Warren Buffett and Hedge Funds Love These 11 Stocks

Published on December 13, 2023 at 4:27 pm by Fahad Saleem in Hedge Funds, News

In this article, we will take a detailed look at the Warren Buffett and Hedge Funds Love These 11 Stocks. For a quick overview of such stocks, read our article Warren Buffett and Hedge Funds Love These 5 Stocks.

Market volatility of 2023 forced smart money managers to practice discipline in stock picking. In November, data from Goldman Sachs showed that hedge funds’ bets this year reached a concentration level which was the highest recorded in the past 22 years as they sought to pile into mega-cap quality stocks that outperformed in 2023. Goldman Sachs’ index of crowding across hedge funds reached a new high in 2023. Goldman said that the average fund holds about 70% of its long portfolio in its top 10 positions. This lack of diversification is strikingly similar to what Warren Buffett has been practicing for years now. Warren Buffett famously said that diversification is “protection against ignorance.”

Overall, the performance of hedge funds remain mixed in 2023. Macro-focused hedge funds performed well in most part of the year as stocks remains fogged in uncertainty. However, in November, hedge funds posted their best monthly performance since January, while macro hedge funds saw losses, according to data by Hedge Fund Research (HFR), Reuters reported. Overall, the hedge fund industry gained 2.2% in November, while it’s up 4.35% for the year.

Methodology

For this article, we first listed down all holdings of Warren Buffett’s Berkshire Hathaway as of the end of the third quarter. From these socks we picked 11 with the highest number of hedge fund investors. That means these are the stocks loved by both Warren Buffett and other elite money managers heading into the last quarter of 2023 and potentially 2024.

11. Chevron Corp (NYSE:CVX)

Number of Hedge Funds: 72

Chevron Corp (NYSE:CVX) ranks 11th in our list of the stocks loved by both Warren Buffett and hedge funds. Chevron Corp (NYSE:CVX) recently revealed that its total capital expenditure in 2024 will rise about 14% on a YoY basis to $15.5 billion to $16.5 billion, plus an additional $3 billion for affiliate capex.

Insider Monkey’s database of 910 hedge funds shows that 72 hedge funds had stakes in Chevron Corp (NYSE:CVX). The biggest stakeholder of Chevron Corp (NYSE:CVX) was Warren Buffett’s Berkshire Hathaway which owns an $18.6 billion stake in Chevron Corp (NYSE:CVX).

10. Charter Communications, Inc (NASDAQ:CHTR)

Number of Hedge Funds: 73

Charter Communications, Inc (NASDAQ:CHTR) ranks 10th in our list of Warren Buffett stocks popular among hedge funds. Warren Buffett owns a $1.7 billion stake in the company as of the end of the third quarter of 2023.

Charter shares recently fell after Charter Communications, Inc’s (NASDAQ:CHTR) guidance pointed to subscriber loss in the fourth quarter of 2023. Charter’s Chief Financial Officer Jessica Fischer said during a conference that net adds in high-speed Internet were soft in November and October.

ClearBridge Large Cap Value Strategy made the following comment about Charter Communications, Inc. (NASDAQ:CHTR) in its Q3 2023 investor letter:

“Long-term holdings Charter Communications, Inc. (NASDAQ:CHTR) and Comcast delivered strong second-quarter results relative to expectations; their stable recurring revenue streams and undemanding valuations were rewarded in the current environment. Cable multiples compressed over the past 24 months on fears of heightened competition in their core broadband business from fixed wireless and fiber providers. While fiber remains a competitive alternative to cable broadband over the long term, high upfront investments and a materially higher cost of capital are resulting in slower buildouts than previously expected. Fixed wireless also continues to gain traction, particularly in rural markets, but share gains also appear to be moderating. At the same time, both Comcast and Charter are expanding their footprints into rural and adjacent markets while gaining wireless market share, leveraging their mobile virtual network operator agreements with Verizon. We think both cable companies are well-positioned to continue to grow while generating substantial free cash flows. We added to Comcast during the quarter.”

