10 Best Roth IRA Stocks To Buy According To Hedge Funds

In this article, we discuss the 10 best Roth IRA stocks to buy according to hedge funds.

A Roth individual retirement account (IRA) allows you to contribute after-tax dollars into an account that can keep on growing tax-free. The account gives you the option to withdraw the amount penalty-free after the age of 59½. However, the Roth IRA must be opened for five years before the withdrawal can be made. Roth IRA does not require a minimum contribution, and there is no age limit on when the contribution can be made. The only qualifying factor is that a single filer should earn less than $144,000 in 2022 and $153,000 annually in 2023 to make a deposit to the Roth IRA. Meanwhile, married couples can contribute to a Roth IRA if they earn less than $214,000 in 2022 and $228,000 in 2023 together. The contributions made to the Roth IRA can be used for emergency purposes. However, it must be noted that only contributions can be withdrawn at any time and not the amount of profit generated from the amount deposited.

In times of raging inflation, investors are looking towards using a Roth IRA to protect their investment gains from taxes. Some of the best Roth IRA stocks attracting hedge fund investment as of Q3 2022 include Amazon.com, Inc. (NASDAQ:AMZN), Alphabet Inc. (NASDAQ:GOOGL), and Apple, Inc. (NASDAQ:AAPL).

Our Methodology

We scanned Insider Monkey’s database of 920 hedge funds and picked the most popular Roth IRA stocks among these elite hedge funds. These Roth IRA stocks provide investors with an opportunity to diversify their portfolios and earn healthy returns. The list includes stocks from different sectors ranging from consumer discretionary, energy, financial, and technology.

Best Roth IRA Stocks To Buy According To Hedge Funds

10. Shell plc (NYSE:SHEL)

Number of Hedge Fund Holders: 39

Shell plc (NYSE:SHEL) is a London, UK-based integrated energy company with a global presence. The company is making an aggressive move in lowering its reliance on conventional energy sources like crude oil and natural gas and transitioning towards renewable energy sources like wind and solar. This emerging theme is unfolding currently and could be at its peak in the next two to three decades.

In a research note issued on November 11, Ryan Todd at Piper Sandler increased the price target on Shell plc (NYSE:SHEL) from $65 to $71 and maintained an Overweight rating on the stock. The analyst highlighted that the Q3 2022 results were very positive for the integrated energy companies. Shell plc (NYSE:SHEL) has seen an improvement in shareholder returns and has significantly improved cash flow generation during the third quarter. Shell plc (NYSE:SHEL) can be considered one of the best Roth IRA stocks as it offers an attractive forward dividend yield of 3.58% as of November 25. The company has also started a $4 billion share buyback plan on October 27 that is expected to be completed in the next three months.

Third Point Management shared its outlook on Shell plc (NYSE:SHEL) in its Q1 2022 investor letter. Here’s what the firm said:

“We have continued to add to our position in Shell, as it trades at the same deeply discounted multiple today that it did last year due to a move up in commodity prices. We are engaged in discussions with management, board members, and other shareholders, as well as informal talks with financial advisors. We have discussed various alternatives with the aim of both increasing shareholder value and allowing Shell to effectively manage the energy transition. We have reiterated our view that Shell’s portfolio of disparate businesses ranging from deep water oil to wind farms to gas stations to chemical plants is confusing and unmanageable. Most investors we have discussed this with agree that the company would be more successful over the long term with a different corporate structure. Discussions among the parties have been constructive and will be ongoing since stakeholders clearly see these corporate changes as instrumental, particularly if Shell wishes to become a leader in the energy transition rather than be left behind as a tarnished legacy brand.

Beyond our discussions around corporate structure, there have been two important developments since our last update. First, Shell announced a plan to redomicile its headquarters to the UK and create a single shareholder class. This move allows greater flexibility to modify its portfolio (either through asset sales or spin-offs) and allows for a more efficient return of capital, specifically via share repurchases. Second, fundamental and geopolitical events have highlighted the strategic importance of reliable energy supplies, especially in Europe. Shell’s LNG business, the largest in the world outside of Qatar, will play a critical role in ensuring energy security for Europe. In our view, the value of this business has increased dramatically since our original investment.

While Shell continues to trade at a large discount to its intrinsic value, with proper management we believe the company can simultaneously deliver shareholder returns, reliable energy and decarbonization of the global economy. We look forward to continued engagement with management and other shareholders and to more strategic clarity from the Company.”

9. EQT Corporation (NYSE:EQT)

Number of Hedge Fund Holders: 57

EQT Corporation (NYSE:EQT) is a Pittsburgh, Pennsylvania-based natural gas producer with a focus on the Appalachian Basin. The company has the distinction of being the biggest natural gas producer in the US.

