The 5 Most Popular Stocks Among Hedge Funds Going Into Q2

The U.S stock market had a tough first quarter. The S&P 500 Index, which had tumbled more than 10.5% by February 11, did manage to recuperate, ending the three-month period up by 0.77%. The Nasdaq Composite also bottomed out on February 11 and then rebounded, but ended the quarter with a 2.75% loss. Finally, there’s the Dow Jones Industrial Average, the best performer among major stock indexes; after hitting its February low, it recovered as well, concluding the quarter with a 1.49% gain. Nonetheless, with bears reigning Wall Street and sentiment low for much of the quarter, it was hard to find companies with institutional support that rose. However, the five firms in this list, which also happen to be the most popular among the hedge funds that we track, all saw hedge fund support increase over the first quarter.

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While there are many metrics that investors can assess in the investment process, the hedge fund sentiment is something that is often overlooked. However, hedge funds and other institutional investors allocate significant resources while making their bets and their long-term focus makes them the perfect investors to emulate. This is supported by our research, which determined that following the small-cap stocks that hedge funds are collectively bullish on can help a smaller investor to beat the S&P 500 by around 95 basis points per month (see the details here).

#5. Microsoft Corporation (NASDAQ:MSFT)

Fifth in this list is Microsoft Corporation (NASDAQ:MSFT), which fell as much as 11.2% during the first quarter, ending the period with a 0.45% loss. The depressed valuation was probably one of the elements that attracted new institutional investors to it. Between January and March, Windows’ parent company saw the number of hedge funds in our database long its stock rise by almost 3% to 144. Their combined stakes, worth more than $20.8 billion as of March 31, accounted for roughly 4.8% of the company’s total shares. Among the funds with large stakes in Microsoft Corporation (NASDAQ:MSFT) was Boykin Curry’s Eagle Capital Management, which held 30.8 million shares worth more than $1.7 billion at the end of the first quarter.

Microsoft has continued to tumble during the second quarter, losing 5.4%, mostly on the back of an earnings miss, when it delivered fiscal third quarter EPS of $0.62, missing the Street’s consensus by $0.02. Poor fiscal fourth quarter revenue guidance and declining Windows sales did nothing to help matters either. On Thursday, the company announced that it is partnering with Facebook Inc (NASDAQ:FB) to lay a high-capacity data-transfer cable across the Atlantic.

#4. Apple Inc. (NASDAQ:AAPL)

The fourth-most popular stock among the hedge funds that we track was Apple Inc. (NASDAQ:AAPL), which unlike Microsoft, posted a 3.54% gain in the first quarter. However, its stock price did fall over the first few weeks of the year, opening an attractive entry point for investors. Consequently, the number of hedge funds in our database long the stock rose by 14.2% over the quarter, to 152. While their stakes accounted for only 2.5% of the company’s float, they were worth over $14.8 billion on March 31. Apple Inc. (NASDAQ:AAPL) has failed to carry that momentum into the second quarter however, tumbling by almost 8.3% since April 1. A significant part of the decline was due to the company’s fiscal second quarter miss, its light fiscal third quarter guidance and the worrisome decline in iPhone sales.

To the surprise of many investors and analysts, one of the new shareholders of Apple in the first quarter was Warren Buffett’s Berkshire Hathaway, which started a new position comprised of 9.81 million shares. Another large Apple supporter was Ken Fisher’s Fisher Asset Management, which disclosed ownership of 11.31 million shares as of March 31. On the other hand, as readers probably remember, famed activist Carl Icahn, a long-time Apple bull, sold off his 45.76 million shares during the first quarter.

We count down the three most popular stocks among top investors on the next page.