5 Safe Stocks To Buy According To Hedge Funds
Published on October 21, 2021 at 11:52 am by VARDAH GILL in Hedge Funds, News
In this article, we take a look at 5 safe stocks to buy according to hedge funds. If you want to read our detailed analysis of safe stocks, go directly to see the 11 Safe Stocks To Buy According To Hedge Funds.
- Netflix, Inc. (NASDAQ:NFLX)
Number of Hedge Fund Holders: 113
Netflix, Inc. (NASDAQ:NFLX), an American online media service, reported addition of 183 million global subscribers in Q1 of 2020, fueled by the Covid-related lockdowns. The company is also foraying into gaming business to offset the competition in the streaming industry.
Chicago-based Citadel Investment Group is the leading shareholder of Netflix, Inc. (NASDAQ:NFLX), with shares worth $2.4 billion. Overall, 113 hedge funds tracked by Insider Monkey were bullish on the stock in Q2, valued at over $13.2 billion. In the previous quarter, 110 hedge funds had positions in Netflix, Inc. (NASDAQ:NFLX), which highlights the positive hedge fund sentiment.
On October 15, Benjamin Swinburne of Morgan Stanley lifted the firm’s price target on Netflix, Inc. (NASDAQ:NFLX) to $675, while maintaining an Overweight rating on the shares. The stock gained 21.02% in 2021.
Polen Capital mentioned Netflix, Inc. (NASDAQ:NFLX) in its Q1 2021 investor letter. Here is what the firm has to say:
“We purchased Netflix in March, initiating a 3% position in the Portfolio. We believe Netflix is a highly competitively advantaged company. It has recently met all our investment guardrails, and we anticipate it will remain sustainably above our guardrails over the next five years and beyond. We know Netflix for its ubiquitous streaming service and deep library of owned content. The company has made investments in this content (currently running at nearly $20 billion/year), generally keeping subscribers highly engaged and loyal to their service. The company has number one market share in 99% of markets globally, but it is our view that video streaming on-demand is still an underpenetrated space with many years of attractive growth likely ahead. The service is also relatively affordable at roughly $11/month on average globally.
We believe Netflix’s growth in content spend is beginning to moderate, which could allow margin expansion to continue for many years when paired with ongoing subscriber growth and price increases. While there is competition from the likes of Apple (Apple TV+), Amazon (Prime Video), Disney (Disney+ and Hulu), and others, we believe there can be a handful of winners in this industry. Already, we see many people subscribe to multiple streaming video services, with Netflix being their “anchor” service. That said, the barriers to entry are high, and we believe they are getting higher given the substantial amount of capital and size of the subscriber base required to maintain a competitive service for both viewers and content producers. Over the next five years, we expect Netflix’s earnings growth to be approximately 30% annualized and free cash flow to grow at an even higher rate.”
- Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 138
Apple Inc. (NASDAQ:AAPL) stands fourth on our list of safe stocks to buy according to hedge funds. The stock has returned over 900% in the past ten years for shareholders and it also benefits from the extremely loyal global customer base. The revenue of Apple Inc. (NASDAQ:AAPL) grew by 89% in the first quarter of 2020, which shows the company’s durability during times of financial volatility.
Apple Inc. (NASDAQ:AAPL) has a track record of 10 years of consistent dividend growth. The company pays an annual dividend of $0.88 per share, yielding 0.61%, with a dividend payout ratio of 26.83%. Warren Buffett’s Berkshire Hathaway is the leading shareholder of Apple Inc. (NASDAQ:AAPL), with shares worth $121.5 billion. In addition to this, 138 hedge funds tracked by Insider Monkey were reported having stakes in the stock in Q2 2021, up from 127 in the previous quarter. These stakes are valued at $145.5 billion.
In October, Morgan Stanley lifted its price target on Apple Inc. (NASDAQ:AAPL) to $168, with an Overweight rating on the shares.
ClearBridge Investments mentioned Apple Inc. (NASDAQ:AAPL) in its first-quarter 2021 investor letter. Here is what the firm has to say:
“As we actively manage holdings and position sizes, we look to regularly recycle capital into more compelling opportunities. Maintaining our valuation discipline, we sharply reduced our position in Apple, whose shares more than doubled following our initial purchase in mid-2019 with an earnings multiple rising from the low-to-mid teens to nearly 30x.”
- PayPal Holding, Inc. (NASDAQ:PYPL)
Number of Hedge Fund Holders: 143
PayPal Holding, Inc. (NASDAQ:PYPL) is a pioneer in digital online payments which gained even more relevance during the pandemic-related lockdown. The company reported 7.4 million new users in April 2020. In the past year, PayPal Holding, Inc. (NASDAQ:PYPL) returned 32.48%, outperforming the S&P 500, which gained 28.25% during the same time. The company ranks third on our list of safe stocks to buy according to hedge funds.
