In this article, we discuss 10 best cryptocurrency stocks to buy according to hedge funds.
The crypto industry is no stranger to volatility. For example, in May 2021, Bitcoin plummeted 50% before rebounding to all-time highs of approximately $69,000 later that year. Bitcoin is forecasted to conclude 2022 at nearly $16,800, down from $19,500 at the peak of the FTX crisis. If more controversy unfolds from FTX’s bankruptcy, Bitcoin can fall even further. Even ARK Invest’s Cathie Wood, who is a popular Bitcoin connoisseur, admitted that financial institutions may reevaluate their crypto strategies in the short-term because of FTX.
Despite the volatile and unpredictable nature of the crypto industry, it still manages to contort some major financial rules, which is slowly but surely leading the world to a modern economy. Although the recent global events, FTX collapse, and Bitcoin plunge have impacted the crypto industry, there are retail traders around the world who believe that buying crypto products on the dip will result in a sector recovery.
For example, Brazilian investors are indicating a solid proclivity for crypto even as the global industry is crashing down, with an unpredictable future ahead. Brazilians are trusting crypto assets over conventional financial investment products like equities and precious metals. Data from a November survey by Finbold indicates that 33% of Brazilian investors intend to purchase cryptocurrencies such as Bitcoin within the next 12 months. Cryptocurrency ranks as the top investment, followed by real estate at 26%, and stocks took up the third place at 22%.
Some of the best cryptocurrency stocks to buy include Apple Inc. (NASDAQ:AAPL), Mastercard Incorporated (NYSE:MA), and Microsoft Corporation (NASDAQ:MSFT).
Our Methodology
These are the most popular crypto stocks among the 920 hedge funds tracked by Insider Monkey as of the end of the third quarter of 2022. These companies have deep links to the crypto universe. We have arranged the list according to the hedge fund sentiment around the securities.
Best Cryptocurrency Stocks to Buy According to Hedge Funds
10. CME Group Inc. (NASDAQ:CME)
Number of Hedge Fund Holders: 60
CME Group Inc. (NASDAQ:CME) is an American company that runs the biggest financial derivatives exchange in the world, trading in several asset classes such as agricultural products, currencies, energy, interest rates, metals, stock indexes, and cryptocurrencies futures. On November 10, CME Group Inc. declared a $1.00 per share quarterly dividend, in line with previous. The dividend is distributable on December 28, to shareholders of record on December 9.
On October 27, Deutsche Bank analyst Brian Bedell raised the price target on CME Group Inc. to $202 from $200 and maintained a Buy rating on the shares following the “good” Q3 report.
According to Insider Monkey’s data, 60 hedge funds were bullish on CME Group Inc. at the end of September 2022, compared to 56 funds in the prior quarter. GuardCap Asset Management is the leading position holder in the company, with 4.18 million shares worth $740.4 million.
Like Apple Inc., Mastercard Incorporated, and Microsoft Corporation, CME Group Inc. is one of the premier crypto stocks to watch.
Baron Funds made the following comment about CME Group Inc. in its Q3 2022 investor letter:
“CME Group Inc. operates the world’s largest and most diversified derivatives marketplace. Shares fell 13% during the quarter (despite reporting strong average daily trading volume growth of 26% year-over year) due to concerns that EPS growth will slow in 2023 as the rate hike cycle comes to an end. We continue to own the stock due to CME’s strong competitive moats, its product breadth and liquidity depth, its durable growth characteristics driven by the secular shift from uncleared over-the-counter trading to exchange-traded futures, and tailwinds from the rising rate environment.”
9. American Express Company (NYSE:AXP)
Number of Hedge Fund Holders: 68
American Express Company (NYSE:AXP) is an American multinational firm that specializes in payment card services. In June 2022, American Express Company disclosed that Abra Crypto Card on the American Express network will transact in U.S. dollars and offer crypto back on any purchase category. American Express Company is one of the best crypto stocks to buy according to smart investors.
Based on American Express Company’s performance to date, the management continues to expect full-year revenue growth of 23% to 25% versus a 25.24% consensus and now stands by its initial full-year EPS guidance range of $9.25 to $9.65, compared to a $9.84 consensus.
On November 29, Redburn analyst Fahed Kunwar initiated coverage of American Express Company with a Neutral rating. The brand power of debit is declining as digital wallets become popular, contended the analyst, who believes the market underestimates the cyclical and structural concerns pressuring card network stocks.
