In this article, we will share the insights on 10 large-cap stocks hedge funds are talking about.
The S&P 500, the benchmark for large-cap US stocks, has fallen 10% since the beginning of the year. This fits into the fix or correction area for the indexes that savvy investors are most interested in. Buying during a correction is often a winning game in the long run. However, investors should be aware that these periods are volatile and can lead to large losses if not timed correctly.
Thought their associated indexes are down, large-cap companies do have several tailwinds. In 2021, their revenues exceeded expectations. In addition, corporate acquisitions have accelerated. However, many risks remain. Inflation is a major risk and inflation will need to moderate slightly for a strong bullish outlook to materialize.
We are currently under a stock picker’s market and Insider Monkey has behind-the-scenes access into the minds of some of the sharpest stock pickers on the planet. We have been busy been reviewing several investor letters from hedge funds and other prominent investors to identify the different companies that smart money is focusing on right now. You can check out all of these letters from hedge funds and prominent investors on our hedge fund investor letters 2021 Q4 page.
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Our Methodology
The following list consists of the 10 most popular large-cap stocks with market caps not exceeding $37 billion, based on the database of 924 elite funds tracked by Insider Monkey that filed 13Fs for the December 2021 reporting period. We ranked each stock based on the number of hedge fund holders. We’ve provided updated stock returns and hedge fund comments for additional context on each stock.
10 Large-Cap Stocks Hedge Funds Are Talking About
10. Biogen Inc. (NASDAQ:BIIB)
Market Capitalization as of Feb. 25, 2022: $30.5B
Number of Hedge Fund Holders: 63
Miller Value Partners recently released its Q2 2021 Investor Letter, a copy of which you can download here. The Miller Opportunity Trust Class I gained 4.18%, underperforming its benchmark, the S&P 500 Index which returned 8.55% in the same quarter. You should check out Miller Value Partners’ top 5 stock picks for investors to buy right now, which could be the biggest winners of this year.
In the Q2 2021 Investor Letter, the fund highlighted a few stocks, and Biogen Inc. (NASDAQ:BIIB) was one of them. Biogen Inc. (NASDAQ:BIIB) is a biotechnology company. In the last three months, Biogen Inc. (NASDAQ:BIIB) stock lost 6%. Here is what the fund said:
“We started building a position in Biogen (BIIB) following the approval in early June of Aduhelm, their controversial Alzheimer’s drug. The stock initially traded up to an intra-day high of $468.55 and subsequently traded down to a low of $340.27 near the end of June. We believe the significant unmet need will lead to higher than expected demand for the drug.”
9. Paramount Global (NASDAQ:PARA)
Market Capitalization as of Feb. 25, 2022: $19.3B
Number of Hedge Fund Holders: 64
Ariel Investments, an investment management firm, published its “Ariel Focus Fund” third quarter 2021 investor letter – a copy of which can be downloaded here. Ariel Focus Fund returned -4.71% in the third quarter, trailing the Russell 1000 Value Index, which lost -0.78%, and the S&P 500 Index which gained 0.58%. Through the third quarter of 2021, the Ariel Focus Fund had gained 15.44% compared to 16.14% for the Russell 1000 Value Index and 15.92% for the S&P 500. You can take a look at the fund’s top 5 holdings to have an idea about their best picks for 2021.
Ariel Focus Fund mentioned ViacomCBS Inc. (NASDAQ: VIAC), which changed its name to Paramount Global in February, in the fund’s Q3 2021 investor letter, where it discussed its stance on the firm. Paramount Global is a New York-based mass media company with a $19.3 billion market capitalization. PARA shares have gained 5.68% since the beginning of the year, while its 12-month returns are down by 59.28%. The stock closed at $29.56 per share on February 25, 2022.