9. American Express Company (NYSE:AXP)

Number of Hedge Funds: 74

American Express Company (NYSE:AXP) is among the favorite stocks of Warren Buffett. Berkshire owns a $22.7 billion stake in American Express Company (NYSE:AXP) as of the end of the third quarter of 2023. In October, BofA in a report said stocks that are directly impacted by boomers are better positioned to gain when compared to “millennial” stocks. BofA thinks due to high wealth, boomers spend more.

American Express Company (NYSE:AXP) is one of the stocks BofA is bullish on because of this trend.

Out of the 910 hedge funds tracked by Insider Monkey, 74 hedge funds reported owning stakes in American Express Company (NYSE:AXP).

Artisan Select Equity Fund made the following comment about American Express Company (NYSE:AXP) in its Q3 2023 investor letter:

“American Express Company (NYSE:AXP) shares declined by 14%. Company results continued to be excellent, but shares were weak due to fears of a recession or a meaningful slowdown in the economy. Credit quality is normalizing after below-normal credit provision levels coming out of the pandemic. The company has an excellent brand, outstanding underwriting and a premium cardholder base that is the envy of the payments industry. It is well positioned to grow, and the current valuation reflects short-term fears over the direction of the economy, rather than the long-term upward trajectory in American Express’ earnings power.”

8. Occidental Petroleum Corporation (NYSE:OXY)

Number of Hedge Funds: 75

Warren Buffett’s Berkshire Hathaway owns a $14.5 billion stake in Occidental Petroleum Corporation (NYSE:OXY). As of the end of the third quarter of 2023, 75 hedge funds reported owning stakes in Occidental Petroleum Corporation (NYSE:OXY).

Last month, Occidental Petroleum Corporation (NYSE:OXY) posted Q3 results. Adjusted EPS in the period came in at $1.18, beating estimates by $0.32. Revenue fell about 22.1% year over year to $7.4 billion, surpassing estimates by $440 million.

7. T-Mobile US Inc (NASDAQ:TMUS)

Number of Hedge Funds: 79

Warren Buffett’s Berkshire Hathaway owns a $734 million stake in T-Mobile US Inc (NASDAQ:TMUS) as of the end of the third quarter of 2023. Citi recently released a list of stocks to buy for the next 12 months. Citi said in a report these are “actionable stocks by excluding those with low liquidity; preference for stocks that did not score poorly on Citi’s multi-factor quant model; and bold stock calls that were significantly different from the Street in expected total returns, earnings forecasts, or analysis.”

T-Mobile US Inc (NASDAQ:TMUS) was one of these stocks. Citi has a $176 price target on the stock.

Of the 910 hedge funds tracked by Insider Monkey, 79 hedge funds reported owning stakes in T-Mobile US Inc (NASDAQ:TMUS).

ClearBridge Dividend Strategy made the following comment about T-Mobile US, Inc. (NASDAQ:TMUS) in its Q3 2023 investor letter:

“During the quarter we initiated positions in two new names: T-Mobile US, Inc. (NASDAQ:TMUS) and Gilead Sciences. T-Mobile is the best-in-class player in the wireless space, delivering the strongest growth with the lowest cost structure and the best consumer proposition. T-Mobile’s strength is rooted in its advantaged competitive position. Its superior spectrum holdings enable it to provide better wireless service at meaningfully lower cost. T-Mobile’s annual capital expenditures run about $10 billion, on the order of half the amount its peers must spend. Due to its lower cost structure, T-Mobile can undercut its competitors on price while still generating compelling profitability and returns.

This combination — superior service at lower prices — has enabled T-Mobile to outgrow its competition. In the three years since completing its merger with Sprint, T-Mobile has grown its post-paid subscriber base by about 22%. Over the same period, AT&T’s has grown by about 14%, while Verizon’s by less than 5%.

