In this article, we discuss the top 5 stock picks of John Overdeck and David Siegel’s Two Sigma Advisors. If you want our detailed analysis of these stocks, go directly to the Top 10 Stock Picks of John Overdeck and David Siegel’s Two Sigma Advisors.
5. Merck & Co., Inc. (NYSE:MRK)
Two Sigma Advisors’ Stake Value: $471,713,000
Percentage of Two Sigma Advisors’ 13F Portfolio: 1.22%
Number of Hedge Fund Holders: 77
Merck & Co., Inc. (NYSE:MRK), a New Jersey-based multinational pharmaceutical company, is one of the top stock picks from the Q3 portfolio of John Overdeck and David Siegel’s Two Sigma Advisors, with the hedge fund owning 6.28 million Merck & Co., Inc. (NYSE:MRK) shares, worth $471.71 million, representing 1.22% of the total investments for the third quarter.
As of September 2021, 77 hedge funds monitored by Insider Monkey were long Merck & Co., Inc. (NYSE:MRK), with stakes valued at $4.55 billion. This is compared to 79 funds being bullish on the stock in the preceding quarter, with a total stake value of $5.29 billion. Arrowstreet Capital is one of the leading Merck & Co., Inc. (NYSE:MRK) stakeholders from the third quarter, with 6.56 million shares amounting to $493.25 million.
Merck & Co., Inc. (NYSE:MRK), on October 28, posted its Q3 results. EPS in the third quarter equaled $1.75, beating estimates by $0.20. The revenue was up 4.80% from the prior-year quarter at $13.15 billion, outperforming estimates by $833.53 million.
Truist analyst Robyn Karnauskas on November 24 raised the price target on Merck & Co., Inc. (NYSE:MRK) to $95 from $92, and kept a Buy rating on the shares as part of a broader research note on major pharma.
Here is what Artisan Partners has to say about Merck & Co., Inc. (NYSE:MRK) in its Q1 2021 investor letter:
“In Q1, we initiated a position in Merck, a provider of health care solutions including prescription medicines, vaccines, biologic therapies, animal health and consumer care products. We purchased Merck when the stock came under pressure in part on concerns that the newly minted Biden administration could implement regulatory changes and lower drug costs in the pharmaceutical industry. Recent, but anticipated changes to Merck’s management team have also weighed on shares, as have concerns over the company’s heavy reliance on immunotherapy treatment Keytruda. Notably, Merck is not getting much credit from investors for the 60+ programs it has in clinical development, despite having several solid and large new product opportunities. Additionally, the company’s strong balance sheet and robust free cash flow provide it multiple options for future partnerships and acquisitions. While Merck is undergoing a period of transition, we think the company’s fundamentals are strong and believe changes to management should be a catalyst for improvement.”
4. Visa Inc. (NYSE:V)
Two Sigma Advisors’ Stake Value: $498,823,000
Percentage of Two Sigma Advisors’ 13F Portfolio: 1.29%
Number of Hedge Fund Holders: 143
Visa Inc. (NYSE:V), a multinational financial technology company facilitating the electronic transfer of funds, posted its Q3 results on October 26. The EPS came in at $1.62, beating estimates by $0.08. The $6.56 billion revenue gained almost 29% year-over-year, outperforming estimated revenue by $45.89 million.
Two Sigma Advisors holds a $498.8 million position in Visa Inc. (NYSE:V) as of Q3, which accounts for 1.29% of the fund’s total 13F securities. Citing attractive stock valuation, UBS analyst Rayna Kumar assumed coverage of Visa Inc. (NYSE:V) with a Buy rating and a $275 price target on November 17.
Insider Monkey’s Q3 database tracks the movement of 867 elite hedge funds, of which a total of 143 funds were bullish on Visa Inc. (NYSE:V) at the end of September, down from 162 funds holding stakes in the company in the preceding quarter. The leading Visa Inc. (NYSE:V) stakeholder is TCI Fund Management, with a $4.44 billion stake in the company.
Here is what Polen Capital has to say about Visa Inc. (NYSE:V) in its Q3 2021 investor letter:
“Visa Inc. faced pressure as some believe these “old payment infrastructure” businesses will be disrupted by newer fintech companies using blockchain, buy now, pay later (BNPL), or other innovations to provide better/cheaper payment services. However, we believe that some of these technologies have meaningful limitations which could benefit existing payment networks. For example, BNPL transactions are often funded with cards and turn a one-time transaction into many smaller ones with more transaction fees for Visa. Just like with regulation, we continually monitor for competition and technological disruption. As of now, we do not see a significant risk in the foreseeable future to this company.”
3. Johnson & Johnson (NYSE:JNJ)
Two Sigma Advisors’ Stake Value: $527,944,000
Percentage of Two Sigma Advisors’ 13F Portfolio: 1.36%
Number of Hedge Fund Holders: 88
Johnson & Johnson (NYSE:JNJ), one of the leading multinational healthcare corporations, is one of the top stock picks of Two Sigma Advisors, with the hedge fund owning 3.26 million Johnson & Johnson (NYSE:JNJ) shares as of September, worth almost $528 million, representing 1.36% of the firm’s Q3 portfolio.
Johnson & Johnson (NYSE:JNJ) is a popular stock among the smart money, with 88 funds owning stakes in the company as of Q3 2021, according to Insider Monkey’s database of elite hedge funds. The leading Johnson & Johnson (NYSE:JNJ) stakeholder is Terry Smith’s Fundsmith LLP, with 7.2 million shares valued at $1.16 billion.
