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In this article, we will discuss the 12 Best Stocks To Invest In Right Now. You can skip our outlook of the equity market and go directly to the 5 Best Stocks To Invest In Right Now.
The equities markets around the world have been in a slump in 2022 over concerns of an impending recession and rising interest rates. The S&P 500 index is down 20% YTD, reflecting the challenging environment both companies and investors had to face in 2022. The current market environment is difficult for individual investors who favor stock-picking as picking and choosing a stock in this market is extremely difficult as the market heads south. This is where the benefits of having your funds invested with a hedge fund or following the positions of large successful hedge funds can reap the rewards for investors.
As the name suggests, hedge funds are “hedged” against several risks, which an individual investor might not consider or remain oblivious to. Most hedge funds perform better in bear markets than in bull markets. Hedge funds employ different strategies to protect the value of the assets under management and provide returns to investors. One of the most popular kinds of hedge funds across the globe is the long-short equity fund. The total asset size of long-short equity funds in the world is estimated to be $683 billion. However, investors have been taking money out of these long-short equity funds over the past few years. In 2022 till August, $25 billion have been taken out by investors from long-short equity funds.
Funds that employ various strategies across different asset classes, often called “multi-strategy funds,” are gaining popularity around the world. The difference in asset-under-management of long-short equity funds and multi-strategy funds has come down to approximately $27 billion from $235 billion in 2021. Multi-strategy funds can improve investors’ access to new investment methods, reducing the need for time-consuming due diligence. Similarly, employing a single strategy, especially during periods of high volatility, is not wise, which is why multi-strategy hedge funds are gaining popularity.
Why Hedge Funds Win and Why Should We Pay Attention to Their Stock Picks?
A latest report by Bloomberg cements the argument which says that major hedge funds have an edge in the market over average investors due to the sheer scale of the money, resources and talent these institutions have. The report says that despite the economic volatility, giants in the $4 trillion hedge fund industry were able to post double-digit gains. These notable names include Citadel and Millennium Management.
Bloomberg specifically mentioned the role resources play in this performance:
“Giants from Citadel to Millennium Management produced double-digit gains as their army of traders once again earned steady returns.”
The report also noted that a whopping 95% of the capital allocated to multi-strategy investment firms posted gains in 2022 through September, while nine in every 10 dollars invested in macro hedge funds gained 23.7% on average in the same period. Hedge funds on average lost 9% in this period, while the S&P index fell 25%.
Given this outperformance, in this article, we will focus on the top picks of over 900 hedge funds tracked by Insider Monkey. These stocks are the most popular among the elite hedge funds, as of the end of the third quarter.
Best Stocks To Invest In Right Now According to Hedge Funds
12. Netflix, Inc. (NASDAQ:NFLX)
Number of Hedge Fund Holders: 115
Netflix, Inc. (NASDAQ:NFLX) is a streaming video-on-demand platform that provides original and third-party digital video content to consumers. It is the largest subscription-based SVOD platform, with over 220 million subscribers.
On December 9, 2022, John Blackledge, an analyst at Cowen, increased his price target on Netflix, Inc. (NASDAQ:NFLX) to $405 while keeping an Outperform rating on the stock. The analyst named the company as his top large-cap pick for 2023.
As per Insider Monkey’s database, 115 hedge funds remained bullish on Netflix, Inc. (NASDAQ:NFLX) at the end of the third quarter. Fisher Asset Management had the biggest stake in the company at the end of the third quarter.
Netflix, Inc. (NASDAQ:NFLX) mustered a modest recovery as the market Allocation Effect: 0.3 mulled the potential of its new lower-priced ad-supported subscription model to drive revenue growth and reduce its dependency on continued heavy investment in content to attract and retain viewers.
11. salesforce.com, inc. (NYSE:CRM)
Number of Hedge Fund Holders: 117
Founded in 1999, salesforce.com, inc. (NYSE:CRM) is a cloud-based company that provides software solutions focused on customer relationship management, customer services, sales, application development, marketing automation, and analytics.
On December 5, 2022, Phil Winslow, an analyst at Credit Suisse, reduced his price target on salesforce.com, inc. (NYSE:CRM) to $225 while keeping an Outperform rating on the stock. According to the analyst, the company’s Q3 results were impressive, and the management raised its 2023 operating margin guidance to 20.7% from prior guidance of 20.4%, which is a positive sign.
