5 Hot Stocks to Buy According to Hedge Funds

2. Meta Platforms, Inc. (NASDAQ:META)

Number of Hedge Fund Shareholders: 220

Year-to-Date Return (through June 5): 118%

Hedge funds have started buying back into Meta Platforms, Inc. (NASDAQ:META) after the social media giant’s stock crashed to a 7-year low late last year. Smart money ownership of META has risen by 18% over the past two quarters after cratering by 34% during the five quarters prior to that. Philippe Laffont’s Coatue Management more than doubled the size of its META position during Q1, giving it 8.06 million shares worth $1.71 billion on March 31.

Ranking second is another stock that’s been heavily downtrodden in recent quarters but has bounced back big time this year, Meta Platforms, Inc. (NASDAQ:META). It’s certainly easy to envision why investors were selling off META shares prior to this year, as the company’s tepid growth and the heightened competition from TikTok have cast doubts on Meta’s long-term outlook. There’s also the company’s money-losing metaverse initiative, which continues to burn through around $4 billion quarterly. Despite that, Meta Platforms is a money-making machine, generating over $18 billion in free cash flow last year, which has proven heavily enticing to investors as META shares have fallen to compelling valuations.

Artisan Value Fund discussed the favorable risk/reward profile for Meta Platforms, Inc. (NASDAQ:META) shares late last year in its Q1 2023 investor letter:

“Our top contributors in Q1 were Meta Platforms, Inc. (NASDAQ:META), Warner Bros Discovery (WBD) and FedEx. Following sharp declines in 2022, shares of Meta Platforms have more than doubled since their early November 2022 lows. Last year’s drawdown created a highly favorable risk-reward, which we took advantage of by adding to our position. Management has wisely, in our view, recalibrated its spending plans to focus on profitability amid a weaker advertising environment, increased TikTok competition and Apple’s privacy changes. While investors got ahead of themselves back in 2021, extrapolating pandemic growth rates into the future, Meta is still a highly successful enterprise generating over $120 billion of revenue annually on a run-rate basis and has more than $40 billion in cash on its balance sheet to help it navigate its future course. Recent usage and engagement trends for Facebook and Instagram have been positive, and Reels—Meta’s answer to TikTok—is gaining traction.”