In this article, we discuss the 10 value stocks hedge funds like in 2022.
The Federal Reserve is widely expected to raise interest rates in the next few days to address the surging inflation as oil and gas prices remain volatile due to the ongoing Ukraine war and the broader supply and demand issues that have persisted since the waning of the pandemic. There is a danger that the US economy could slip into recession as the yield curve, the difference between short-term bond yields and longer term bond rates, flattens. Jim Reid, a strategist with Deutsche Bank, has said in a recent report that “risks of a recession are building”.
Goldman Sachs analysts recently forecast that the US GDP would only rise by 1.75% from the fourth quarter of 2021 to the fourth quarter of 2022, a stark decline from the near 6% growth seen in 2021. The investment bank also predicted that the chances of the economy slipping into recession had risen to nearly 30%. Consumer price inflation was nearly 8% in February, the highest it has been in nearly four decades. All these warning signs have pushed investors away from risky stocks towards safer havens in established firms.
Some of the top value stocks that hedge funds like in 2022 include Berkshire Hathaway Inc. (NYSE:BRK-B), Wells Fargo & Company (NYSE:WFC), and General Motors Company (NYSE:GM), among others discussed in detail below.
Our Methodology
For this article we used our database of over 900 hedge funds and picked some value stocks that are most popular among these money managers. Stocks that have a PE ratio of less than 25 were preferred for the list.
Data from around 900 elite hedge funds tracked by Insider Monkey was used to identify the number of hedge funds that hold stakes in each company.
Value Stocks Hedge Funds Like in 2022
10. FedEx Corporation (NYSE:FDX)
Number of Hedge Fund Holders: 64
PE Ratio: 11.69
FedEx Corporation (NYSE:FDX) provides transportation and business services. It is one of the top transport stocks on Wall Street. At the end of the fourth quarter of 2021, 64 hedge funds in the database of Insider Monkey held stakes worth $2.4 billion in FedEx Corporation (NYSE:FDX), compared to 49 in the previous quarter worth $1.6 billion.
In late December, Argus analyst John Eade raised the price target on FedEx Corporation (NYSE:FDX) stock to $285 from $270 and maintained a Buy rating, noting the strong balance sheet, positive volume trends, and a recent dividend hike as evidence of the solidity of the stock in a volatile market.
Just like Berkshire Hathaway Inc. (NYSE:BRK-B), Wells Fargo & Company (NYSE:WFC), and General Motors Company (NYSE:GM), FedEx Corporation (NYSE:FDX) is one of the stocks that hedge funds are buying amid rising inflation.
In its Q3 2021 investor letter, Artisan Partners, an asset management firm, highlighted a few stocks and FedEx Corporation (NYSE:FDX) was one of them. Here is what the fund said:
“Our weakest Q3 performers included FedEx Corporation (NYSE:FDX). Shares of FedEx, a global shipping and logistics firm, were held back by disappointing business results as labor cost headwinds and air network disruptions overshadowed solid top-line trends. We think the company should be able to overcome these near-term issues. Importantly, FedEx Corporation (NYSE:FDX) has strong pricing power as it operates in a consolidated global shipping industry. In September, the company announced it would increase its shipping rates by an average of 5.9% across most of its services, which is the first time in several years that its annual increase would exceed 5.0%. The industry’s renewed pricing discipline is a welcome change, reflecting a broader commitment to earn better returns on invested capital. FedEx Corporation (NYSE:FDX) is also closer to fully integrating TNT, a European-focused parcel company it acquired in 2016. The market is beginning to incorporate a higher probability FedEx will fully integrate TNT, which will provide a significant boost to profits. The stock now trades at a near-trough multiple of less than 12X 2022 earnings, so we added to our position on weakness.”
9. HCA Healthcare, Inc. (NYSE:HCA)
Number of Hedge Fund Holders: 66
PE Ratio: 12.53
HCA Healthcare, Inc. (NYSE:HCA) provides healthcare services. On January 31, Citi analyst Jason Cassorla reiterated a Buy rating on the stock with a price target of $277, noting that the shares had room to climb higher in the coming months as the firm returned on a path to execution amid the waning of the pandemic.
HCA Healthcare, Inc. (NYSE:HCA) remains a favorite health stock in the finance world. At the end of the fourth quarter of 2021, 66 hedge funds in the database of Insider Monkey held stakes worth $2.9 billion in HCA Healthcare, Inc. (NYSE:HCA), compared to 72 the preceding quarter worth $3.3 billion.
In its Q4 2020 investor letter, Bireme Capital, an asset management firm, highlighted a few stocks and HCA Healthcare, Inc. (NYSE:HCA) was one of them. Here is what the fund said:
“Since March we have increasingly tilted the long book towards stocks whose businesses will improve as the pandemic fades, a strategy we first discussed in our 1Q20 letter. Now that 2020 is — thankfully — over, let’s take a look back at some of our predictions from Q1.
HCA Healthcare, Inc. (NYSE:HCA) runs for-profit hospitals. In Q1, we said:
“We were shocked to see HCA Healthcare, Inc. (NYSE:HCA) initially trade down more than 50% in mid-March, in line with hotel companies and online travel agents. HCA will likely earn $11-12 in EPS when the COVID-19 crisis recedes, and we think the stock will trade back towards $150. Therefore, during Q1 we added we added ~80% to our shareholdings at an average price of roughly $90.”
If anything, this prediction was pessimistic. Despite the raging pandemic, 2020 revenue of $51.5b was actually up year-over-year. Earnings increased as well, with 2020 EPS of $10.93 and guidance of $12.10-13.10 in EPS for 2021. Said another way, in March HCA Healthcare, Inc. (NYSE:HCA) was trading for about 5 times 2021 earnings. We think that at $175 this stock is still cheap today and should trade at well over $200 per share.”