On November 17, Mark Lear at Piper Sandler increased the target price for EQT Corporation from $62 to $63 and maintained an Overweight rating on the stock. The target price reflects a potential upside of over 51% from the closing price as of November 25. Lear revised the target price following the amendments made to the exploration and production (E&P) models after the company’s Q3 2022 results. The analyst observed that EQT Corporation’s (NYSE:EQT) primary focus has been on enhancing capital returns through disciplined allocation. However, the E&P companies could incur higher capital expenditure (CAPEX) due to increasing service costs in Q4 2022 and 2023.

ClearBridge Investments presented its positive outlook on EQT Corporation in its Q3 2022 investor letter. Here’s what the firm said:

“We also added natural gas company EQT (NYSE:EQT) in the energy sector. As one of the lowest-cost domestic producers, EQT stands to benefit from its position as a leading supplier of natural gas to a world suffering from critically low energy reserves. The Russian invasion of Ukraine and threats to hold natural gas exports hostage have spurred a surge in European energy prices, generating long-term agreements by European countries to purchase U.S. natural gas.

This strong demand and elevated prices have helped EQT strengthen its balance sheet and position it to take advantage as opportunities emerge for natural gas to plug the gaps in the global energy transition from fossil fuels to renewables.”

According to the data compiled by Insider Monkey, Eric W. Mandelblatt’s Soroban Capital Partners is the biggest hedge fund holder of EQT Corporation stock with a stake of around $263.2 million as of Q3 2022.

8. Johnson & Johnson (NYSE:JNJ)

Number of Hedge Fund Holders: 85

Johnson & Johnson is a New Brunswick, New Jersey-based company involved in the manufacturing of pharmaceuticals, medical devices, and consumer goods.

Johnson & Johnson intends to focus more on the high-growth generating pharmaceuticals and medical devices segment of the company. To provide a boost to the medical devices segment, Johnson & Johnson announced on November 1 that it has decided to acquire heart pump maker Abiomed, Inc. (NASDAQ:ABMD) for a sum of over $16 billion. The Danvers, Massachusetts-based firm is also involved in manufacturing support devices for kidneys and lungs.

Johnson & Johnson also has the distinction of being a Dividend King as it has increased its dividends for the past six decades. The stock offers an annual forward dividend yield of 2.57% as of November 25, making it one of the best Roth IRA stocks to invest in.

Here’s what Distillate Capital Partners LLC said about Johnson & Johnson in its Q2 2022 investor letter:

“Johnson & Johnson was among the 2 largest trims at around 1% each. Each stock was up 1% in the quarter compared to the 16% price decline for the S&P 500 and the positions were reduced as the valuations became somewhat less appealing, though still attractive enough to warrant inclusion.”

Johnson & Johnson was held by 85 hedge funds at the end of the third quarter of 2022.

7. Tesla, Inc. (NASDAQ:TSLA)

Number of Hedge Fund Holders: 88

Tesla, Inc. (NASDAQ:TSLA) is an Austin, Texas-based manufacturer of electric vehicles led by billionaire Elon Musk.

Adam Jonas at Morgan Stanley believes that the current price of Tesla, Inc. offers an attractive entry point in the stock given the challenges that Mr. Musk is facing in streamlining the operations of Twitter since the acquisition of the microblogging and social media network for $44 billion. On November 23, Mr. Jonas gave Tesla, Inc. stock a target price of $330 with an Overweight rating. The analyst highlighted that Tesla, Inc. is a self-funded pure-play EV firm and is expected to experience 20% to 30% YoY growth in the top line due to the changing dynamics of the renewable energy industry. Mr. Jonas sees a “value opportunity” emerging in Tesla, Inc. for individuals looking to invest in the best Roth IRA stocks.

In its Q2 2022 investor letter, Baron Funds discussed its stance on Tesla, Inc.. Here’s what the firm said:

“In 2014, before we began to invest in Tesla (NASDAQ:TSLA), I called Roger to ask whether he thought Elon Musk’s electric car business would succeed. I did not believe that Roger, an owner of dealerships that sell cars powered by internal combustion engines (ICE) would likely have a favorable opinion of Tesla’s prospects. That was principally for two reasons:

1. First, automobile manufacturing and distribution is unusually complicated, capital intensive, and highly regulated, which makes profitability problematic;
2. second, cars with ICE motors require extensive annual maintenance, and dealer services revenues, not profits from automobile sales, are the most important contributor to profits of perpetual licensed ICE car dealerships.