According to Insider Monkey’s database, 117 hedge funds held shares of the company at the end of the third quarter of 2022. Fisher Asset Management was the most bullish fund on the company’s stock at the end of Q3 2022.
We sold Salesforce, Inc. (NYSE:CRM) to reduce our weighting in the Information Technology sector. Salesforce held their investor day, and the company reiterated their organic Fiscal Year 2026 revenue target of $50 billion. This target remains more back-end loaded based on current slowing macroeconomic conditions and requires new annual contract growth well ahead of what the company has been averaging for the past few years. We are skeptical that the company will be able to achieve this revenue target organically and see Merger & Acquisitions (M&A) being key to achieving the growth. While we believe Salesforce has shown good success in growing its non-CRM clouds, we do see more competitive pressures emerging for the Marketing and Customer Service Clouds, specifically on the pricing side during a global economic slowdown.
10. PayPal Holdings, Inc. (NASDAQ:PYPL)
Number of Hedge Fund Holders: 126
PayPal Holdings, Inc. (NASDAQ:PYPL) is an American multinational company that operates an online payment system and provides its services to consumers and merchants. The company’s user count reached 426 million by the end of 2021, which also includes 34 million merchant accounts. Some other payment platforms like Venmo and Xoom also belong to PayPal Holdings, Inc. (NASDAQ:PYPL).
On November 7, 2022, James Fotheringham, an analyst at BMO Capital, reduced his price target on PayPal Holdings, Inc. (NASDAQ:PYPL) to $109 while keeping an Outperform rating on the stock. The analyst is positive about the company’s long-term prospects as it continues to gain e-commerce volumes, continued frequency of usage by active accounts, and margin expansion via enhanced cost discipline.
As per Insider Monkey’s database, 126 hedge funds remained bullish on PayPal Holdings, Inc. (NASDAQ:PYPL) at the end of Q3 2022. Fisher Asset Management came out to be the biggest holder of the company’s shares at the end of the quarter.
9. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 140
Apple Inc. (NASDAQ:AAPL) is an American multinational tech company that designs consumer electronic devices such as smartphones, smartwatches, tablets, TV boxes, etc. It also provides several software-based services such as Apple Music, iCloud, Apple TV+, Apple Care, Apple Pay, etc. The majority of the company’s revenue is generated through its smartphones (iPhones).
On December 14, 2022, Amit Daryanani, an analyst at Evercore ISI, reiterated his price target on Apple Inc. (NASDAQ:AAPL) at $190 while keeping an Outperform rating on the stock. The analyst believes that the company will comply with regulatory requirements in the EU.
At the end of Q3 2022, 140 hedge funds in Insider Monkey’s database were long on Apple Inc. (NASDAQ:AAPL) at the end of the quarter. Berkshire Hathaway remained the leading stakeholder of the company at the end of Q3 2022.
In its Q2 2022 investor letter, Alger Capital, an asset management firm, highlighted a few stocks and Apple Inc. (NASDAQ:AAPL) was one of them. Here is what the fund said:
Apple Inc. (NASDAQ:AAPL) is a leading technology provider in telecommunications. computing and services. Apple’s iOS operating system is the company’s unique intellectual property and competitive strength. This software drives extremely tight engagement with consumers and enterprises. The engagement is fostering the growing purchase of high-margin services like music, apps, and apple pay. Apple’s shares detracted from performance as management lowered its guidance for the second quarter due to headwinds from the war in Ukraine, adverse foreign currency shifts, and dampened consumer demand associated with the coronavirus in China. Additionally, many investors were concerned that lockdowns implemented to curtail the spread of COVID-19 would impact the production of apple products, however, the manufacturing facilities have resumed activity.
8. Uber Technologies, Inc. (NYSE:UBER)
Number of Hedge Fund Holders: 142
Headquartered in San Francisco, California, Uber Technologies, Inc. (NYSE:UBER) is a company that offers mobility as a service. The services offered by the company include ride-hailing, food, package delivery, couriers, etc. The company runs its operations in more than 63 countries and has over 110 million users. Almost 70% of the total revenue is generated through ride-sharing, while 20% comes from food delivery.
