In this article, we discuss Jeremy Grantham’s top 5 favorite stocks. If you want to see more stocks in this selection, click “Super Bubble” is Yet to Burst: Jeremy Grantham’s Warning and His 10 Favorite Stocks.
5. Wells Fargo & Company (NYSE:WFC)
Number of Hedge Fund Holders: 83
Jeremy Grantham’s Stake Value: $404.56 Million
Wells Fargo & Company (NYSE:WFC) is a California-based diversified financial services company, operating through four segments – Consumer Banking and Lending, Commercial Banking, Corporate and Investment Banking, and Wealth and Investment Management. Jeremy Grantham’s Q2 portfolio features 10.33 million Wells Fargo & Company (NYSE:WFC) shares worth $404.56 million, representing 2.3% of the total 13F securities.
On July 17, Barclays analyst Jason Goldberg maintained an Overweight rating on Wells Fargo & Company (NYSE:WFC) but lowered the price target on the stock to $58 from $64 after the Q2 results. Pressured fee income, followed by a larger than modeled provision impacted June quarter results, the analyst informed investors.
According to Insider Monkey’s data, 83 hedge funds were long Wells Fargo & Company (NYSE:WFC) at the end of June 2022, compared to 93 funds in the last quarter. Boykin Curry’s Eagle Capital Management is the biggest position holder in the company, with more than 18 million shares worth $709.3 million.
Here is what Davis Opportunity Fund has to say about Wells Fargo & Company (NYSE:WFC) in its Q4 2021 investor letter:
“The absolute level of revenues and profits generated by such companies is in fact so large that most of the major financial holdings in the portfolio produce enough annual operating income individually that a number of them could, in theory, purchase several entire businesses among hundreds of choices within the S&P 1500 Index, using just a year’s cash earnings without dipping into capital. This is theoretical, as financial companies would not be in the business of buying healthcare or technology companies, for example, but we point out these facts to illustrate the sheer scale of the economics produced by single financial companies in a given year, which is often a multiple of the cash earnings yielded by companies in a host of other industries.
Given this cash-generation power, we are naturally drawn to what we believe are strong and profitable financial institutions when the price is right. Presently, we believe the valuations of our financial holdings are not only reasonable, but extremely compelling, and our portfolio composition reflects this view. Representative financial holdings in the Fund include Wells Fargo.”
4. U.S. Bancorp (NYSE:USB)
Number of Hedge Fund Holders: 43
Jeremy Grantham’s Stake Value: $441.19 Million
U.S. Bancorp (NYSE:USB) is an American bank holding company for the U.S. Bank National Association, which is one of the largest banking institutions in the United States. Jeremy Grantham owns 9.59 million shares of U.S. Bancorp (NYSE:USB) as of Q2 2022, worth $441.19 million, representing 2.3% of his total 13F portfolio. The stock features among Grantham’s top 5 holdings and is one of his favorite plays. He has held a stake in U.S. Bancorp (NYSE:USB) since Q1 2013.
On July 12, Citi analyst Keith Horowitz lowered the price target on U.S. Bancorp (NYSE:USB) to $50 from $53 and kept a Neutral rating on the shares. The analyst updated U.S. bank models ahead of Q2 earnings and slashed price targets to factor in the losses from the latest Federal Reserve stress test, which he sees as a “conservative measure of inherent risk on bank balance sheets”.
According to Insider Monkey’s data, 43 hedge funds reported owning stakes in U.S. Bancorp (NYSE:USB) at the end of Q2 2022, compared to 40 funds in the last quarter. Warren Buffett’s Berkshire Hathaway held the largest position in the company, comprising approximately 120 million shares worth $5.5 billion.
Here is what ClearBridge Investments Dividend Strategy has to say about U.S. Bancorp (NYSE:USB) in its Q4 2021 investor letter:
“Over the last year, we have repositioned our portfolio to navigate the course we see ahead. We have increased our exposure to interest-rate sensitive banks by adding to existing positions in U.S. Bancorp.”
3. UnitedHealth Group Incorporated (NYSE:UNH)
Number of Hedge Fund Holders: 91
Jeremy Grantham’s Stake Value: $562.37 Million
UnitedHealth Group Incorporated (NYSE:UNH) is an American multinational managed healthcare and insurance company. Jeremy Grantham’s GMO portfolio had 1.09 million shares of UnitedHealth Group Incorporated (NYSE:UNH) at the end of June 2022, worth $562.37 million, representing 3% of the total holdings.
On August 10, Mizuho analyst Ann Hynes raised the price target on UnitedHealth Group Incorporated (NYSE:UNH) to $600 from $550 and reaffirmed a Buy rating on the shares after the “strong” Q2 results. The analyst raised estimates based on UnitedHealth Group Incorporated (NYSE:UNH)’s optimistic business outlook.