Penske Automotive Group is principally an ICE car dealer. Since electric cars are powered by batteries and need little service, franchised dealerships are incented to sell ICE not EV automobiles. Further, Roger had been a long-term director of General Motors. General Motors’ ICE automobile business would be disrupted if Tesla were successful.

Regardless, I was right to have spoken with Roger. That was since he outlined numerous issues we needed to consider, study, and question before we determined whether we believed Tesla could be a successful business…before we ultimately chose whether to invest in that company.

When we completed our initial due diligence on Tesla, which diligence has been ongoing since 2014, we decided to invest $360 million in Tesla over the next two years. I then called Roger and outlined why I thought we could earn 20 times our capital over the next 10 years. Roger was so certain I was wrong that he offered to bet me $1 million that Tesla would fail. “Roger, I can’t bet you a million dollars. First, if you are right, I couldn’t afford to pay you. Second, if I’m right, you’re my friend, and I couldn’t take your money.” We settled on a dinner bet…” (Click here to see the full text)

6. T-Mobile US, Inc. (NASDAQ:TMUS)

Number of Hedge Fund Holders: 100

T-Mobile US, Inc. (NASDAQ:TMUS) is an Overland Park, Kansas, and Bellevue, Washington-based network operator. The company has the distinction of being the second biggest wireless carrier in the US, with nearly 112 million customers as of Q3 2022.

T-Mobile US, Inc. posted strong subscriber numbers for Q3 2022 as it reported the highest-ever net additions of postpaid customers to its network. Following these positive developments, Ivan Feinseth at Tigress Financial increased the price target on T-Mobile US, Inc. from $195 to $202 and maintained a Buy rating on the stock. The analyst believes that the company will experience healthy top-line growth in the future as it continues to benefit from its extensive high-speed 5G network. This will also result in continued customer gains. Feinseth added that the industry-leading 5G position would continue to provide T-Mobile US, Inc. with cash flow growth. The rise of the 5G network is another emerging trend, as themes like artificial intelligence, metaverse, and augmented reality will be based on this infrastructure.

As of Q3 2022, T-Mobile US, Inc. was held by 100 hedge funds.

In addition to T-Mobile US, Inc., stocks such as  Amazon.com, Inc., Alphabet Inc., and Apple, Inc. are also on our list of the best Roth IRA stocks to buy according to hedge funds.

5. Apple, Inc. (NASDAQ:AAPL)

Number of Hedge Fund Holders: 140

Apple, Inc. is a Cupertino, California-based tech giant. The company is also spearheading the field of digital streaming and mobile payment services through its offerings.

Given the tension between the US and China, Apple, Inc. is now reducing its reliance on components manufactured in Asia. According to a report published by Bloomberg on November 15, Apple, Inc. is preparing itself to source chips from its facility in Arizona. CEO Tim Cook shared this update during his recent visit to Europe, where he met the engineering and retail workers.

On November 14, Samik Chatterjee at JPMorgan highlighted how iPhone 14’s demand is expected to outstrip supply during the coming quarters. The analyst thinks the company’s short-term supply challenges provide investors with an attractive opportunity to go long on one of the stock.

Here’s what Wedgewood Partners said about Apple, Inc. in its Q3 2022 investor letter:

“Apple Inc. (NASDAQ:AAPL) 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. Visa Inc. (NYSE:V)

Number of Hedge Fund Holders: 165

Visa Inc. (NYSE:V) is a San Francisco, California-based provider of digital payment services through its payment gateway network.

On November 17, the company announced the appointment of Ryan McInerney as CEO, effective from February 2023. Notable hedge funds like Ray Dalio’s Bridgewater Associates and Chase Coleman’s Tiger Global increased their stake in the company during Q3 2022, reflecting a bullish take on Visa Inc. stock by some of the world’s leading hedge funds.

Following the positive Q3 2022 results, Visa Inc. announced an increase in quarterly dividends by 20% to 45 cents. The company also announced a new $12 billion share buyback plan to further boost shareholder returns. Visa Inc. was able to report strong quarterly results, despite the headwinds caused by the US dollar gaining strength against major currencies of the world, making it one of the best Roth IRA stocks to buy.

Baron Funds discussed its outlook on Visa Inc. in its Q3 2022 investor letter. Here’s what the firm said:

“Shares of global payment network Visa Inc. (NYSE:V) 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.”

Of the 920 hedge funds in Insider Monkey’s database, Visa Inc. was held by 165 funds as of Q3 2022.

3. Alphabet Inc. (NASDAQ:GOOGL)

Number of Hedge Fund Holders: 196

Alphabet Inc. is a Mountain View, California-based diversified technology company leading in emerging themes like artificial intelligence, cloud computing, smartphones, and software.

