Below we present the list of The 5 Most Diversified Stocks That Hedge Funds Love. For our methodology and a more comprehensive list please see The 10 Most Diversified Stocks That Hedge Funds Love.
5. The Procter & Gamble Company (NYSE:PG)
Number of Hedge Fund Shareholders: 72
Kicking off the second half of the list is The Procter & Gamble Company (NYSE:PG), the consumer goods giant that boasts many of the most recognizable brands found on store shelves. Olay, Gillette, Old Spice, Crest, Mr. Clean, Febreze, Tampax, and Dawn are just a small collection of the company’s brands, which span everything from grooming and baby care, to healthcare and beauty.
Procter & Gamble is a cash flow generating juggernaut, converting 93% of its earnings into FCF over the previous year and allocating boatloads of that cash towards shareholder returns in the form of buybacks and dividends. On the latter front, PG shares currently yield 2.89%. P&G grew sales by 5% during its fiscal year 2022 to $80 billion.
Hedge funds have largely been maintaining their positions in The Procter & Gamble Company (NYSE:PG) for the past several quarters following a 12% drop in ownership of PG during the first quarter of 2021. Ray Dalio’s Bridgewater Associates and Rajiv Jain’s GQG Partners both sold off some of their PG shares during Q2, but maintain positions valued at over $800 million as of June 30.
4. Danaher Corporation (NYSE:DHR)
Number of Hedge Fund Shareholders: 83
Danaher Corporation (NYSE:DHR) has four segments that supply products and services across a range of diverse industries, including the medical and life sciences fields, water and environmental protection, and dental care.
While Covid-19 proved to be a boon for the company, its non-Covid vaccine/therapies revenue is also growing at a double-digit rate. The majority of Danaher’s revenue is recurring, which should insulate the company from the effects of a recession. Danaher is expected to generate $7.15 billion in revenue during Q3.
Hedge fund ownership of Danaher Corporation (NYSE:DHR) soared between the end of 2018 and the end of 2021, rising by 78% while the stock tripled in value. There’s been a slight dip in the number of funds long DHR this year and the stock is off 18% in 2022. Ken Fisher’s Fisher Asset Management and Dan Loeb’s Third Point own large stakes in Danaher as of June 30.
The Weitz Investment Partners III Opportunity Fund built a new stake in Danaher Corporation (NYSE:DHR) during Q2 and praised the company’s free cash flow and strong track record of successful acquisitions in the fund’s Q2 2022 investor letter:
“Consistent with that approach, portfolio activity among our long holdings tilted toward purchases. We added to almost half our holdings by varying degrees, and we were pleased to initiate new positions in Danaher (NYSE:DHR). Danaher is a provider of instruments and diagnostic tools to medical, life science, and other desirable end-markets worldwide. The business generate significant free cash flow, possess strong competitive positions, and have excellent management teams with demonstrated acquisition records.”
3. The Walt Disney Company (NYSE:DIS)
Number of Hedge Fund Shareholders: 111
The Walt Disney Company (NYSE:DIS) owns a host of iconic entertainment characters, brands and media networks, operates the leading streaming service in the world, Disney+, and manages a stable of popular theme parks and resorts. It also stages various live performances of its content in the form of Broadway plays, and licenses merchandise of its popular brands.
Bank of America analyst Jessica Reif Ehrlich has a ‘Buy’ rating and $127 price target on Disney, down from $144 previously. The analyst projects Disney to pull in $21.7 billion in fiscal Q4 revenue, down slightly from previous projections due in part to revised Disney+ subscriber adds, which are now expected to come in at 8 million, down from previous forecasts of 15 million.
The Walt Disney Company (NYSE:DIS) remains one of the most popular stocks among hedge funds, but there has been somewhat of an exodus from the stock in recent quarters, with a net 38% decline in hedge fund ownership since the end of 2020. Jim Simons’ Renaissance Technologies and David Tepper’s Appaloosa Management both initiated stakes in DIS during Q2.
Oakmark Fund was buying up shares of The Walt Disney Company (NYSE:DIS) during Q2, revealing that they’re substantially discounted to the fund’s intrinsic value estimates for the stock, as laid out in its Q2 2022 investor letter:
“Disney (NYSE:DIS) is one of the most beloved consumer companies in the world. Its media business has a rich library of intellectual property, which provides a powerful engine for creating new content across the Disney, Pixar, Marvel, and Star Wars brands. This content also contributes to the success of Disney’s theme parks, which generated nearly half the company’s earnings and grew more than 10% annually in the decade prior to the pandemic. Shares have fallen nearly 50% over the past year as investors worried about the company’s ability to transition its media business to a direct-to-consumer streaming world. This transition has required management to make investments in its Disney+ streaming service that are depressing profitability today. However, we believe these investments will ultimately produce attractive returns as Disney+ continues to grow subscribers and increase pricing over time. As a result, we were able to purchase shares at a substantial discount to our estimate of intrinsic value.”