Here is what Ariel Focus Fund had to say about ViacomCBS Inc. (NASDAQ: VIAC) in its Q3 2021 investor letter:
“Leading entertainment company, ViacomCBS Inc. (VIAC) was the top contributor to relative performance over the trailing one-year period. Shares continued to benefit from solid earnings results and continued investor enthusiasm surrounding the launch of Paramount+ and other international streaming video on demand services. As the price of ViacomCBS Inc. substantially increased during the period, management announced an equity offering and a mandatory convertible preferred stock offering to further support investment in its streaming services. Shares began to tumble on the news, as an overleveraged family office, Archegos Capital Management, became a forced seller of the company. As prices moved closer to our assessment of intrinsic value, we reduced our position size in the company, insulating our portfolios from the largest weekly decline in the stock’s history and maintaining its status as a top contributor.”
8. TransDigm Group Incorporated (NYSE:TDG)
Market Capitalization as of Feb. 25, 2022: $36.7 B
Number of Hedge Fund Holders: 64
Vulcan Value Partners, an investment management firm, published its “Large Cap, Small Cap, Focus Composite, Focus Plus Composite, and All Cap Composite” second quarter 2021 investor letter – a copy of which can be downloaded here. Vulcan’s Large Cap Composite Fund delivered a 12.4% net return for the second quarter of 2021, including 9.9% gains for its Small Cap strategy, 14.8% for the Focus Composite Fund, 13.9% by the Focus Plus Composite Fund, and 13.6% by the All Cap Composite Fund. You can view the fund’s top 5 holdings to have a peek at their top bets for 2022.
In the Q2 2021 investor letter of Vulcan Value Partners, the fund mentioned TransDigm Group Incorporated (NYSE: TDG) and discussed its stance on the firm. TransDigm Group Incorporated is a Cleveland, Ohio-based aerospace manufacturing company, that currently has a $36.7 billion market capitalization. TDG shares are down by 1.33% since the beginning of the year, lowering their 12-month returns to 4.41%.
Here is what Vulcan Value Partners had to say about TransDigm Group Incorporated (NYSE: TDG) in its Q2 2021 investor letter:
“TransDigm Group Inc., another material contributor during the quarter, is an aerospace manufacturer providing highly engineered, niche components for use on commercial and military aircraft. The vast majority of the company’s profits come from aftermarket sales. Its business was impacted by the global pandemic; however, the company has been able to maintain margins despite strong revenue headwinds, and it continues to generate strong free cash flow.”
7. Bill.com Holdings, Inc. (NYSE:BILL)
Market Capitalization as of Feb. 25, 2022: $23.7B
Number of Hedge Fund Holders: 65
Alger, an investment management firm, published its “Alger Mid Cap Focus Fund” fourth quarter 2021 investor letter – a copy of which can be downloaded here. During the fourth quarter, the largest portfolio sector weightings were Information Technology and Industrials. The largest sector overweight was Industrials. The portfolio had no exposure to the Utilities or Materials sectors and negligible exposure to the Real Estate sectors. Spare some time to check the fund’s top 5 holdings to have a clue about their top bets for 2022.
Alger Mid Cap Focus Fund, in its Q4 2021 investor letter, mentioned Bill.com Holdings, Inc. (NYSE: BILL) and discussed its stance on the firm. Bill.com Holdings, Inc. is a San Jose, California-based software company with a $23.7 billion market capitalization. BILL shares are down by 12.11% since the beginning of the year, dragging its 12-month returns down to 38% gains.
Here is what Alger Mid Cap Focus Fund had to say about Bill.com Holdings, Inc. (NYSE: BILL) in its Q4 2021 investor letter:
“Bill.com Holdings, Inc., was among the top detractors from performance. Bill.com provides cloud-based software solutions that simplify, digitize, and automate complex back-office financial operations for small and medium size businesses. Its software helps customers to generate and process invoices, streamline approvals, send and receive payments, synchronizing data with their accounting system and manage their cash.”
6. Liberty Broadband Corporation (NASDAQ:LBRDK)
Market Capitalization as of Feb. 25, 2022: $26 B
Number of Hedge Fund Holders: 65
Weitz Investment Management, an investment management firm, published its “Value Fund” fourth quarter 2021 investor letter – a copy of which can be downloaded here. In its letter, the fund mentioned that it knows very little in economics, politics, and investor psychology is predictable. The fund believes, though, that business value is (roughly) measurable and that it (eventually) exerts a gravitational pull on a company’s stock price.
