In this article, we will take a look at the 10 most promising long-term stocks according to hedge funds.
Another 50 bps Cut is Still Restrictive
The labor market has been more resilient than ever. On October 4, Gary Cohn, the IBM vice chairman, and former US National Economic Council director in the Trump administration, appeared in an interview on Yahoo Finance to discuss the job report and the US economy.
Cohn suggests that the jobs data is the least scientific information the government puts out and therefore, it must be taken with a grain of salt. However, he emphasizes the importance of understanding trends. The number of people entering the workforce is expanding and jobs are being created, deducing that the market is in a neutral place.
Cohn believes that the US economy is normalizing. He reveals that we have not lived in a normal economy in over a decade, therefore, relative to history, the status quo is fairly reasonable. He adds that the Fed has orchestrated a soft landing and expects another 50 basis point cut before the end of 2024, which according to him is still restrictive.
Portfolio Manager Highlights High Growth Sectors
As the AI flame starts to settle, the market may be up for a major shift. On October 7, Keith Buchanan, GLOBALT Investments senior portfolio manager, appeared in an interview on Yahoo Finance to discuss his expectations of the market.
Expectations for earnings have been revised from mid-single digits to mid-double digitals, promising robust growth as 2024 comes to a close. Buchanan suggests that most of the growth comes from artificial intelligence and the widening of earnings growth beyond traditional growth sectors like technology.
This year, the industrial and energy sectors have enjoyed greater returns capturing a large chunk of the market. Buchanan is highly bullish on AI plays and value stocks. He also adds that names in financials, industrials, and consumer discretionary are poised for growth ahead of 2024. He advises investors to consider geopolitical events before making any investment decisions.
Now that we have assessed the future of the financial markets and possible sectors eyeing growth, let’s take a look at the 10 most promising long-term stocks according to hedge funds.
A trader in a financial institution using fundamentals analysis to select stocks for a portfolio.
Our Methodology
To find the most promising long-term stocks according to hedge funds, we went over multiple rankings over the internet to list long-term blue chip stocks. We then examined the analyst upside and the hedge fund sentiment of these stocks as of Q2 2024 and picked the most popular ones. The stocks are sorted in ascending order of the number of hedge fund holders as of Q2 2024 as a primary metric and analyst upside as of October 13, as a secondary metric.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
10 Most Promising Long-Term Stocks According to Hedge Funds
10. Chevron Corporation (NYSE:CVX)
Number of Hedge Fund Holders: 64
Analyst Upside as of October 13, 2024: 10%
Chevron Corporation (NYSE:CVX) ranks 10th on our list of the most promising long-term stocks according to hedge funds. The energy and petroleum company is headquartered in California, United States, and is present in more than 180 countries
During the second quarter of 2024, the company forged alliances in Namibia, Brazil, Equatorial Guinea, and Angola to expand its exploration base and enhance its acreage position. Chevron Corporation (NYSE:CVX) is also making strides in clean and renewable energy. In May, the company operated a gas turbine on a 60% hydrogen fuel blend, significantly reducing emissions.
Chevron Corporation (NYSE:CVX) is committed to innovation. Previously in August, the company started production at Anchor using its industry-first deepwater technology. This technology is a breakthrough for CVX, enabling it to explore difficult-to-access resources and develop deepwater developments.
The company also owns a 16.5-megawatt wind farm that can power more than 13,000 homes annually. Overall, Chevron Corporation (NYSE:CVX) has huge potential in the clean energy industry and is consistently working to introduce clean energy policies.
Diamond Hill Capital’s Diamond Hill Large Cap Strategy stated the following regarding Chevron Corporation (NYSE:CVX) in its fourth quarter 2023 investor letter:
“Other bottom contributors included Chevron Corporation (NYSE:CVX), Carrier Global and Becton, Dickinson. Shares of integrated oil and gas company Chevron were pressured as global oil production is growing — particularly in the US, which has now surpassed its past production levels — in turn pressuring oil prices and company profit margins.”
9. NIKE, Inc. (NYSE:NKE)
Number of Hedge Fund Holders: 66
Analyst Upside as of October 13, 2024: 12%
NIKE, Inc. (NYSE:NKE) is one of the most promising long-term stocks according to hedge funds. NIKE, Inc. (NYSE:NKE) is an athletic footwear and apparel company, with a market share of almost 35% in the sports footwear category in the United States.
NIKE, Inc. (NYSE:NKE) regularly adds new products to its shelves, keeping its hype alive. In September, the company partnered with NIGO to launch an exclusive Air Force 111 and apparel collection. In addition to that, earlier in September, the company partnered with Patta and Isabel to launch new collections. These partnerships allow Nike to attract people with all kinds of aesthetics and needs from across the globe.
While the company experienced a decline in revenue for the Nike brand in North America, it was offset by the growth in China and the APLA (Asia Pacific and Latin America) region. Despite moderate revenue growth, NIKE, Inc. (NYSE:NKE) managed to deliver $6.4 billion to shareholders in fiscal 2024. Of this, $2.2 billion was paid in dividends and a share repurchase worth $4.3 billion was executed.
NKE is a consumer favorite for its high-quality athletic wear. While its sales may come across as saturated, its consistent performance is an implication of its loyal and solid customer base. Overall, according to the Insider Monkey database, 66 hedge funds were bullish on the stock at the close of Q2 2024.
Mar Vista Investment Partners’ Mar Vista Focus strategy stated the following regarding NIKE, Inc. (NYSE:NKE) in its Q2 2024 investor letter:
“NIKE, Inc.’s (NYSE:NKE) stock declined following management’s revised forecast for fiscal year 2025, projecting negative mid-single-digit revenue growth instead of the previously anticipated positive growth. The company has observed a marked slowdown in lifestyle product sales since April, a trend that persisted into June. Our current projections indicate that both sales and earnings will fall 15-20% below the conservative estimates set by management just a quarter ago. This substantial downward revision in sales and earnings is attributed to insufficient product innovation, wholesale channel shift, and intentional reduction of supply in lifestyle franchises. While the negative adjustments to guidance could potentially act as a clearing event for the stock, the degree of conservatism in the new projections remains uncertain.
Nike maintains its position as the global leader in sportswear. However, its revenue growth has been hampered by a lack of innovation, and its recovery is further complicated by deteriorating macroeconomic conditions in the US and China. The company’s renewed focus on innovation and efforts to re-engage with wholesale channels may eventually help restore growth, but we believe increased skepticism regarding management’s ability to execute is justified”
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