10 Most Popular Stocks Among Hedge Funds

For a very long-time Apple Inc. (NASDAQ:AAPL) has been dominating the hedge fund popularity rankings. Things changed a bit recently. Apple Inc. is still among the top 10, but it isn’t one of the most popular 5 stocks. Fourth quarter was marked by two major events that affected the stock market. In November, Donald Trump won the presidential election, leading to a rally as investors anticipated a more favorable business environment due to lower regulations. A month later, the Federal Reserve hiked the key interest rate by 0.25 percentage points to between 0.50% and 0.75%, which was taken as a sign of optimism about the U.S. economy. In addition, the Fed promised three more increases in 2017, as the central bank is confident in the strength of the labor market and believes that the inflation is closer to reaching the targets.

These and other developments affected the investors’ behavior and their attitude towards individual companies, as well as sectors and industries. At Insider Monkey we follow over 700 institutional investors, including some of the biggest and most famous activist hedge funds. Every quarter, we analyze their 13F filings with the Securities and Exchange Commission and determine their collective sentiment towards individual companies.

In this way, during the fourth quarter, investors were generally bullish on the stock market. Billionaires Warren Buffett and Carl Icahn both said they bought stock after the presidential election and most likely others also did the same thing. Other investors also expressed optimism that under a Trump presidency and Republicans in power, the business environment is going to improve on the back of relaxed regulations and tax cuts. Particularly, investors are bullish on the financial sector, which can also be observed by a significant jump in the number of funds from our database that held shares of big banks heading into 2017. With this in mind, let’s take a closer look at the 10 stocks that are the most popular among hedge funds.

As a side note, at Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 39.7% gains over the past 12 months and outperformed the 24.1% gain enjoyed by the S&P 500 ETFs. Our enhanced small-cap hedge fund strategy returned more than 45% over the last 12 months and outperformed SPY by more than 30 percentage points over the last 4.5 years (more details here).

Let’s start from the bottom. On the 10th spot we have Charter Communications, Inc. (NASDAQ:CHTR), in which 103 funds tracked by us amassed shares worth $17.29 billion heading into 2017. During the fourth quarter, the stock registered a decline in popularity, as the number of funds long the stock declined by eight, while the aggregate value of holdings fell by $1.17 billion. Charter’s stock has gained over 13% since the beginning of the year, mainly due to a boost in January amid news that Verizon Communications Inc (NYSE:VZ) might be interested in acquiring Charter Communications, Inc. (NASDAQ:CHTR). The company also reported better-than-expected financial results with EPS of $1.67 per share on revenue of $10.28 billion, versus estimates of $1.00 and $10.23 billion, respectively. However, subscribers growth figures lagged as Charter is integrating Time Warner Cable’s business it acquired last year. Among the largest shareholders of Charter Communications, Inc. (NASDAQ:CHTR) is Warren Buffett’s Berkshire Hathaway, which owns 9.44 million shares as of the end of 2016.

As stated earlier, financial stocks saw funds piling into them between October and December. JPMorgan Chase & Co. (NYSE:JPM) saw 110 funds long its stock at the end of December, versus 98 funds a quarter earlier. Consequently, the aggregate value of these funds’ positions jumped to $10.69 billion from $7.61 billion. Among the investors that added the stock to their equity portfolio is Dan Loeb‘s Third Point, which reported a new stake containing 5.25 million shares in its latest 13F filing. JPMorgan Chase & Co. (NYSE:JPM)’s shares surged by nearly 37% since the end of the third quarter of 2016, with the majority of the gains coming following the November election. With the Fed expressing confidence in the U.S. economy and planning to further increase interest rates this year and Trump promising to cut corporate tax rate, JPMorgan and other banks are expected to provide higher profits. According to Bloomberg, JPMorgan Chase & Co. (NYSE:JPM) could save around $3.0 billion and boost its net income by 14% per year if the tax rate is cut to 15% from 35% and deductions are disallowed.

On the other hand, the number of funds from our database bullish on Visa Inc (NYSE:V) declined by four to 110, while the total value of their holdings declined slightly to $10.67 billion. Seeing as the stock has advanced by over 10% year-to-date and the company posting better-than-expected results earlier this month with fiscal first-quarter EPS of $0.86 and revenue of $4.46 billion topping the consensus estimates by $0.08 and $170 million respectively, it may be the case that some investors rushed to the exits too soon. Among the investors bullish on Visa Inc (NYSE:V) are Ken Fisher’s Fisher Asset Management, Berkshire Hathaway, and Ken Griffin’s Citadel Investment Group.