Among the hedge funds tracked by Insider Monkey, 91 funds were bullish on UnitedHealth Group Incorporated (NYSE:UNH) at the end of June 2022, compared to 103 funds in the prior quarter. Rajiv Jain’s GQG Partners is the leading position holder in the company, with more than 3 million shares worth $1.60 billion.
Here is what Wedgewood Partners had to say about UnitedHealth Group Incorporated (NYSE:UNH) in its Q2 2022 investor letter:
“UnitedHealth Group also contributed to performance during the quarter. United’s operating income grew +3% on difficult year-ago comparisons as benefits members utilized more services compared to last year. Optum Health grew operating income +40% as more patients are enrolled in the Company’s value-based care services. The Company estimates nearly a third of all medical care is unnecessary and represents an opportunity to capture savings for both patients. Optum’s integrated platform of patient data, IT, and service providers are focused on driving out these unnecessary costs and should serve as the engine for long-term, mid-teens earnings per share growth.”
2. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 128
Jeremy Grantham’s Stake Value: $577.71 Million
Apple Inc. (NASDAQ:AAPL) has been part of Jeremy Grantham’s GMO portfolio since the first quarter of 2013. In Q2 2022, Grantham held 4.23 million Apple Inc. (NASDAQ:AAPL) shares worth $577.71 million. He purchased Apple stock at an average price of about $23 per share, and has so far netted 579% gains on his investment.
On September 6, Credit Suisse analyst Shannon Cross told investors she expects the iPhone 14 cycle to be similar to an S model, as Apple Inc. (NASDAQ:AAPL) continues to take advantage of an increasing installed base, supported by high customer retention, incremental share shift, and tailwinds from 5G adoption. She maintained an Outperform rating on Apple Inc. (NASDAQ:AAPL) with a $201 price target.
According to Insider Monkey’s data, 128 hedge funds were long Apple Inc. (NASDAQ:AAPL) at the end of June, compared to 131 funds in the earlier quarter. Ken Fisher’s Fisher Asset Management is the leading stakeholder of the company, with 65.6 million shares worth roughly $9 billion.
Here is what Alger Capital specifically said about Apple Inc. (NASDAQ:AAPL) in its Q2 2022 investor letter:
“Apple Inc. (NASDAQ:AAPL) is a leading technology provider in telecommunications. computing and services. Apple’s iOS operating system is the company’s unique intellectual property and competitive strength. This software drives extremely tight engagement with consumers and enterprises. The engagement is fostering the growing purchase of high-margin services like music, apps, and apple pay. Apple’s shares detracted from performance as management lowered its guidance for the second quarter due to headwinds from the war in Ukraine, adverse foreign currency shifts, and dampened consumer demand associated with the coronavirus in China. Additionally, many investors were concerned that lockdowns implemented to curtail the spread of COVID-19 would impact production of apple products, however the manufacturing facilities have resumed activity.”
1. Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders: 258
Jeremy Grantham’s Stake Value: $819.49 Million
Jeremy Grantham’s largest holding as of Q2 2022 is Microsoft Corporation (NASDAQ:MSFT). He lifted his stake by 6% between March and June, disclosing 3.19 million shares of the company in his portfolio worth $819.49 million, representing 4.4% of the total investments. Microsoft Corporation (NASDAQ:MSFT) has been part of the GMO portfolio since Q1 2013, and it is one of the favorite stock picks of Jeremy Grantham.
On August 11, Guggenheim analyst John DiFucci initiated coverage of Microsoft Corporation (NASDAQ:MSFT) with a Neutral rating and a $292 price target. While he believes Microsoft Corporation (NASDAQ:MSFT) can increase revenue and free cash flow, supported by upside in Azure and Office Commercial 365, he sees ongoing decline in Windows.
According to Insider Monkey’s Q2 data, 258 hedge funds were long Microsoft Corporation (NASDAQ:MSFT), compared to 259 funds in the earlier quarter. Peter Rathjens, Bruce Clarke, and John Campbell’s Arrowstreet Capital is a significant position holder in the company, with approximately 18 million shares worth $4.6 billion.
Here is what Alger Capital specifically said about Microsoft Corporation (NASDAQ:MSFT) in its Q2 2022 investor letter:
“Microsoft Corporation (NASDAQ:MSFT) is a positive dynamic change beneficiary of corporate America’s transformative digitization. During a previous earnings call, Microsoft’s CEO estimated that technology spending as a percent of GDP may increase from about 5% today to 10% in 10 years. Microsoft’s enterprise cloud product, Azure, is rapidly growing and accruing market share and its revenues increased 49% during the first three months of this year as the company’s revenue growth approached 20%. Microsoft’s share price declined despite its high unit volume growth as the broad equity market was down due to higher interest rates and slowing economic growth.”
You can also take a look at 10 Medical Marijuana Stocks To Buy Now and 10 Stocks That Billionaire Rob Citrone Is Selling.