According to Weitz Investment, when confidence is shaken and markets are volatile, active managers have the raw material they need to add value for investors. We’re looking forward to an interesting year. Spare some time to check the fund’s top 5 holdings to have a clue about their top bets for 2022.
Weitz Investment Management, in its Q4 2021 investor letter, mentioned Liberty Broadband Corporation (NASDAQ: LBRDA) and discussed its stance on the firm. Liberty Broadband Corporation is an Englewood, Colorado-based holding company with a $26 billion market capitalization. LBRDA shares have lost 17.94% return since the beginning of the year, while their 12-month losses stand at 9.79%.
Here is what Weitz Investment Management, Inc. had to say about Liberty Broadband Corporation (NASDAQ: LBRDA) in its Q4 2021 investor letter:
“Finally, a couple of old favorites. Liberty Broadband owns 26% of Charter Communications, the second-largest U.S. cable company. Charter finished the year -20.6% from its recent high, and we believe it is a cheap stock in its own right. Liberty Broadband, whose primary asset is its Charter shares, offers Charter ownership at a discount. Another Liberty company, Liberty SiriusXM, owns over 80% of SiriusXM Satellite Radio. We believe that SiriusXM is undervalued and that the Liberty SiriusXM structure allows us to own the company at a discount. Both Charter Communications and SiriusXM are growing nicely, generating prodigious amounts of free cash flow and buying back lots of their own stock. John Malone controls both of these Liberty securities, and we believe he will find ways to close the discounts and extract maximum value for shareholders. Both Liberty securities were stock market duds in 2021, but we expect them to be contributors in 2022 regardless of what the general market does.”
5. Willis Towers Watson Public Limited Company (NASDAQ:WTW)
Market Capitalization Since Feb. 25, 2022: $ 27.2B
Number of Hedge Fund Holders: 66
Vltava Fund, an investment management firm, published its fourth-quarter 2021 investor letter – a copy of which can be downloaded here. In its Q4 2021 investor letter, Vltava Fund described 2021 as a year of very strong growth in profitability among the companies they own in their portfolio, as those profits grew even faster than did the Fund’s NAV.
Vltava Fund mentioned Willis Towers Watson Public Limited Company (NASDAQ: WTW) and discussed its stance on the firm in that investor letter. Willis Towers Watson Public Limited Company is a London, United Kingdom-based multinational risk management, insurance brokerage, and advisory company with a $27.2 billion market capitalization. WLTW shares are down by 5.66% since the beginning of the year, while their 12-month losses are just over 1%.
Here is what Vltava Fund had to say about Willis Towers Watson Public Limited Company (NASDAQ: WTW) in its Q4 2021 investor letter:
“There were two new additions to the portfolio last year – (including) shares of the insurance broker Willis Towers Watson. I mentioned both purchases already in the previous newsletter to shareholders. At first sight, these were only minor changes. There were many more transactions in the portfolio over the past year, however. Most purchases were directed to shares we have already held in the portfolio. We have been purchasing virtually all the stocks we hold, many of them repeatedly. While we are by no means opposed to anything new and always are looking for new investment opportunities, we generally tend to gravitate to what we already have in the portfolio, to what we know well, and moreover what we see is working out well.”
4. Caesars Entertainment Inc. (NASDAQ:CZR)
Market Capitalization Since Feb. 25, 2022: $18.1 B
Number of Hedge Fund Holders: 72
Carillon Tower Advisers, an investment management firm, published its “Carillon Eagle Mid Cap Growth Fund” fourth quarter 2021 investor letter – a copy of which can be downloaded here. Mid-cap stocks overall posted solid gains in the final quarter of 2021. As was the case for the majority of the year, the Russell Midcap® Growth Index (up 2.85%) lagged behind its Russell Midcap® Value Index (up 8.54%) counterpart. Spare some time to check the fund’s top 5 holdings to have a clue about their top bets for 2022.