Alphabet Inc. could be forced to focus on cutting costs as activist investor TCI Fund Management has urged the company to lower its expenses and reduce employee headcount. The London-based hedge fund has a “strong conviction” on the future of Alphabet Inc. as it holds a stake of over $6 billion in the company. The hedge fund believes that the company could trim its headcount by 20%. Furthermore, the median salary offered by the Silicon Valley giant is 67% higher than its competitor Microsoft Corporation (NASDAQ:MSFT). Reducing the workforce is expected to boost the company’s margins, making it one of the best Roth IRA stocks.

Here’s what Mayar Capital said about Alphabet Inc. in its Q3 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. Amazon.com, Inc. (NASDAQ:AMZN)

Number of Hedge Fund Holders: 269

Amazon.com, Inc. is a Seattle, Washington-based e-commerce giant that has also diversified into cloud computing, consumer electronics, digital streaming, and healthcare. The company is at the second position on our list of the ten best Roth IRA stocks to buy according to hedge funds.

Amazon.com, Inc. is working on streamlining its workforce as it will continue to slash its headcount into 2023, according to CEO Andy Jassy. The company has recently cut jobs across the books and devices business units. Furthermore, the rapid Amazon Web Services (AWS) segment has extended a hiring freeze until Q1 2023.

MoffettNathanson LLC, a New York-based research firm, highlighted Amazon.com, Inc. as a winner in the e-commerce segment on November 15. The research firm has shown confidence in the growth outlook of e-commerce businesses despite macroeconomic uncertainty. The report pinpoints Amazon.com, Inc. as a market share gainer and considers it a cheap business for investors at the current levels.

Here’s what Baron Funds said about Amazon.com, Inc. in its Q3 2022 investor letter:

“Amazon.com, Inc. (NASDAQ:AMZN) is the world’s largest e-commerce retailer and cloud services provider. Shares of Amazon increased 6% in the quarter after the company reported strong results with 7% year-over-year revenue growth driven by 33% growth in Amazon Web Services (AWS), Amazon’s leading cloud computing service, while guiding for an acceleration in third quarter revenue growth, which is expected to be between 13% and 17% year-overyear. Amazon’s share of e-commerce is roughly 40%, far ahead of competition, yet domestic e-commerce accounted for only 14.5% of total retail sales (according to U.S. Census Bureau data for the second quarter of 2022), implying durable growth opportunities ahead. Internationally, the opportunity remains large as Amazon still has less than a 2% market share of international retail spending. Its advertising share is also only 3% and growing, underpinned by the structural closed-loop systems it enables (merchants know exactly whether their ad dollars resulted in a purchase since they are all done on the Amazon platform), which enables accurate targeting and measurement. Lastly, AWS has a good runway for growth as the industry still represents only 9.5% out of the $4.3 trillion of global IT spending according to Gartner. Areas such as logistics and health care present additional optionality.”

As of Q3 2022, Amazon.com, Inc. was held by 269 hedge funds.

1. Microsoft Corporation (NASDAQ:MSFT)

Number of Hedge Fund Holders: 269

Microsoft Corporation is a Redmond, Washington-based technology giant co-founded by Bill Gates in 1975.

Microsoft Corporation is on its way to becoming a member of the Dividend Aristocrat list. The company has increased its dividends for the past 20 consecutive years and offers an annual forward dividend yield of 1.10% as of November 25. The company is relying upon cloud computing, gaming, and enterprise software as the next growth frontier.

Furthermore, Microsoft Corporation has entered into a multi-year partnership with NVIDIA Corporation (NASDAQ:NVDA) to develop a “massive” artificial intelligence (AI) computer, which will be powered on the infrastructure of Microsoft Azure. The company is also working on getting the go-ahead from the regulatory authorities regarding its $69 billion acquisition of Activision Blizzard, Inc. (NASDAQ:ATVI) which was announced in January 2022. The deal is expected to further strengthen the company’s operations. Microsoft Corporation’s strong business fundamentals merit the company’s inclusion in the list of 10 best Roth IRA stocks to invest in.

Here’s what Carillon Tower Advisers said about Microsoft Corporation in its Q3 2022 investor letter:

“Despite reporting very good quarterly results, Microsoft Corporation (NASDAQ:MSFT) underperformed the overall market in August. Technology stocks in general underperformed in August due to fears over slowing global economic growth, potentially leading to cuts in corporate information technology budgets.”

You can also take a peek at the 10 Best Safe Dividend Stocks for Retirement Portfolios and Gabelli’s 11 High Dividend Stocks.

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This article is originally published at Insider Monkey.