secure, and ubiquitous way for consumers to pay. Visa has invested to reduce friction and fraud in the payments experience, to the benefit of both merchants and consumers.”
V is a stock that both mutual funds and hedge funds love according to Goldman Sachs. While we acknowledge the potential of V as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than V but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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