Carillon Eagle Mid Cap Growth Fund, in its Q4 2021 investor letter, mentioned Caesars Entertainment, Inc. (NASDAQ: CZR) and discussed its stance on the firm. Caesars Entertainment, Inc. is a Reno, Nevada-based hotel and casino entertainment company with an $18.1 billion market capitalization. CZR shares have lost 15.69% since the beginning of the year, are by nearly 16% over the past year.
Here is what Carillon Eagle Mid Cap Growth Fund had to say about Caesars Entertainment, Inc. (NASDAQ: CZR) in its Q4 2021 investor letter:
“Caesars Entertainment, a diversified casino-entertainment and resort company, underperformed in the period as its quarterly earnings update was viewed as disappointing by investors. The firm highlighted a number of one-time headwinds that ultimately weighed on margins, as well as some negative impacts brought on by the surge in COVID cases. Despite this, we believe that the sizeable overall margin improvements Caesars has realized coming out of the pandemic will ultimately prove sustainable in the long run.”
3. Twilio Inc. (NYSE:TWLO)
Market Capitalization Since Feb. 25, 2022: $30.3 B
Number of Hedge Fund Holders: 80
RiverPark Funds, an investment management firm, published its “RiverPark Large Growth Fund” fourth quarter 2021 investor letter – a copy of which can be downloaded here. The RiverPark Large Growth Fund (the “Fund”) lost 3.23% for the third quarter of 2021, while its benchmarks, the S&P 500 Total Return Index (“S&P”) advanced 0.58%, the Russell 1000 Growth Total Return Index (“RLG”) returned 1.16%, and the Morningstar Large Growth Category lost 0.07%.
RiverPark Large Growth Fund mentioned Twilio Inc. (NYSE: TWLO) in its latest investor letter and discussed its stance on the firm. Twilio Inc. is a San Francisco, California-based cloud communications platform with a $30.3 billion market capitalization. TWLO shares have been hammered in 2022 thus far, losing 43.26%, dragging their 12-month losses down to 54.42%.
Here is what RiverPark Large Growth Fund had to say about Twilio Inc. (NYSE: TWLO) in its Q4 2021 investor letter:
“Twilio: TWLO shares were also down sharply to end the year. Just like after 1Q and 2Q, despite another quarterly beat in 3Q, management guidance–which we believe to be conservative– disappointed some investors. Third quarter revenue of $740 million was up 65% year over year, significantly exceeding management’s guidance of 50%-52% revenue growth. Management guided 4Q21 revenue to +40% revenue growth, which was ahead of sell side expectations, but likely below buy side expectations. Investors were also troubled by the departure of COO George Hu, who has been credited with rebuilding Twilio’s sales and marketing teams after arriving from SaleForce.com shortly after the company’s IPO in 2016.
The COVID crisis has accelerated the adoption of the company’s cloud-based, integrated communications platform that allows companies in a wide range of businesses to embed digital communications capabilities (video, chat, voice, SMS, fax, and email) into their customer facing applications without needing to build back-end infrastructure and interfaces. Twilio’s total addressable market is now greater than $40 billion, which should grow by 50% over the next few years, providing a strong secular tailwind for the company. We expect the company’s gross margin to continue to expand from 54% in the second quarter toward management’s long-term goal of 60%-65%, and, as the company grows to scale, we expect its non-GAAP operating margin to expand to 25%.”
2. Expedia Group, Inc. (NASDAQ:EXPE)
Market Capitalization Since Feb. 25, 2022: $31.1 B
Number of Hedge Fund Holders: 82
Heartland Advisors, an investment management firm, published its “Heartland Mid Cap Value Fund” fourth-quarter 2021 investor letter – a copy of which can be seen here. Security selection was mixed, with holdings in Materials and Consumer Discretionary bolstering returns; however, the portfolio couldn’t overcome weakness in Financials and Information Technology, and the Strategy lagged the Russell Mid Cap® Value Index for the quarter. The portfolio finished the year up more than 20% and kept pace with its benchmark.
