Top 5 Most Popular Stocks Hedge Funds Are Buying

The stock market saw endless turmoil last year amid the COVID-19 pandemic, but 2021 has proved to be a year of recovery in which a unique situation has emerged: small-time investors grouped to put short-sellers up against the wall. 

Casting stock market instability aside, total hedge fund holdings have reached a massive $3 trillion, according to a WalletHub report. 

The whooping number is bigger than the GDP of every country in the world except for that of the U.S. and three more. “Furthermore, hedge fund managers often earn hundreds of thousands of dollars per year, but there are many who are billionaires.”

As the global economy patchily recovers, investors have flocked to follow up on what hedge fund managers are buying, selling, and holding. So, these are the top 5 stocks hedge funds are buying from over 400 fund filings.

Apple Inc AAPL  

According to Gene Munster, managing partner and co-founder of Loup Ventures, Apple stock is bound to reach $200 next year and beyond. “The combination of hardware, software and services should help to push the stock higher from current levels over the next two years.”

But not only that, as the implementation of 5G, the launch of the augmented reality glasses, and the interests the company has in the automotive industry are bound to drive the price.  

“For years investors have had a little bit of a negative bias towards Apple just given their hardware business, but I think if you look at how the world is progressing, this accelerating digital transformation, work [and] learn remotely and all of how we need their products,” he said.

Microsoft Corporation MSFT

Second on WalletHub’s list, Microsoft stock hasn’t performed as good but the company’s solid financial situation would lure prospective shareholders to take the plunge. So, in the long term, the stock looks very promising.

Its success is cemented on the stock’s return of equity, estimated at 43%, well above the industry’s 12% average. Plus, the company’s 26% net income growth in the last five years is something of note. 

According to Simple Wall Street, even though its earnings’ growth is expected to decelerate, “the dividend is well covered and Microsoft is reinvesting its profits efficiently as evidenced by its exceptional growth.”

Amazon Inc AMZN

“Despite a wide range of price targets on Amazon stock, not a single analyst supports a sell or a hold –consensus is a strong buy,” according to The Street. 

Amazon stock is nowhere near close to all-time highs, and it’s worth close to $3,300 skewed to the downside of Wall Street’s recommendations. So, Amazon is in third place on the list as –like in the case of Microsoft– the stock is a solid option long-term.

“AMZN shares could continue to struggle. But I think that investors should look past the performance of the stock in the next few weeks and focus instead on the long-term story,” writes Daniel Martins.

Google - Alphabet Inc Class A GOOGL

This year, Google stocks have outperformed Facebook Inc FB, Amazon, and Netflix Inc NFLX, soaring 51%. The company, however, has been targeted by regulators on allegations of monopolistic practices. 

According to Investor’s Business Daily, “GOOGL stock holds an IBD Composite Rating of  98 out of a best possible 99, according to IBD Stock Checkup.”

Experts claim that the company’s stock “is long past the glory days” when it soared by 800% in under three years after its IPO. “In recent years, Google stock typically keeps pace with the S&P 500, punctuated by brief periods of outperformance.”

American Express Company AXP

Despite some hiccups, in the last couple of weeks, American Express stock has outperformed the market. Back in April, according to MarketBeat, AXP had received a consensus rating of Hold, with the company set to disclose its next quarterly earnings on October 22.

Overall, though, American Express has had a positive 2021 with the stock up nearly 45%. Investors are catching up with the economy’s rebound, while the company has made a great effort in securing more accounts by updating and refreshing its card rewards programs.

Disclosure: No positions in any securities mentioned.