Given the high fixed-cost nature of the wireless business, these steady increases in revenue growth have led to outsize increases in profits and free cash flow. Free cash flow in 2023 is expected to come in around $13.5 billion, up from less than $8 billion last year. In 2024 free cash flow is expected to grow by over 20% to approximately $17 billion — providing a 10% yield based on today’s stock price.

We have long admired T-Mobile, but until recently the stock did not pay a dividend. The company announced its inaugural dividend in September, and we bought the stock shortly thereafter. The initial yield is about 2% and it is expected to grow about 10% per year.”

6. Citigroup Inc (NYSE:C)

Number of Hedge Funds: 79

Berkshire Hathaway owns a $2.3 billion stake in Citigroup Inc (NYSE:C) as of the end of the third quarter. Including the fund, a total of 79 hedge funds reported owning stakes in Citigroup Inc (NYSE:C) as of the end of the third quarter of 2023.

In October, Citigroup Inc (NYSE:C) posted Q3 results. Adjusted EPS in the quarter came in at $1.52, beating estimates by $0.30. Revenue in the quarter increased by about 8.8% year over year to $20.1 billion, beating estimates by $830 million.

Here is what Silver Beech Capital has to say about Citigroup Inc. (NYSE:C) in its Q3 2023 investor letter:

“Citigroup (“Citi”) is a large-capitalization global diversified financial services holding company that primarily serves multinational institutional and high net worth consumer clients. Citi is one of three large American banks to be designated in “bucket 3 or 4” of the “global systemically important bank” (“G-SIB”) framework by The Basel Committee on Banking Supervision. The other banks in this group are J.P. Morgan and Bank of America.

As a G-SIB, Citi is subjected to increased regulatory supervision by global bank regulators and central banks. Enhanced regulatory supervision was an important post-crisis reform to strengthen the global financial system by increasing bank capital ratios, transparency, and decreasing risk-taking. These reforms resulted in the largest G-SIBs moving away from risk-oriented banking activities such as advisory, high-yield lending, and trading, towards lower-risk activities. Indeed, Citi’s most valuable, high-growth segment, Treasury and Trade Solutions, is in lower-risk and entrenched activities such as liquidity and cash management, payments, trade solutions, and automated receivables processing. In our view, somewhat unintuitively, Citi’s increased regulatory supervision contributes to the company’s less risky banking business model, and thus its attractiveness as a downside-oriented investment opportunity.

Citi’s market perception suffers from the bank’s negative historical reputation. In 2008 during the Great Financial Crisis, Citi received the most TARP funding (the largest “bailout”) of the U.S. banks. TARP funding was provided by the U.S. government to forestall a liquidity problem that threatened to become a solvency problem. More recently, Citi mistakenly used its own capital to pay lenders when acting as Revlon’s loan agent, resulting in a $400M fine by the Federal Reserve and orders to resolve internal controls (which Citi fulfilled). Citi’s large global consumer bank was assembled by prior management in the early 2000s to attract and service high-end global consumers. Unfortunately, this pivot was costly and ill-timed in the context of increasingly complex multi-jurisdictional regulation to prevent money laundering and tax evasion. The global consumer bank has been a drag on Citi’s overall performance…”

Click to continue reading and see Warren Buffett and Hedge Funds Love These 5 Stocks.

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Disclosure. None. Warren Buffett and Hedge Funds Love These 11 Stocks was initially published on Insider Monkey.

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AI Fire Sale: Insider Monkey’s #1 AI Stock Pick Is On A Steep Discount

Published on December 13, 2024 at by Inan Dogan, PhD

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China’s terrifying internet “Master Key”… and the one microcap that could stop them

Published on December 18, 2024 at by Insider Monkey Staff

In August 2024, news outlets around the world revealed one of the most shocking data breaches in recent history.

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Click to continue reading…

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