In Q2 2021, PayPal Holding, Inc. (NASDAQ:PYPL) posted an EPS of $1.15, beating the estimates by $0.03. The number of users reached 400 million during the quarter, with a 27% year-over-year growth in payment transactions at $4.7 billion. This September, DA Davidson raised its price target on PayPal Holding, Inc. (NASDAQ:PYPL) to $325, with a Buy rating on the shares, highlighting the company’s acquisition of Japanese online payment services company, Paidy.
As of Q2 2021, of the 873 elite funds tracked by Insider Monkey, 143 hedge funds have stakes in PayPal Holding, Inc. (NASDAQ:PYPL), the same as in the quarter before. The total value of these stakes is $16.3 billion.
Harding Loevner mentioned PayPal Holding, Inc. (NASDAQ:PYPL) in its Q2 2021 investor letter.
- Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders: 238
Microsoft Corporation (NASDAQ:MSFT), an American multinational tech company, has been a strong dividend player in the financial market. The company’s annual dividend stands at $2.24 per share, yielding 0.74%. Microsoft Corporation (NASDAQ:MSFT) has increased its dividend by 31.45% in the past three years, with a 28.11% dividend payout ratio. The company stands second on our list of safe stocks to buy according to hedge funds.
Microsoft Teams, the company’s communication platform gained, over 75 million users in 2020 during the lockdown, compared with 20 million in 2019. The figure has reached 145 million this year. In fiscal Q4 2021, Microsoft Corporation (NASDAQ:MSFT) posted an EPS of $2.17, beating the estimates by $0.25. According to analysts, the EPS of Microsoft Corporation (NASDAQ:MSFT) is expected to grow by 7.7% in 2021.
Recently, Morgan Stanley lifted its price target on Microsoft Corporation (NASDAQ:MSFT) to $331, while keeping an Overweight rating on the shares. Of the 873 elite funds tracked by Insider Monkey, 238 funds reported having stakes in Microsoft Corporation (NASDAQ:MSFT) in Q2, compared with 251 in the previous quarter. These stakes are valued at $62.4 billion.
Baron Opportunity Fund released its second-quarter 2021 investor letter and mentioned Microsoft Corporation (NASDAQ:MSFT) in it. Here is what the firm has to say:
“Shares of Microsoft Corporation, a cloud-software leader and provider of software productivity tools and infrastructure, rose during the quarter following a strong earnings report highlighting solid demand for its broad product stack and continued momentum migrating its business to the cloud. Microsoft was a top contributor in the period because it trades at reasonable free cash flow and earnings valuations, has cloud and digital transformation tailwinds at its back, reported a solid March quarter, and beat Street expectations by a wide margin. Microsoft’s results continued to be strong across the board, with Azure cloud computing revenues up 46% in constantcurrency (“cc”) terms and commercial cloud bookings growth of 38% cc, the best in years. Microsoft also reported robust profitability growth, with operating income expanding 31% and GAAP earnings up 45%. We believe the company is well positioned for continued solid growth and profitability through market share gains as more companies look to transform and digitize their businesses as they move operations to the cloud.”
- Facebook, Inc. (NASDAQ:FB)
Number of Hedge Fund Holders: 266
Facebook is consistently evolving and diversifying its products to keep up with the competition. In 2020, the tech and social media company started the new venture, Facebook Shop, for businesses to set up their online stores. Due to this, the advertising activity at Facebook, Inc. (NASDAQ:FB) grew by 39% during the initial months of the pandemic. The company tops our list of best safe stocks to buy according to hedge funds.
Crake Asset Management is the leading shareholder of Facebook, Inc. (NASDAQ:FB) in Q2, with shares valued at $168.6 billion. Along with this, 266 hedge funds tracked by Insider Monkey have positions in the stock in Q2 2021, valued at $42.3 billion. The hedge fund sentiment remained positive for Facebook, Inc. (NASDAQ:FB) in Q2 as, in the previous quarter, 257 hedge funds had stakes in the company.
On October 4, Facebook, Inc. (NASDAQ:FB) stock plunged nearly 5% after the company suffered a global outage. However, the stock is still up 20.42% this year, while its 12-month returns stood at 21.50%. In Q2 2021, Facebook, Inc. (NASDAQ:FB) posted a GAAP EPS of $3.61, beating the estimates by $0.61. Recently, Tigress Financial lifted its price target on the stock to $466, while keeping a Strong Buy rating on the shares.
First Eagle Investment Management mentioned Facebook, Inc. (NASDAQ:FB) in its second-quarter investor letter. Here is what the firm has to say:
“Leading contributors in the First Eagle Global Fund this quarter included Facebook, Inc. Class A. Facebook has continued to post impressive results for both revenue and active users of its traditional platforms. In the meantime, the social media giant continues to make progress on new initiatives—like Facebook Horizon (virtual reality) and Facebook Shops (e-commerce)—and maintains attractive monetization optionality around services like Messenger and WhatsApp.”