According to Insider Monkey’s Q3 data, 68 hedge funds were bullish on American Express Company, compared to 67 funds in the last quarter. Warren Buffett’s Berkshire Hathaway is the leading stakeholder of the company, with 151.6 million shares worth $20.45 billion.
In its Q2 2022 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and American Express Company was one of them. Here is what the fund said:
“In financials, American Express Company has done an excellent job demonstrating the resiliency of its franchise in the midst of a global pandemic that drove a 60% decline in its core travel and entertainment business. The company’s spend-centric model has been helped by fiscal stimulus ensuring a flush consumer, while management continues to execute well by adding millions of new consumer and small and medium business accounts, which should benefit the franchise over the medium to long term. We remain optimistic regarding the company’s prospects as travel and entertainment activity rebounds, adding to our position in the quarter.”
8. Intel Corporation (NASDAQ:INTC)
Number of Hedge Fund Holders: 69
Intel Corporation (NASDAQ:INTC), a California-based computer technology and semiconductor company, is one of the best crypto stocks to monitor. Intel Corporation announced in April 2022 its new Intel Blockscale ASIC, offering energy efficient hashing for proof-of-work consensus networks. Intel Blockscale ASIC will provide the energy efficiency and computing power needed to deliver scalable and sustainable operations.
On November 22, Mizuho analyst Vijay Rakesh resumed coverage of Intel Corporation with a Neutral rating and a $32 price target. Since his earlier research note on February 18, the analyst thinks Intel Corporation has seen higher challenges in both the server and PC markets, with server CPU ramps delayed to 2023 and weaker PC demand. While Intel Corporation is regaining some share in PCs, in the core high margin server/data center segment it continues to expect market share loss into 2023, the analyst told investors.
According to the third quarter database of Insider Monkey, 69 hedge funds held stakes worth $1.9 billion in Intel Corporation, compared to 65 funds in the last quarter worth $2.5 billion. John Overdeck and David Siegel’s Two Sigma Advisors is one of the biggest stakeholders of the company, with 15.15 million shares valued at $390.5 million.
ClearBridge Investments made the following comment about Intel Corporation in its Q3 2022 investor letter:
“Also on the detractor side, Intel Corporation delivered a disappointing revenue miss and lowered full-year revenue and earnings guidance as COVID-19-driven demand for PCs abated (where Intel enjoys half its sales) and a delay in its flagship Sapphire Rapids CPU hurt its data center business. Despite these issues, we still believe Intel is an economically sensitive turnaround story with substantial upside.”
7. Block, Inc. (NYSE:SQ)
Number of Hedge Fund Holders: 75
Block, Inc. (NYSE:SQ) is a multinational financial technology company that serves the financial services, mobile payments, and point of sale industries. Block, Inc.’s Cash App makes it convenient to invest in stocks and Bitcoin. In Q3 2022, Block, Inc.’s gross profit outperformed Street estimates on the strength of its Cash App and Seller systems, but was partly offset by weaker Buy Now Pay Later gross profit.
On November 16, Mizuho analyst Dan Dolev raised the price target on Block, Inc. to $69 from $57 and maintained a Neutral rating on the shares. The analyst said payday lending is largely significant to Cash App gross profit growth. Payday lending is a short-term boost to inflows, but it may eventually pressure Block, Inc.’s multiple as delinquencies across consumer lending continue to increase, the analyst wrote in a research note. This is concerning given Cash App’s skew towards lower-income households, added the analyst.
According to Insider Monkey’s data, 75 hedge funds were bullish on Block, Inc. at the end of September, compared to 72 funds in the prior quarter. Cathie Wood’s ARK Investment Management is the biggest stakeholder of Block, Inc., with a position worth $505.45 million. It is one of the best crypto stocks to buy according to hedge funds.
In its Q2 2022 investor letter, Baron Funds, an asset management firm, highlighted a few stocks and Block, Inc. was one of them. Here is what the fund said:
“Block, Inc. provides point-of-sale technology to small businesses and operates the Cash App ecosystem of financial services for individuals. Shares fell due to mixed quarterly results with more modest growth in the Seller business offsetting strength in Cash App. While integration of recently acquired Afterpay is progressing well and credit metrics remain healthy, the buy-now-pay-later business slowed due to greater competitive intensity. We continue to own the stock due to Block’s long runway for growth, sustainable competitive advantages, and unique corporate culture.”
Given this cash-generation power, we are naturally drawn to what we believe are strong and profitable financial institutions when the price is right. Presently, we believe the valuations of our financial holdings are not only reasonable, but extremely compelling, and our portfolio composition reflects this view. Representative financial holdings in the Fund include Wells Fargo.”
