Below is the list of $40 billion hedge fund’s top 5 stock picks. For a detailed discussion about Terry Smith’s investment philosophy and portfolio management strategy please see This $40 Billion Hedge Fund Loves These 10 Stocks.
5. Intuit Inc. (NASDAQ:INTU)
Fundsmith’s stake value: $2.4 billion
Percentage of Fundsmith’s portfolio: 5.85%
Number of hedge fund holders: 82
Fundsmith cut its stake in Intuit Inc. (NASDAQ:INTU) by 19% during the December quarter, yet it remains the fifth largest holding in its portfolio. Over the years, the London-based investment firm has held a stake in the company and it appears that it has benefited from its strategy. Shares of the financial services company soared by 22% in the last twelve months, enlarging five-year gains to over 300%. Intuit Inc. (NASDAQ:INTU) is a fast-growing company. The company posted total revenue of $2.6 billion in the December quarter, up 41% from the prior year.
Baron Funds, an asset management firm, mentioned a few stocks including Intuit. Here is what Baron Funds stated:
“Intuit Inc. is the leading provider of accounting and tax preparation software. Shares increased after the company reported quarterly results that beat Street estimates, with 22% revenue growth in the Small Business segment and record-high revenue from Credit Karma. The company closed the acquisition of MailChimp, which expands its product offering and is accretive to EPS. Management increased full-year guidance to reflect better organic growth and the contribution from MailChimp. We continue to own the stock due to Intuit’s strong competitive position and numerous growth opportunities. We have several investments in software companies that help businesses manage their financial processes and operations. Intuit Inc. provides accounting and payroll solutions for small businesses as well as tax preparation software for consumers and tax professionals.”
4. PayPal Holdings, Inc. (NASDAQ:PYPL)
Fundsmith’s stake value: $2.45 billion
Percentage of Fundsmith’s portfolio: 5.99%
Number of hedge fund holders: 110
PayPal Holdings, Inc. (NASDAQ:PYPL) was among the worst performers of Fundsmith’s portfolio during the December quarter. Despite that, the firm saw the dip in its share price as a buying opportunity. Fundsmith raised its stake in the company by 6% to 5.99% of the overall portfolio. Besides the latest selloff, PayPal’s stock price produced substantial gains for shareholders during the past two years.
In the fourth quarter investor letter, ClearBridge Investments, an investment management firm, mentioned a few stocks including PayPal Holdings. Here is what ClearBridge Investments stated:
“PayPal, a platform and provider of digital and mobile payment services through brands including Venmo, enhances our exposure to digital payments, e-commerce, and fintech; nascent markets with penetration rates accelerating globally. The pandemic pulled forward the growth of digital payments, which was further accelerated by PayPal’s entrance into cryptocurrency and buy now, pay later (BNPL). Shares recently declined 40% from their 52-week high due to competitive concerns and disruptions to consumer spending, providing an attractive entry point. PayPal is trading at its pre-pandemic multiple while its long-term growth drivers remain intact and it has increased innovation at both Venmo and core PayPal, adding new experiences around shopping and investing that we expect to positively contribute to growth in users and average revenue per user over the next five years.”
3. Estée Lauder Companies Inc. (NYSE:EL)
Fundsmith’s stake value: $2.65 billion
Percentage of Fundsmith’s portfolio: 6.47%
Number of hedge fund holders: 44
Estée Lauder Companies Inc. (NYSE:EL) is an American multinational manufacturer and marketer of skincare, makeup, fragrance, and hair care products. Fundsmith has been holding a leading stake in the company over the years. It also appears that the stake in the company contributed positively to the London-based hedge fund. The company’s share price surged 214% in the past five years. In addition, the company offers a dividend yield of around 0.90%.
Of the 924 hedge funds tracked by Insider Monkey, Estee Lauder Companies Inc. was in 44 portfolios as of December.
2. IDEXX Laboratories, Inc. (NASDAQ:IDXX)
Fundsmith’s stake value: $2.79 billion
Percentage of Fundsmith’s portfolio: 6.81%
Number of hedge fund holders: 43
Terry Smith of Fundsmith has been showing confidence in IDEXX Laboratories, Inc. (NASDAQ:IDXX) over the years. His confidence has also been paying off considering a robust share price run of a multinational corporation engaged in providing products and services for animal veterinary, poultry, livestock, water testing, and dairy markets. Its share price grew 12% in the last twelve months, extending five-year gains to over 250%. The company’s share price run is backed by its strong financial numbers. In 2021, the company’s revenue of $3.2 billion surged 19% year over year while earnings per share of $8.60 increased 28% on a reported basis and 29% on a comparable basis.
Bullish hedge fund positions remained flat in IDEXX Laboratories compared to the previous quarter. It was in 43 hedge fund portfolios as of December.
1. Microsoft Corporation (NASDAQ:MSFT)
Fundsmith’s stake value: $4.37 billion
Percentage of Fundsmith’s portfolio: 10.67%
Number of hedge fund holders: 262
The hedge fund’s strategy of holding a large stake in Microsoft Corporation (NASDAQ:MSFT) contributed significantly to its returns. It was among the largest contributor to Fundsmith’s returns in 2021. Over the years shareholders of the technology giant are enjoying steady share price gains and healthy dividend growth. The company has generated double-digit growth in revenue and earnings in 2021 and expects to extend the trend into the coming years.
In the fourth quarter investor letter, Motiwala Capital, an investment management firm, mentioned a few stocks including Microsoft Corporation. Here is what Motiwala Capital stated:
“Microsoft (NASDAQ:MSFT) re-enters our portfolio after a long gap. MSFT sells enterprise and consumer software products as well as hardware products such as the Xbox video game console and Surface laptops. All business segments experienced double-digit revenue growth and earnings per share have compounded in the mid-double digits over the last 5 years. We believe MSFT continues this momentum in the years ahead.”
You can also take a look at 10 Monthly Dividend Stocks to Buy in April and 10 Consumer Technology Stocks to Invest In According to Ken Fisher