The company’s Q3 revenue amounted to $8.34 billion, beating market expectations by $284.22 million. The company’s Normalized EPS stood at $0.21, missing market expectations by $0.27. The CEO, while commenting on results, stated that even with foreign exchange and inflationary headwinds impacting businesses globally, the company delivered better than expected in the quarter due to several factors, such as strong demand and better marketplace efficiency.
As per Insider Monkey’s database, 142 hedge funds had stakes in Uber Technologies, Inc. (NYSE:UBER) at the end of the third quarter. Fisher Asset Management remained the leading stakeholder in the company at the end of Q3 2022.
During the quarter, we began new GardenSM campaigns in Uber Technologies, Inc. (NYSE:UBER) and Shopify. In July, we initiated our position in Uber, a leader in global ride-hailing and online food delivery. We believe the company is well positioned to benefit from strong secular tailwinds in both of its core businesses. Earlier this year, management outlined a plan at its investor day to achieve $4 billion of free cash flow by 2024, an encouraging commitment given investors have maligned the company for years of being unprofitable. We witnessed solid progress toward achieving this goal in the company’s most recent earnings results, where it beat expectations for the quarter on both fronts and delivered positive FCF for the first time. The company also indicated it isn’t seeing any evidence of slowing demand. We recognize the execution risk associated with Uber achieving its long-term targets, and the path likely won’t be linear, which is why we are keeping our position size modest until we see signs of continued operational momentum in the coming quarters.
7. Mastercard Incorporated (NYSE:MA)
Number of Hedge Fund Holders: 146
Founded in 1966, Mastercard Incorporated (NYSE:MA) is the second-largest payment processor in the world. In 2021, Mastercard Incorporated (NYSE:MA) processed approximately $6 trillion in transactions. The company operates in more than 200 countries and can process transactions in more than 150 currencies.
On October 28, 2022, Ashwin Shirvaikar, an analyst at Citi, reduced his price target on Mastercard Incorporated (NYSE:MA) to $400 while keeping a Buy rating on the stock. According to the analyst, the company still has room for growth even though its Q4 expense guidance left the investors puzzled.
146 hedge funds are currently bullish on Mastercard Incorporated (NYSE:MA) as per Insider Monkey’s database. Akre Capital Management had the leading stake in the company at the end of Q3 2022.
Here is what Stewart Asset Management has to say about Mastercard Incorporated (NYSE:MA) in its Q3 2022 investor letter:
We invest in businesses with strong, resilient earnings growth which are less cyclical. In the pandemic recession of 2020, the aggregate earnings of the portfolios we manage did not decline year-over-year, and in fact grew, albeit modestly. Looking at the Great Recession which began at year-end 2007 and lasted to mid-year 2009 is helpful too. Our four largest current holdings in the portfolio weathered that period well. During this same period, Mastercard’s (NYSE:MA) earnings almost tripled.
6. Alphabet Inc. (NASDAQ:GOOG)
Number of Hedge Fund Holders: 156
Alphabet Inc. (NASDAQ:GOOG) is a multinational conglomerate holding company. The company generated $257.6 billion in sales in 2021.
On November 30, 2022, Christophe Cherblanc, an analyst at Societe Generale, reduced his price target on Alphabet Inc. (NASDAQ:GOOG) to $132 while keeping a Buy rating on the stock. According to the analyst Alphabet Inc. (NASDAQ:GOOG) faces limited short-term cyclical headwinds being a large corporation with revenues of $280 billion.
As per Insider Monkey’s database, 156 hedge funds owned stakes in Alphabet Inc. (NASDAQ:GOOG) at the end of the third quarter.
Here is what Stewart Asset Management has to say about Alphabet Inc. (NASDAQ:GOOG) in its Q3 2022 investor letter:
We invest in businesses with strong, resilient earnings growth which are less cyclical. In the pandemic recession of 2020, the aggregate earnings of the portfolios we manage did not decline year-over-year, and in fact grew, albeit modestly. Looking at the Great Recession which began at year-end 2007 and lasted to mid-year 2009 is helpful too. Our four largest current holdings in the portfolio weathered that period well. Alphabet (NASDAQ:GOOG), then called Google, reported earnings that doubled from 2007 to 2010.
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Disclosure: None. 12 Best Stocks To Invest In Right Now is originally published on Insider Monkey.