6. PayPal Holdings, Inc. (NASDAQ:PYPL)
Number of Hedge Fund Holders: 126
PayPal Holdings, Inc. (NASDAQ:PYPL) is a digital payments company that offers financial technology solutions under the PayPal, PayPal Credit, Braintree, Venmo, Xoom, Zettle, Hyperwallet, Honey, and Paidy brands. PayPal Holdings, Inc. announced in August 2022 that users can transfer crypto from PayPal to external crypto addresses for no network charges.
In the PYMNTS survey — Black Friday 2022: High Prices Reshape Holiday Shopping Habits, November 2022, Wedbush analyst Moshe Katri noted that PayPal Holdings, Inc., an Outperform rated stock, remained a dominant e-commerce payment option.
According to Insider Monkey’s data, 126 hedge funds were bullish on PayPal Holdings, Inc. at the end of Q3 2022, compared to 97 funds in the prior quarter. Ken Fisher’s Fisher Asset Management featured as the leading position holder in the company, with 17.6 million shares worth $1.5 billion.
In addition to Apple Inc., Mastercard Incorporated, and Microsoft Corporation, PayPal Holdings, Inc. is one of the favorite crypto stocks among smart investors.
Here is what RiverPark Large Growth Fund has to say about PayPal Holdings, Inc. in its Q3 2022 investor letter:
“PayPal, announced better-than-expected 2Q results, positive guidance (including more than $1.3 billion of 2023 cost savings leading to operating margin expansion), a $15 billion stock repurchase program, and the appointment of Blake Jorgensen as CFO, who was previously the well-regarded CFO at Electronic Arts. The company reported 9% revenue growth, in-line with guidance, and $0.93 EPS, exceeding guidance due to robust operating leverage. Management narrowed its 2022 revenue guidance from 11%-13% growth to about 11% growth due to the macro environment but raised its EPS guidance due to greater operating margin leverage and share buybacks. The stock also reacted to the news that activist investor Elliott Management had taken a stake in the company. PYPL operates at significantly lower margins than its payment competitors Visa and Mastercard, and sources suggest that Elliott intends, among other things, to push for the company to improve its margins and drive higher cash flow growth in the near term.
PayPal provides direct exposure to the secular growth in e-commerce driven digital payments as it is the most accepted digital wallet on-line. More than 3/4 of the 1,500 largest online retailers across North America and Europe accept PayPal, which is almost triple the acceptance of Apple Pay, the number two digital wallet. PayPal is also a key beneficiary of the current dramatic shift in consumer buying habits brought on by the pandemic, as well as the relatively newer consumer-to-consumer payment trends through its Venmo peer-to-peer (P2P) payment service. With a 2Q non-GAAP operating margin of 19%, PYPL also has significant margin expansion potential given that competitors Adyen, Visa and Mastercard have 50%-65% operating margins. We believe the combination of the secular growth of eCommerce and P2P payments, along with expanding operating leverage and the strategic use of the company’s significant and growing cash balance should fuel a mid-20% earnings growth rate over the next five years. This, to us, presents an excellent risk/reward profile given that PYPL trades at a modest premium to the market multiple and a 6% 2023 FCF yield.”
5. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 140
Apple Inc. users can trade in crypto using Apple Pay and the company has announced that it is now supporting the Ripple Interledger Protocol. Apple Inc. might even leap into the cryptocurrency space by providing Apple users a way to mine coins through their IOS/OS devices. Apple Inc. is one of the favorite cryptocurrency stocks of smart investors.
On December 1, Piper Sandler analyst Harsh Kumar trimmed forecasts for Apple Inc. primarily due to iPhone supply constraints from shutdowns in Zhengzhou, China. He slashed his revenue forecast for the December quarter to $119 billion from $127.3 billion and assumed a reduction of 9 million handset units primarily for the new models manufactured in November. However, the analyst observed that COVID restrictions have since been relaxed. He believes Apple Inc. “remains a formidable brand” and reiterated an Overweight rating on the shares with a $195 price target despite this “temporary reduction from unforeseen events.”
Among the hedge funds tracked by Insider Monkey, 140 funds reported owning stakes in Apple Inc. at the end of September, compared to 128 funds in the prior quarter. Warren Buffett’s Berkshire Hathaway is the biggest stakeholder of the company, with a position worth $123.6 billion.
