In this article, we will take a look at some of the best 5 High Quality Stocks to Buy According to Hedge Funds. For deeper discussion and analysis, read 10 High Quality Stocks to Buy According to Hedge Funds.
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5. Caterpillar Inc. (NYSE:CAT)
Number of Hedge Fund Holders: 86
On May 11, Evercore ISI analyst David Raso raised the price recommendation on Caterpillar Inc. (NYSE:CAT) to $1,103 from $878. The analyst reiterated an Outperform rating on the stock.
During the company’s Q1 2026 earnings call, Chairman and CEO Creed said Caterpillar now expected full-year 2026 sales and revenue growth in the low double digits. He also said the company was not expecting any material impact on its 2026 outlook at this stage, even with ongoing geopolitical uncertainty and higher energy prices.
Senior Vice President Kyle Epley said the company had lowered its estimate for full-year 2026 tariff costs to between $2.2 billion and $2.4 billion. That was down from the earlier estimate of $2.6 billion shared last quarter. He added that the company planned to increase efforts to offset tariff-related costs in the second half of the year.
Epley also said Caterpillar still expected restructuring charges of about $300 million to $350 million in 2026. The company’s capital expenditure forecast remained around $3.5 billion. He added that MP&E’s free cash flow was now expected to top the $9.5 billion reported last year.
Caterpillar Inc. (NYSE:CAT) makes construction and mining equipment, off-highway diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives.
4. CVS Health Corporation (NYSE:CVS)
Number of Hedge Fund Holders: 88
On May 13, Bernstein raised its price recommendation on CVS Health Corporation (NYSE:CVS) to $106 from $94. It reiterated an Outperform rating on the stock. The firm said it still sees CVS as well-positioned to benefit from the Medicare Advantage turnaround. It also pointed to the possibility of steadier earnings in the company’s pharmacy and pharmacy benefit manager businesses following PBM reform. Bernstein believes the PBM bill and the first Federal Trade Commission settlement earlier this year largely marked the completion of PBM reform. In its view, that served as a clearing event and reduced uncertainty around CVS’ turnaround efforts.
During the company’s Q1 2026 earnings call, CEO, President, and Chairman J. Joyner said CVS generated adjusted operating income of $5.2 billion and adjusted earnings per share of $2.57. He said the quarter’s results supported a stronger outlook for 2026, prompting the company to raise its full-year adjusted EPS guidance to between $7.30 and $7.50, up from the prior range of $7 to $7.20. Joyner also said the Final Rate Notice issued in April represented progress toward improving sustainability, though it still did not fully offset underlying medical cost pressures. He noted that industry cost trends remained above historical averages, and CVS would continue taking measures to improve Medicare Advantage margins.
Looking ahead, Joyner said CVS plans to launch Health100 later this year. He described it as an AI-native technology and service platform aimed at helping payers, PBMs, pharmacies, and providers connect more smoothly. According to him, the platform is intended to serve as a consumer-facing entry point that creates a more integrated healthcare experience.
CVS Health Corporation (NYSE:CVS) is a health solutions company with segments that include Health Care Benefits, Health Services, Pharmacy & Consumer Wellness, and Corporate/Other.
3. The Home Depot, Inc. (NYSE:HD)
Number of Hedge Fund Holders: 98
On May 20, DA Davidson analyst Michael Baker lowered the firm’s price recommendation on The Home Depot, Inc. (NYSE:HD) to $377 from $445. It reiterated a Buy rating on the shares. The analyst noted that the stock turned slightly positive after its initial post-earnings decline. He said that may have been tied to commentary during the earnings call, suggesting that May trends improved after sales weakened in the second half of April, apparently due to weather conditions. Baker also said the recent rise in interest rates is likely to delay the timing of a broader macro recovery. That view was reflected in the firm’s reduced price target.
The same day, RBC Capital analyst Steven Shemesh lowered the firm’s price target on HD to $340 from $377 and kept a Sector Perform rating on the stock following its Q1 results. He said the company posted a modest Q1 earnings beat, though housing turnover remained stalled while the demand and cost outlook weakened. According to Shemesh, RBC continues to struggle to identify a catalyst that could push Home Depot’s results meaningfully higher.
The Home Depot, Inc. (NYSE:HD) is a home improvement retailer that sells home improvement products, building materials, lawn and garden products, decor items, and maintenance, repair, and operations products through its stores and online platform.
2. Walmart Inc. (NASDAQ:WMT)
Number of Hedge Fund Holders: 114
On May 22, BofA lowered its price target on Walmart Inc. (NASDAQ:WMT) to $144 from $150. It reiterated a Buy rating on the shares. The firm said it reduced its valuation multiple after earnings because of a more challenging consumer environment. Even so, BofA believes Walmart could continue gaining market share as consumers become more price-conscious. The firm said that trend “should drive a return to a beat/raise cycle assuming the freight environment doesn’t worsen.”
On May 15, Piper Sandler analyst Peter Keith raised the firm’s price target on WMT to $137 from $130 and maintained an Overweight rating on the stock. The firm said investors have become concerned about consumer discretionary spending because of higher gas prices, though consumer spending has remained resilient. Piper Sandler also noted that tax refunds stood out during Q1, but there has been no clear sign that those funds significantly boosted retail spending. According to the firm, middle- and upper-income consumers likely chose to save that money instead. For the home improvement sector, the firm said the sluggish trends seen in Q4 appeared to continue into the latest quarter.
Walmart Inc. (NASDAQ:WMT) is a technology-powered omnichannel retailer that operates retail and wholesale stores, clubs, eCommerce websites, and mobile applications across the U.S., Africa, Canada, Central America, Chile, China, India, and Mexico.
1. UnitedHealth Group Incorporated (NYSE:UNH)
Number of Hedge Fund Holders: 145
On May 22, UBS analyst AJ Rice raised the firm’s price recommendation on UnitedHealth Group Incorporated (NYSE:UNH) to $460 from $410. He reiterated a Buy rating on the shares. The analyst said managed care organizations broadly increased guidance after stronger-than-expected Q1 results benefited from favorable respiratory trends and seasonal cost patterns. Rice also noted that improved Medicare Advantage rates, more stable ACA exchange enrollment, and modest outperformance in Medicaid have increased confidence in margin recovery. At the same time, he said the sector continues to face cost pressures tied to specialty drugs, GLP-1s, and behavioral health.
On May 13, BofA analyst Kevin Fischbeck raised the firm’s price goal on UNH to $420 from $380. He maintained a Neutral rating on the stock. According to the analyst, the tone of discussions with the company’s leadership team at the BofA Healthcare Conference was “bullish.” Fischbeck said the company appeared confident that it could return to at least the low end of its target margins across most businesses by 2028.
UnitedHealth Group Incorporated (NYSE:UNH) is a healthcare and well-being company with operations across Optum Health, Optum Insight, Optum Rx, and UnitedHealthcare. Its UnitedHealthcare segment includes Employer & Individual, Medicare & Retirement, and Community & State businesses.
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