After being the star company of many hedge funds, Apple Inc. (NASDAQ:AAPL) saw a drop in popularity in the last three months of 2016. At the end of December, 113 funds amassed shares of the company, versus 145 funds a quarter earlier. However, the value of these funds positions advanced to $16.54 billion from $16.22 billion, but a significant contribution to this figure is Berkshire Hathaway’s position, which was boosted by around 280% to 57.36 million shares worth $6.64 billion (40% of the aggregate amount). Apple Inc. (NASDAQ:AAPL)’s stock is 17% in the green year-to-date as investors were upbeat about the company’s financial results and iPhone sales in the holiday company. Moreover, with the general optimism surrounding the U.S. economy, Apple Inc. (NASDAQ:AAPL) is likely to follow the cycle.

Citigroup Inc (NYSE:C) saw the number of institutional investors long its stock advance by 17 during the fourth quarter, while the aggregate value of their stakes jumped by $1.43 billion to $10.14 billion. Aside from the aforementioned interest rates hikes, the recent announcement that Trump wants to repeal the Dodd-Frank act is also expected to benefit big banks. However, a tax rate cut would result in less savings for Citigroup Inc (NYSE:C) compared to other big banks, as it generates more earnings outside the U.S., Bloomberg added. Edgar Wachenheim‘s Greenhaven Associates held some 11.35 million shares of Citigroup Inc (NYSE:C) at the end of December.

While the majority of the top five most popular stocks among hedge funds are represented by tech companies, they generally saw a drop in the number of investors holding shares. Amazon.com, Inc. (NASDAQ:AMZN) saw 123 funds tracked by us holding around $14.44 billion worth of stock heading into 2017, which is significantly lower compared to 150 funds with stakes worth $20.79 billion at the end of September. Among these funds, Fisher Asset Management was the largest shareholder with a 2.0 million-share stake. The strong returns registered by big tech companies’ stocks in the recent past it’s widely discussed which company will reach the $1.0 trillion valuation sooner, with Amazon.com, Inc. (NASDAQ:AMZN) being one of the favorites. as the company has a cloud business growing at a fast pace and has recently entered into the Internet of Things segment and is planning to get into the logistics business.

The number of investors long Microsoft Corporation (NASDAQ:MSFT) remained unchanged at 126 between October and December and the total value of their positions inched up by 3.4% to $18.77 billion. Microsoft Corporation (NASDAQ:MSFT) also has a fast-growing cloud business, Azure, which registered a growth of 93% last quarter. Andreas Halvorsen‘s Viking Global boosted its stake in Microsoft Corporation (NASDAQ:MSFT) by 61% to 21.95 million shares during the fourth quarter.

After having ranked on the ninth spot in our database at the end of September, Bank of America Corp (NYSE:BAC) became the third most popular company among the investors tracked by us in the following three months, as the number of investors bullish on the stock jumped by 27 to 139, while the value of their positions surged to $12.49 billion from $7.24 billion. Bank of America Corp (NYSE:BAC)’s shares have performed much better than the other two financial stocks, having advanced by more than 58% since the beginning of October, with a big rally having started after the elections. Among the largest shareholders of Bank of America Corp (NYSE:BAC) are Harris Associates, Fisher Asset Management, and Lansdowne Partners.

Alphabet Inc (NASDAQ:GOOGL) can be considered the most popular company as both of its Class A and Class C stocks ranked among the top five. In this way, 139 funds tracked by us held around $14.62 billion worth of class A shares, compared to 137 funds with stakes worth $14.79 billion a quarter earlier. On the other hand, the number of investors long class C stock declined by eight to 126 and the value of their holdings slid by $1.49 billion to $12.74 billion. With it’s advertising business showing solid growth, Alphabet Inc (NASDAQ:GOOGL)’s expansion into hardware, with recently-released Pixel smartphones and Internet of Things devices, is expected to strengthen the core business. Viking Global reported ownership of 1.81 million shares of Alphabet Inc (NASDAQ:GOOGL)’s Class A stock and 1.08 million class C shares as of the end of 2016.

Even though Facebook Inc (NASDAQ:FB) ranked as the most popular stock, it saw a slight decline in the number of bullish investors from our database. Heading into the fourth quarter, 146 funds amassed shares worth $12.42 billion in aggregate, compared to 149 funds and $16.28 billion, respectively, a quarter earlier. Among the funds that closed their positions in Facebook Inc (NASDAQ:FB) during the fourth quarter is Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, which unloaded 7.11 million shares. Facebook’s stock is 14% in the green year-to-date and has advanced by 25% over the last 52 weeks. With Snapchat’s parent company Snap readying for an IPO this year, Facebook’s popularity among smart money investors might decline further, as both companies are near the top when it comes to social media domination. However, Facebook, which also owns WhatsApp and Instagram, has more platforms to monetize on and registers a faster growth, it’s unlikely that SnapChat will have a severe impact on investors’ sentiment towards Facebook Inc (NASDAQ:FB).

Disclosure: none