Top 5 Stocks to Buy Now According To Secretive Billionaire Quant Hedge Fund Manager

Below are the top 5 stocks to buy now according to a secretive billionaire quant hedge fund manager. For a comprehensive list see: Top 10 Stocks to Buy Now According To Secretive Billionaire Quant Hedge Fund Manager.

5. Target Corporation (NYSE: TGT)

General merchandise stores chain Target Corporation (NYSE: TGT) is among the permanent members of the secretive billionaire quant hedge fund manager portfolio since 2015. However, Two Sigma sold 24% of its stake in the latest quarter to capitalize on the share price rally. Target Corporation shares jumped almost 30% this year, extending the five years gains to 130%.

In addition to share price gains, the general merchandise stores chain also offers hefty dividends to investors. It has raised dividends in the past 52 straight years. Insider monkey says, “Target Corporation was in 57 hedge funds’ portfolios at the end of the third quarter of 2020. The all-time high for this statistics is 55. This means the bullish number of hedge fund positions in this stock currently sits at its all-time high.”

4. Cisco Systems (NASDAQ: CSCO)

The technology company Cisco Systems (NASDAQ: CSCO) underperformed this year, but the billionaire quant hedge fund Two Sigma sees the dip as a buying opportunity. The firm has raised its stake in Cisco by 116% in the latest quarter to 11 million shares valued above $433 million.

It is the fourth largest stock investment of the quant hedge fund, accounting for 1.24% of the overall portfolio. Meanwhile, other investors aren’t looking so optimistic about Cisco. According to Insider Monkey, CSCO isn’t among the 30 most popular stocks among hedge funds.

Brown Advisory is bullish on CSCO saying that “Networking equipment provider Cisco Systems gained after reporting solid quarterly results amid a challenging economic environment. The company’s security and video conferencing products are in greater demand due to the ongoing work-from-home trend, suggesting an improved business growth outlook for the remainder of the year.”

Amana Mutual Fund also made some bullish comments in its Q1 letter:

“Along with growing e-commerce, another result of shelter-in-place will likely be a greater appreciation of the possibilities of video conferencing. As a company that sees itself as defining the future of the internet, while featuring negligible debt and an attractive dividend, Cisco has proven relatively resilient.”

3. Lowe’s Companies (NYSE: LOW)

Despite an 11% decline in Lowe’s stake during the third quarter, the home improvement corporation Lowe’s Companies (NYSE: LOW) is the third-largest stock investment of the quant hedge fund manager. Lowes stake accounts for 1.26% of the overall portfolio valued at $440 million. It is the permanent member of the secretive billionaire quant hedge fund manager portfolio since 2015.

Lowe’s shares soared 37% in the last twelve months, enlarging five years’ gains to 118%. The company also offers dividends to investors, which makes it a good stock to hold in a portfolio.

In a previous article we shared Pershing Square’s detailed comments about LOW. Here is an excerpt from that article:

“In 2020, beyond adapting the business for surging demand and the associated operational strains imposed by Covid-19, Lowe’s continues to invest behind critical strategic initiatives, including improving omnichannel capabilities. Management completed the re-platforming of its ecommerce platform earlier this year, and will now focus on enhancing online features and functionality, thereby improving the overall user experience. Lowe’s is also accelerating investments in its supply chain initiatives, a critical element of the company’s longer-term business transformation. We believe that Lowe’s continues to make substantial progress toward achieving each of management’s high-priority initiatives, which will aid Lowe’s future competitive position.

In recent quarters, Lowe’s management has begun to acknowledge its medium-term 12% operating margin target as “not the end point,” but rather “a stop along [Lowe’s] journey,” and has further noted that they believe Lowe’s “can do better than that over time.” As Lowe’s revenue productivity and margins begin to approach its best-in-class peer Home Depot, which achieved a greater than 14% profi t margin last year, it will generate signifi cant increases in profi t, which, when coupled with the company’s likely soon-to-be-relaunched, large share repurchase program should lead to accelerated future earnings-pershare growth.

Despite Lowe’s signifi cant stock price appreciation, it currently trades at approximately 19 times our estimate of Lowe’s next-twelve-month earnings (vs. Home Depot at 25 times), a valuation which does not refl ect its potential for signifi cant future profi t improvement. As a result, we believe that Lowe’s share price has the potential to appreciate substantially as the company continues to make progress on its business transformation.”

2. Home Depot (NYSE: HD)

The home improvement retailer Home Depot (NYSE: HD) has been in the Two Sigma Advisor’s portfolio since 2013. The home improvement stock has generated massive returns for the quant hedge fund in the past year both in the form of share price gains and dividends. This is the second-largest stock investment of a billionaire hedge fund, according to the latest filings.

Shares of Home Depot soared 25% this year, and are up 104% in the last five years. It has raised dividends in the past 11 straight years, with a five-year dividend growth average of 23%.

Ensemble Capital shared its bullish HD thesis in a recent investor letter:

“Home Depot, Inc. (3.7% weight in portfolio): Home Depot is a newer addition to the Fund. However, we’ve followed the home improvement space for many years and we’re particularly excited about the opportunity ahead for Home Depot. In the years since the housing bust, the company has managed to increase revenue by 60% and earnings by 240% even while only increasing their store count by just 2%. This sort of disciplined execution has led to the company exhibiting returns on invested capital far above most other established retailers, although Starbucks, another holding of ours also generates very high returns on capital.

As discussed during our notes on First American (above), we do expect housing activity to come to a standstill in the near term. However, Home Depot is deemed an essential business and their stores remain open. With ultra-low interest rates enabling cash out refinancing and with a homeowner’s deck that needed repairs prior to the Coronavirus still needing to be repaired after this is over, we expect an explosion of pent up demand to come back to the home improvement sector when the crisis has passed. Just as housing transactions were growing rapidly in January and February, most leading indicators of home improvement activity were also accelerating going into this period.

As anyone who owns a house knows, it is often easy to overlook cosmetic issues in a house you’ve lived in a long time or defer maintenance on small items. But after being stuck in their homes for a month or two, it would not surprise us at all if many homeowners emerge with a long list of items they want to fix. And while Home Depot is the leader in their category and we feel confident they can get through this crisis, the same cannot be said of the large number of local hardware stores which collectively still have a meaningful portion of home improvement market share.”

1. Microsoft Corporation (NASDAQ: MSFT)

The technology giant Microsoft Corporation (NASDAQ: MSFT) is the largest stock pick of the secretive billionaire quant hedge fund manager portfolio. The firm has been holding MSFT shares over the last ten years. Indeed, the hedge fund has raised its stake by 41% in the latest quarter. The investment is accounting for 2.05% of the overall portfolio valued at $716 million.

Several other hedge funds are also optimistic about Microsoft’s performance. According to Insider Monkey, MSFT ranks #2 among the 30 most popular stocks among hedge funds.

The report further says, “Microsoft was in 234 hedge funds’ portfolios at the end of September. The all-time high for this statistics is 235. MSFT investors should pay attention to an increase in activity from the world’s largest hedge funds of late.

Please also see: 10 Best Cheap Stocks To Buy Now According To Ray Dalio and 10 Best Growth Stocks To Buy Now According To Ray Dalio

Disclosure: None