Early or rookie investors may find it difficult to choose their first stock to invest in. After all, there are an overwhelming number of choices available. The best strategy is to start with businesses that have strong foundations and a management that ensures a firm growth. As we have analyzed the data from the last round of 13F filings, we determined that some the most popular stocks among hedge funds we track, are companies that not only sport solid dividend yields, but also represent attractive opportunities for long-term investing. These companies include names like Apple Inc. (NASDAQ:AAPL), Microsoft Corporation (NASDAQ:MSFT) and JPMorgan Chase & Co. (NYSE:JPM) and sport an average dividend yield of 2.85%, but they are mostly held because investors consider they can gain ground over the long-run.
At Insider Monkey, we track hedge funds’ moves in order to identify actionable patterns and profit from them. Our research has shown that hedge funds’ large-cap stock picks historically delivered a monthly alpha of six basis points, though these stocks underperformed the S&P 500 Total Return Index by an average of seven basis points per month between 1999 and 2012. On the other hand, the 15 most popular small-cap stocks among hedge funds outperformed the S&P 500 Index by an average of 95 basis points per month (read more details here). Since the official launch of our small-cap strategy in August 2012, it has performed just as predicted, returning over 123% and beating the market by more than 65 percentage points. We believe the data is clear: investors will be better off by focusing on small-cap stocks utilizing hedge fund expertise rather than large-cap stocks.
5. Apple Inc. (NASDAQ:AAPL)
Investors with Long Positions (as of June 30): 144
Aggregate Value of Investors’ Holdings (as of June 30): $21.27 Billion
We track over 700 hedge funds at Insider Monkey and Apple Inc. (NASDAQ:AAPL) is one of the most popular stocks among them. It ranked as the second most popular stock and had at the top of the list for the last several quarters. However, its on the third spot in our list because it trails a dividend yield of 1.84% and the stock’s latest moves suggest that it might take a downturn. The iPhone-maker has declared dividends of $0.52 for the last two quarters, but its latest quarterly results triggered a negative sentiment on the market, despite the fact that the company was able to beat the Wall Streets’ estimates on most metrics except for iPhone sales. The sell-off that followed the results pointed out Apple’s dependence on a single product. Among the investors we track, Carl Icahn holds the largest stake in the company with 52.76 million shares followed by Ken Fisher ‘s Fisher Asset Management with 11.01 million shares.
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4. JPMorgan Chase & Co. (NYSE:JPM)
Investors with Long Positions (as of June 30): 100
Aggregate Value of Investors’ Holdings (as of June 30): $9.04 Billion
JPMorgan Chase & Co. (NYSE:JPM)’s stock trails a yield of 2.73% and the company has raised its last dividend to $0.44 from $0.40. The financial holding company gained popularity among the hedge funds we follow, with the number of investors increasing by five during the second quarter. JPMorgan Chase & Co. (NYSE:JPM) reported strong second quarter results, with earnings per share of $1.54 against the Wall Street’s estimate of $1.44. Lansdowne Partners and Fisher Asset Management were the biggest shareholders of the company in our database with 21.16 million and 13.74 million shares, respectively.
3. Microsoft Corporation (NASDAQ:MSFT)
Investors with Long Positions (as of June 30): 107
Aggregate Value of Investors’ Holdings (as of June 30): $18.32 Billion
Microsoft Corporation (NASDAQ:MSFT) secures third spot with a dividend yield of 2.82%, slightly below the average dividend yield of these stocks. Its last quarterly dividend stands at $0.31 and the company has been consistently increasing its annual dividend for the last several years. The software company has big problems ahead of it as its fourth quarter fiscal 2015 results showed a 22% drop in its Windows business and its cloud business grew 88%, well-below the average growth of 116% in the past three quarters. Jeffrey Ubben’s ValueAct Capital was the top stakeholder of Microsoft in our database, holding 75.27 million shares valued at $3.32 billion. First Eagle Investment Management came in second with 33.97 million shares.
2. Pfizer Inc. (NYSE:PFE)
Investors with Long Positions (as of June 30): 85
Aggregate Value of Investors’ Holdings (as of June 30): $4.66 Billion
Pfizer Inc. (NYSE:PFE) ranks second with a dividend yield of 3.37% as the company currently pays a dividend of $0.28 unchanged for the last several quarters. Moreover, during the second quarter, the biopharmaceutical company gained popularity among the investors we track as the number of funds with long positions went up by four amid a 3% drop of the stock in the same period. Pfizer reported its second-quarter results on July 28, with earnings per share of $0.56 on revenue of $11.9 billion, beating EPS and revenue estimates of $0.51 and $11.4 billion respectively. Ken Fisher’s Fisher Asset Management owns the largest stake in the company in our database, holding 31.82 million shares valued at $1.07 billion.
1. McDonald’s Corporation (NYSE:MCD)
Investors with Long Positions (as of June 30): 107
Aggregate Value of Investors’ Holdings (as of June 30): $18.32 Billion
With a dividend yield of 3.49%, McDonald’s Corporation (NYSE:MCD) tops our list. The fast-food chain declared a dividend of $0.85 for the last three quarters. McDonald’s Corporation (NYSE:MCD) also ranked number one in our list of top recession-proof stocks, with a history of stable dividend payouts. The stock surged by 55.6% between 2007 and 2009, beating the S&P 500 by 70 percentage points. The fast-food giant is facing fierce competition from other emerging food chains and is putting up a fight to maintain its dominance. Mason Hawkins’ Southeastern Asset Management was the largest shareholder of McDonald’s Corporation (NYSE:MCD) in our database, owning 9.87 million shares valued at $938.31 million at the end of June. Highfields Capital Management is another fund holding a large position in the company, which contains 9.81 million shares.
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