Johnson & Johnson (NYSE:JNJ), on October 19, announced a Q3 EPS of $2.60, beating estimates by $0.25. The $23.34 billion revenue was up 10.70% year-over-year, but missed analysts’ consensus estimates by almost $380 million.
Here is what Distillate Capital has to say about Johnson & Johnson (NYSE:JNJ) in its Q2 2021 investor letter:
“The largest additions in the rebalance, Johnson & Johnson was around 50 and 40 basis points incrementally. J&J underperformed in the quarter while its normalized free cash flows held steady and so its position size was topped off to match the stable cash flows.”
2. Alphabet Inc. (NASDAQ:GOOG)
Two Sigma Advisors’ Stake Value: $603,643,000
Percentage of Two Sigma Advisors’ 13F Portfolio: 1.56%
Number of Hedge Fund Holders: 156
Alphabet Inc. (NASDAQ:GOOG), recognized for being the parent company of Google, represents 1.56% of the total 13F securities at Two Sigma Advisors as of Q3 2021, with the hedge fund owning 225,786 Alphabet Inc. (NASDAQ:GOOG) shares, worth $603.6 million.
On October 26, the Q3 EPS for Alphabet Inc. (NASDAQ:GOOG) totaled $27.99, topping estimates by $4.75. Revenue for the quarter came in at $65.12 billion, up 41.03% year-over-year.
One of the leading Alphabet Inc. (NASDAQ:GOOG) stakeholders from the third quarter is Harris Associates, holding a position worth over $5 billion in the company. Overall, 156 hedge funds were bullish on Alphabet Inc. (NASDAQ:GOOG) at the end of Q3, with a total stake value of over $28.5 billion.
Despite tougher comps, Alphabet Inc. (NASDAQ:GOOG) is set to deliver a strong Q4 performance after solid results in the third quarter, according to Jefferies analyst Brent Thill on October 27. He raised the price target on Alphabet Inc. (NASDAQ:GOOG) stock to $3,500 from $3,325 and kept a Buy rating on the shares.
Here is what Oakmark Funds has to say about Alphabet Inc. (NASDAQ:GOOG) in its Q3 2021 investor letter:
“Alphabet, a U.S. communication services provider, was once again a top contributor for the quarter, solidifying its rank as a top contributing stock for the one-year period. The company’s financial results repeatedly exceeded expectations. In particular, its revenue grew faster than expected and its margin trends improved across all segments. In addition, management has executed $24.4 billion of stock repurchases so far in 2021. After further examination, we recently increased our estimate of Alphabet’s intrinsic value based on the company’s better than expected operating leverage and its notable efficiency improvements. As a result, we continue to believe that Alphabet is trading at a significant discount to its intrinsic value.”
1. Microsoft Corporation (NASDAQ:MSFT)
Two Sigma Advisors’ Stake Value: $943,163,000
Percentage of Two Sigma Advisors’ 13F Portfolio: 2.44%
Number of Hedge Fund Holders: 250
Wells Fargo analyst Michael Turrin on November 22 initiated coverage of Microsoft Corporation (NASDAQ:MSFT), a Big Five US tech corporation, with an Overweight rating and a $400 price target. The analyst is positive that despite being one of the largest global tech companies, Microsoft Corporation (NASDAQ:MSFT) has a bright future ahead, with massive potential for growth.
Microsoft Corporation (NASDAQ:MSFT) is the largest holding in the Q3 portfolio of Two Sigma Advisors, with the firm owning 3.34 million Microsoft Corporation (NASDAQ:MSFT) shares, worth $943.1 million, representing 2.44% of the firm’s total investments.
Fisher Asset Management is the largest Microsoft Corporation (NASDAQ:MSFT) stakeholder as of September end, with 25.5 million shares worth over $7 billion. Overall, a total of 250 out of the 867 elite funds monitored by Insider Monkey were bullish on Microsoft Corporation (NASDAQ:MSFT) at the end of Q3, with stakes amounting to $65.8 billion.
Microsoft Corporation (NASDAQ:MSFT) posted its Q3 earnings on October 26. EPS in the period came in at $2.27, topping estimates by $0.19. Revenue for the third quarter totaled $45.32 billion, up almost 22% from the preceding-year quarter, outperforming estimates by $1.33 billion.
Here is what Alger has to say about Microsoft Corporation (NASDAQ:MSFT) in its Q3 2021 investor letter:
“Microsoft Corporation was among the top contributors to performance during the third quarter. Microsoft is a Positive Dynamic Change beneficiary of corporate America’s transformative digitization. Microsoft’s enterprise cloud product, Azure, is rapidly growing and accruing market share. Microsoft reported that Azure grew 51% in the second quarter. This high unit volume growth is a primary driver of the company’s higher share price, but the company’s strong operating execution has enabled margin expansion that has also helped to increase forward earnings estimates. We believe Microsoft’s subscription-based software offerings and cloud computing services have a durable growth profile because they enhance customers’ growth initiatives and help them to diminish costs. Additionally, investors appreciate Microsoft’s strong free cash flow generation and its return of cash to shareholders in the form of dividends and share repurchases.”
You can also take a look at Martin Taylor’s Crake Asset Management Portfolio: Top 10 Stock Picks and 10 Safest Stocks To Buy Now.