Here is what Wedgewood Partners specifically said about Apple Inc. in its Q3 2022 investor letter:
“Apple Inc. grew revenues +5% (foreign exchange adjusted and excluding Russia) driven by record iPhone revenues that were up about +3% on an exceptional year ago comparison of +50%. Apple’s installed base is over 1.8 billion devices which helps drive a software and services business that has generated almost $80 billion of revenue over the past 4 quarters. As we have highlighted in the past, Apple’s relentless focus on the development and integration between hardware (especially ICs) as well as software, continues to add significant value for customers of its products and services. We expect this favorable competitive dynamic to continue for the foreseeable future.”
4. Mastercard Incorporated (NYSE:MA)
Number of Hedge Fund Holders: 146
Mastercard Incorporated, an American multinational fintech firm, is one of the premier cryptocurrency stocks to invest in. The company provides a Crypto Card Program, which helps customers with simple and real-time use of digital currency for daily transactions. Mastercard Incorporated is also initiating a program to let financial institutions provide cryptocurrency trading to their clients.
On November 29, Redburn analyst Fahed Kunwar initiated coverage of Mastercard Incorporated with a Neutral rating. The brand power of debit is dwindling as digital wallets become mainstream, contended the analyst, who believes the market underestimates the cyclical and structural concerns that are weighing down card stocks.
According to Insider Monkey’s Q3 data, 136 hedge funds were bullish on Mastercard Incorporated, with collective stakes worth $13.8 billion, compared to 137 funds in the prior quarter worth $15 billion. Charles Akre’s Akre Capital Management is the largest stakeholder of the company, with 5.8 million shares valued at $1.6 billion.
Here is what L1 Capital International specifically said about Mastercard Incorporated in its Q2 2022 investor letter:
“Growth in electronic payments, the continued shift away from cash and cheques, and the provision of additional services such as fraud identification and prevention continue to power Mastercard Incorporated’s growth (Figure 14). In person cross-border transactions are recovering alongside normalization of travel.
Mastercard and Visa (we have invested in both) continue to dominate the electronic payments industry outside of China, utilizing their own multi-faceted networks as well as Government and third-party payments infrastructure to facilitate transactions. Another perfect example of a ‘Noah’s Ark’ industry structure.
Regulation, technological disruption and disintermediation, and geopolitical constraints are perennial issues for consideration, but Mastercard (and Visa) management have repeatedly demonstrated their ability to manage these issues…” (Click here to read the full text)
3. Alphabet Inc. (NASDAQ:GOOG)
Number of Hedge Fund Holders: 156
Alphabet Inc. (NASDAQ:GOOG) invested nearly $1.5 billion in the blockchain sector between September 2021 and June 2022, and the CEO announced in the beginning of 2022 that Alphabet Inc. is looking into crypto and blockchain potential. In October 2022, the company announced that users can pay for Google Cloud services using cryptocurrencies through Coinbase’s crypto payment platform, Coinbase commerce. It is one of the premier cryptocurrency stocks to buy according to hedge funds.
On November 30, Societe Generale analyst Christophe Cherblanc maintained a Buy rating on Alphabet Inc. but lowered the price target on the shares to $132 from $147. The analyst said cost management has become a top priority for technology investors. For Alphabet Inc., the issue is less about near-term cyclical pressures than delivering the scale benefits expected from a company with revenues of $280 billion in a “progressively maturing online ecosystem,” the analyst told investors in a research note. He said Alphabet Inc. remains his preferred online stock despite his trimmed estimates.
Among the hedge funds tracked by Insider Monkey, Chris Hohn’s TCI Fund Management is the leading stakeholder of Alphabet Inc., with 52.4 million shares worth $5 billion. Overall, 156 hedge funds were bullish on the stock at the end of Q3 2022, compared to 153 funds in the prior quarter.
Here is what Mayar Capital had to say about Alphabet Inc. in its third-quarter 2022 investor letter:
“In early January this year – which admittedly feels like eons ago – US President Joe Biden was pushing Americans to take up the government’s offer of free COVID tests to help tackle the surging omicron variant. How did Biden respond when citizens asked about the availability of these tests?
“Google it!”
This advice, undoubtedly well-meant, was roundly scoffed at by the press, however. It seemed too obvious to be very helpful.
Anyway, the anecdote serves to introduce you to one of our largest holdings, Alphabet; the parent company of Google. Note that first, Alphabet’s original and core product – its search engine – has entered our common vocabulary as a verb. ‘Googling’ something has the same meaning as ‘researching’ or ‘finding an answer to’ something. Second, the reason Biden’s advice was met with such opprobrium was because Googling something has become almost second nature to us now.
