Large-cap stocks are generally less immune to sharp moves based on rumors than their mid and small-cap counterparts. While this characteristic ensures that they remain relatively stable, it also makes it difficult for investors to enter the stock at a valuation they find reasonable. However, once in a while the equity markets do give an opportunity to patient investors, no matter how big or small a stock is. The third quarter of this year was one such recent period when most stocks, including stocks of industry behemoths, saw wild swings, primarily of the downwards variety. Since smart money always gets active during such periods, the third quarter saw several hedge funds lapping up their favorite large-cap stocks in droves. Based on this sudden jump in the popularity of some large-cap stocks among the hedge funds in our database, we at Insider Monkey compiled a list of the ten large-cap stocks that hedge funds were buying vigorously during the third quarter. In a previous post, we revealed the first five stocks that made it to our list and in this post we’ll reveal the remaining five stocks and discuss their prospects and performance.
We pay attention to hedge funds’ moves because our research has shown that hedge funds are extremely talented at picking stocks on the long side of their portfolios. It is true that hedge fund investors have been underperforming the market in recent years. However, this was mainly because hedge funds’ short stock picks lost a ton of money during the bull market that started in March 2009. Hedge fund investors also paid an arm and a leg for the services that they received. We have been tracking the performance of hedge funds’ 15 most popular small-cap stock picks in real time since the end of August 2012. These stocks have returned 102% since then and outperformed the S&P 500 Index by around 53 percentage points (see the details here). That’s why we believe it is important to pay attention to hedge fund sentiment; we also don’t like paying huge fees.
Alphabet Inc (NASDAQ:GOOG)
– Investors with Long Positions (as of September 30): 119
– Aggregate Value of Investors’ Holdings (as of September 30): $10.18 Billion
Alphabet Inc (NASDAQ:GOOGL)
– Investors with Long Positions (as of September 30): 129
– Aggregate Value of Investors’ Holdings (as of September 30): $11.3 Billion
The greater than 16% rise that both Alphabet Inc (NASDAQ:GOOG) and Alphabet Inc (NASDAQ:GOOGL) had during the third quarter inspired many hedge funds to go long in the company’s class A and class C shares. While the number of hedge funds covered by Insider Monkey that reported owning Alphabet Inc (NASDAQ:GOOG)’s class C shares jumped by 12 quarter-over-quarter, those who reported owning Alphabet Inc (NASDAQ:GOOG)’s class A voting stock increased by 14. It recently came to light that Alphabet Inc is in talks with major Hollywood studios to create original content for its YouTube Red paid service. On Tuesday the company announced that it is contemplating launching Google Fiber, its super-fast internet service, in Los Angeles. Lee Ainslie‘s Maverick Capital increased its stake in Alphabet Inc’s class C shares by 20% to 742,641 shares during the July-to-September period.
Pfizer Inc. (NYSE:PFE)
– Investors with Long Positions (as of September 30): 97
– Aggregate Value of Investors’ Holdings (as of September 30): $6.1 Billion
Pharmaceutical giant Pfizer Inc. (NYSE:PFE) recently announced that it would be buying Allergan plc Ordinary Shares (NYSE:AGN) for $160 billion. Moreover, Reckitt Benckiser Group Plc-ADR (OTCMKTS:RBGLY) CEO, Rakesh Kapoor, recently revealed that the company could consider buying the consumer healthcare unit of Pfizer Inc. (NYSE:PFE). It seems that with the rapid M&A activity taking place in the biotech space, hedge funds had already anticipated that Pfizer Inc. would be making a move soon and purchased shares of the company in droves during the third quarter. Pfizer Inc. was the 16th-most popular stock among the hedge funds covered by Insider Monkey at the end of September, with 12 more funds owning a stake in the company by the end of the quarter than at the start. The aggregate value of investors’ holdings in the company also rose by over $1.4 billion during the third quarter. With ownership of almost 32 million shares of Pfizer Inc., Ken Fisher‘s Fisher Asset Management continued to remain the company’s largest shareholder in our database as of the end of September.