2. Berkshire Hathaway Inc. (NYSE:BRK-A)
Number of Hedge Fund Shareholders: 141
Berkshire Hathaway Inc. (NYSE:BRK-A) is one of the most diversified companies on the planet, owning dozens of varied businesses that include insurance, manufacturing, energy, retail, and railroad companies. Then there’s the holding company’s iconic hedge fund operations, which had $300 billion in 13F securities on June 30, being invested heavily in the tech, finance, and consumer staples industries.
The company’s investment portfolio did take a massive hit during Q2 given the state of the bear market, which led to a $44 billion net loss for the company. Short-term investment performance isn’t a good way to measure the company however. More importantly, Berkshire pulled in $76.2 billion in revenue and recorded an operating profit of over $11 billion.
Shares of Warren Buffett’s holding company Berkshire Hathaway Inc. (NYSE:BRK-A) are among the ten most popular among hedge funds. Michael Larson’s Bill & Melinda Gates Foundation Trust, which receives an annual gift of BRK-A shares donated by Mr. Buffett, is the largest shareholder of the holding company, owning 34.7 million shares worth $9.47 billion as of June 30.
The Diamond Hill Large Cap Fund discussed the latest happenings regarding its Berkshire Hathaway Inc. (NYSE:BRK-A) investment in the fund’s Q1 2022 investor letter:
“Diversified holding company Berkshire Hathaway reported strong earnings during the quarter and benefited from continued share repurchases below intrinsic value. The company also announced significant deployments of excess cash during the quarter, including the acquisition of Alleghany and a large increase in its stake in Occidental Petroleum.”
1. Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Fund Shareholders: 254
Amazon.com, Inc. (NASDAQ:AMZN) has expanded far from its e-commerce roots to become one of the most diversified companies in the world. The company now has its hands in everything from online streaming, book publishing, and cloud services, to electronic devices, co-branded credit cards, and advertising.
Amazon’s advertising business was one of the company’s strongest performers during a difficult Q2, growing by 18%. Amazon’s Web Services also continues to grow at a rapid pace in the burgeoning cloud computing market, growing by 33% year-over-year in Q2. Amazon is expected to surge its revenue by 15.5% to nearly $128 billion.
Amazon.com, Inc. (NASDAQ:AMZN) is the second-most popular individual stock among hedge funds even after ownership of the stock dipped by 10% over the past two quarters. Some of Amazon’s biggest bulls loaded up on shares during the stock’s Q2 weakness, with Ken Fisher’s Fisher Asset Management growing its stake by 1,959% to 48.6 million shares during the quarter, while Jaime Sterne’s Skye Global Management raised its position by 1,982% to 15.4 million shares.
Lakehouse Capital discussed Amazon.com, Inc. (NASDAQ:AMZN)’s resilient Q2 in the face of various headwinds, as well as the company’s long-term growth outlook in the fund’s July 2022 investor letter:
“Amazon.com, Inc. (NASDAQ:AMZN) proved resilient in the face of ongoing macro pressures and delivered a strong quarterly result along with “better-than-feared” guidance for the third quarter. Net sales increased 7% year-on-year (10% constant currency) to $121.2 billion, while operating profit declined 57% to $3.3 billion. The drop in operating profit was attributable not only to external macro factors, such as elevated shipping and fuel costs, but also lower productivity and efficiency costs as a result of some overcapacity on the back of its recent investment cycle. It was pleasing to see that the company has begun to make progress on the more controllable costs, particularly productivity and staffing, with headcount, for example, down almost 100,000 over the quarter. We continue to believe Amazon is well positioned to manage these short-term issues and remains on track to deliver significant profit improvements over the next twelve months.
Management also confirmed that they have not seen any deterioration in Prime membership growth or retention following the 17% increase in Prime fees put through earlier in the year. This is not surprising to us, as in our view, the price increase was more than justified given the tremendous amount of customer value that has been added since the last price increase was implemented back in 2018, which includes the doubling of its fulfilment network and workforce, significant expansion of free same-day delivery and considerable investments in video and music content. Ultimately, we remain positive about Amazon’s future and believe that the company’s scale and market leadership will continue to drive growth for many years to come.”
For more of the latest stock picks worth considering for your portfolio, check out the Best Bitcoin Stocks To Buy and the Best Airline Stocks To Buy.
Disclosure: None.