These two observations reveal a lot about Google’s strength in the search engine market, in which it has a share of over 90 percent. Because internet search is almost the prototypical network, Google has benefitted from – and we think is also protected by – the huge competitive advantage its scale brings – both to those asking the questions and those providing the answers. The Google search platform becomes increasingly useful to anyone seeking information as a greater volume of stuff becomes available. This starts a virtuous cycle that results in a colossal market share for Google itself. In the language of business strategists, Google benefits from vast network effects.
Because Google’s search results are viewed by billions of eyeballs every day, its search page ‘real estate’ is understandably very valuable to those with goods and services to sell. Advertising revenues from this ‘real estate’ as well as that from its other properties such as Mail, Maps, and so on, totaled almost USD 150b in 2021; amounting to almost 58% of the company’s revenues. Ad sales on YouTube, also owned by Alphabet, brought in another USD 28b. With the secular shift of the advertising spend to digital channels – over which Alphabet has a tight grip – we estimate the company has a share of around 40% of the digital advertising market and is probably the most valuable advertising property in the world…” (Click here to see the full text)
2. Visa Inc. (NYSE:V)
Number of Hedge Fund Holders: 165
Visa Inc. (NYSE:V), an American payments technology company, offers a crypto consulting service to its clients and has made multiple investments in crypto platforms as a way to mainstream the adoption of digital currencies. On October 7, Visa disclosed that it is partnering with global crypto exchange FTX to provide debit cards in 40 countries in Latin America, Asia, and Europe. This has resulted in more than 70 crypto partnerships. Visa Inc. is one of the best cryptocurrency stocks to monitor.
On November 28, Baird analyst David Koning said Visa Inc. offered updated operating metrics through November 21 which demonstrated that quarter-to-date trends are higher than his Q1 estimates. He said he likes it a lot given numerous benefits amid macro uncertainty including inflation, rising rates on big cash balances, recovery in the Asia Pacific, and easy comps on Russia in the second half of 2023. The analyst reaffirmed his Outperform rating and a $250 price target on Visa Inc. shares.
Among the hedge funds tracked by Insider Monkey, Visa Inc. was part of 165 public stock portfolios at the end of September 2022, up from 166 in the prior quarter. Ken Fisher’s Fisher Asset Management is a prominent stakeholder of the company, with a position worth $1.5 billion.
Baron Funds made the following comment about Visa Inc. in its Q3 2022 investor letter:
“Shares of global payment network Visa Inc. fell despite reporting financial results that beat Street forecasts and sustained volume growth in recent months. Revenue grew 19% and EPS grew 33% in the most recent quarter, and double-digit payment volume growth persisted through August. Share price weakness represented a reversal of outperformance earlier this year and may be due to foreign exchange headwinds and concerns about a potential weakening of consumer spending. We continue to own the stock due to Visa’s long runway for growth and significant competitive advantages.”
1. Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders: 269
Microsoft Corporation was one of the first technology firms to back the crypto industry. In 2014, the company partnered with Bitpay, allowing users to use Bitcoin as a payment method to purchase apps and games for Windows Phone, Xbox, and Windows operating systems. At the end of September 2022, M12, Microsoft Corporation’s venture capital arm, led a $20 million funding round for Web3 startup Space and Time as the company focuses on decentralization of data.
On November 29, Morgan Stanley analyst Keith Weiss said that investors are concerned that Microsoft Corporation’s estimates have not been derisked and contended that short-term investor concerns primarily fall into two categories, margins and revenue growth. However, he sees a solid and durable demand in the commercial businesses that should result in accelerating revenue and EPS growth in the second half of 2023, said the analyst, arguing that Microsoft Corporation’s “unique positioning as a consolidator” should drive demand that holds up better than investors fear. He has an Overweight rating and a $307 price target on Microsoft Corporation shares.
According to Insider Monkey’s Q3 data, 269 hedge funds were bullish on Microsoft Corporation, compared to 258 funds in the earlier quarter. Bill & Melinda Gates Foundation Trust is the largest position holder in the company, with 39.2 million shares valued at $9.14 billion.
Diamond Hill made the following comment about Microsoft Corporation in its Q3 2022 investor letter:
“Also among our bottom contributors were media and technology giant Alphabet, software and IT services provider Microsoft Corporation and insurance company American International Group (AIG). Microsoft shares declined in Q3, along with other tech companies, as rising interest rates impacted the near-term outlook. We expect the business to continue to generate strong revenue growth and benefit from operating leverage. Microsoft’s cloud computing services business, Azure, is generating robust growth, confirming its competitive positioning.”
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This article is originally published at Insider Monkey.