In its Q4 2021 investor letter, Heartland Mid Cap Value Fund mentioned Expedia Group, Inc. (NASDAQ: EXPE) and discussed its stance on the firm. Expedia Group, Inc. is a Seattle, Washington-based online travel shopping company with a $31.1 billion market capitalization. EXPE shares are off by 4.73% return since the beginning of the year, but remain up by 6.31% over the past 12 months.
Here is what Heartland Mid Cap Value Fund had to say about Expedia Group, Inc. (NASDAQ: EXPE) in its Q4 2021 investor letter:
“The run-up in equity prices over the past year and a half has narrowed the pool of attractively valued businesses. Economically sensitive areas of the market, in particular, have seen valuations stretched—but the impact of investor exuberance is evident in share prices of companies throughout the broader market. In our view, the elevated valuations commanded by many stocks have heightened risks and dampened upside potential.
In response to this backdrop, we continue to focus on finding and owning companies that are poised to succeed against a variety of backdrops or those that are priced at significant discounts to peers regardless of the sector or industry. Recent addition Expedia Group, Inc. (EXPE) is an example of the type of business we’ve found attractive.”
1. Twitter, Inc. (NYSE:TWTR)
Market Capitalization Since Feb. 25, 2022: $28.2B
Number of Hedge Fund Holders: 83
RiverPark Funds, an investment management firm, published its “RiverPark Large Growth Fund” third quarter 2021 investor letter – a copy of which can be downloaded here. The RiverPark Large Growth Fund (the “Fund”) lost 3.23% for the third quarter of 2021, while its benchmarks, the S&P 500 Total Return Index (“S&P”) advanced 0.58%, the Russell 1000 Growth Total Return Index (“RLG”) returned 1.16%, and the Morningstar Large Growth Category lost 0.07%. Spare some time to check the fund’s top 5 holdings to have a clue about their top bets for 2022.
RiverPark Large Growth Fund mentioned Twitter, Inc. (NYSE: TWTR) in its Q4 2021 investor letter and discussed its stance on the firm. Twitter, Inc. is a San Francisco, California-based social network company with a $28.2 billion market capitalization. TWTR shares have dipped by 21.73% since the beginning of the year, and by 50.55% over the past 12 months.
Here is what RiverPark Large Growth Fund had to say about Twitter, Inc. (NYSE: TWTR) in its Q4 2021 investor letter:
“Twitter: Despite reporting in-line third quarter results, TWTR shares struggled at the end of 2021. For TWTR, the declines could be attributed to a fear of continued headwinds from Apple’s iOS tracking changes, as well as the stock continuing to be a show-me story after posting two disappointing quarters since its investor day in February (prior to this in-line quarter), as well as its recent CEO change (founder Jack Dorsey stepped down and is being succeeded by long-time CTO Parag Agrawal). Investors continue to be concerned with the platform’s user engagement, as total monetizable daily active users (mDAU) grew 13% year over year to 211 million, in-line with expectations, but still below management’s long-term target of 20% growth. Management expects mDAU growth to accelerate, driven by continued economic reopening and new features such as Spaces and Communities and an increase in the number and penetration of Twitter Topics. For the quarter, revenue increased 37% year over year to $1.3 billion and 4Q guidance was strong at about 20% growth, as Twitter has less exposure to Apple’s ATT headwinds.
With $4.8 billion of TTM revenue (only 4% of Facebook’s revenue), the company has a large opportunity to take share in the $200 billion global digital advertising market that continues to flow to mobile, Twitter’s focus. As the company continues to launch and improve its products (including stories, audio chat, podcasting, video and subscriptions), its platform should become more compelling to both users and advertisers, allowing it to take advertising dollar share through increased user engagement and ad pricing. As Twitter showed this year, we believe that the company can generate 20%+ revenue growth while also driving operating leverage in its already highly profitable business model, generating expanding excess free cash flow growth over time (3Q OCF grew 81% year over year).”
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Disclosure: None. 10 Large-Cap Stocks Hedge Funds Are Talking About is originally published on Insider Monkey.