8. The Procter & Gamble Company (NYSE:PG)
Number of Hedge Fund Holders: 67
PE Ratio: 26.47
The Procter & Gamble Company (NYSE:PG) provides branded consumer packaged goods. Elite hedge funds hold large stakes in the company. Among the hedge funds being tracked by Insider Monkey, London-based investment firm Cedar Rock Capital is a leading shareholder in The Procter & Gamble Company (NYSE:PG) with 6 million shares worth more than $985 million.
On January 20, Morgan Stanley analyst Dara Mohsenian raised the price target on The Procter & Gamble Company (NYSE:PG) stock to $177 from $161 and kept an Overweight rating, noting that robust sales and market share results were offsetting industry pressures from a cost standpoint for the company.
7. Exxon Mobil Corporation (NYSE:XOM)
Number of Hedge Fund Holders: 71
PE Ratio: 14.49
Exxon Mobil Corporation (NYSE:XOM) is an integrated oil and gas firm. On March 7, MKM Partners analyst John Gerdes raised the price target on the stock to $84 from $81 and kept a Buy rating, noting the strong production outlook and high natural gas prices as growth catalysts for the firm in the near-term.
Exxon Mobil Corporation (NYSE: XOM) is one of the top oil stocks on the market. At the end of the fourth quarter of 2021, 71 hedge funds in the database of Insider Monkey held stakes worth $5.3 billion in Exxon Mobil Corporation (NYSE:XOM), compared to 64 in the previous quarter worth $4.6 billion.
In its Q1 2021 investor letter, Harding Loevner highlighted a few stocks and Exxon Mobil Corporation (NYSE:XOM) was one of them. Here is what the fund said:
“We felt that our remaining energy holding, Exxon Mobil Corporation (NYSE: XOM), with its stronger balance sheet, was in a better position to ride out the cyclical slump in oil demand and even perhaps take advantage of it by investing counter-cyclically. While Exxon Mobil Corporation (NYSE: XOM) does plan to increase capital expenditure, we’ve been disappointed in its regrettable failure to address ongoing emission trends, which reflects poorly on management’s foresight. As a result, we sold our Exxon Mobil Corporation (NYSE: XOM) holdings.”
6. Lowe’s Companies, Inc. (NYSE:LOW)
Number of Hedge Fund Holders: 72
PE Ratio: 19.10
Lowe’s Companies, Inc. (NYSE:LOW) operates as a home improvement retailer. Hedge funds have been piling into the stock in recent months. At the end of the fourth quarter of 2021, 72 hedge funds in the database of Insider Monkey held stakes worth $6.8 billion in Lowe’s Companies, Inc. (NYSE:LOW), up from 60 in the preceding quarter worth $5 billion.
On February 15, Evercore ISI analyst Greg Melich maintained an Outperform rating on Lowe’s Companies, Inc. (NYSE:LOW) stock with a price target of $265, noting that the fundamentals of the firm had improved and it was on track to deliver on updated guidance numbers.
In addition to Berkshire Hathaway Inc. (NYSE:BRK-B), Wells Fargo & Company (NYSE:WFC), and General Motors Company (NYSE:GM), Lowe’s Companies, Inc. (NYSE:LOW) is one of the stocks that hedge funds are loading up on as interest rates rise.
In its Q2 2021 investor letter, Pershing Square Holdings, Ltd., an asset management firm, highlighted a few stocks and Lowe’s Companies, Inc. (NYSE:LOW) was one of them. Here is what the fund said:
“Since the onset of the COVID-19 pandemic, Lowe’s Companies, Inc. (NYSE:LOW) has experienced a significant acceleration in demand driven by consumers nesting at home, higher home asset utilization and the reallocation of discretionary spend. In the three years since Marvin Ellison became CEO, the company has executed a multi-year transformation plan to bolster Lowe’s retail fundamentals, reduce structural costs, expand distribution capabilities, and modernize systems and the company’s online capabilities. This transformation has allowed Lowe’s to meet consumers’ needs during this highly elevated period of demand, and positioned the company for continued success and accelerated earnings growth.
In the second quarter, Lowe’s Companies, Inc. (NYSE:LOW) reported U.S. same-store-sales growth of 2.2%. Growth was bolstered by strength from the critical Pro consumer, where Lowe’s reported growth of 21%, off setting moderating do-it-yourself (“DIY”) demand. While DIY demand has receded from peak-COVID-19 periods, Pro customer demand has accelerated as consumers engage Pro’s for larger renovation projects.
Notwithstanding the headline growth figure, which is impacted by comparisons to COVID-19-aff ected months from spring of 2020, demand remains extremely elevated relative to baseline 2019 levels. July same-store-sales, the most recent full month for which the company has provided disclosure, were up 31.5% on a two-year basis and management indicated August month-to-date results are substantially similar. More significantly, Lowe’s reported Pro growth of +49% on a two-year basis in Q2, evidence that Lowe’s Companies, Inc. (NYSE:LOW) focus on the Pro is bearing fruit. Share gains with the critical Pro customer will provide a tailwind to growth that should allow Lowe’s to outperform market-level growth going forward.
Even as the robust demand experienced during the height of COVID-19 stabilizes at a new base, the medium and longer-term macro environment remain very attractive for the home improvement sector and Lowe’s in particular. This favorable context for the sector is evidenced by consumers’ enhanced focus and appreciation of the importance of the home, higher home asset utilization, rising home prices, historically low mortgage rates, an aging housing stock, strong consumer balance sheets, and the general lack of new housing inventory.
Against this backdrop, Lowe’s Companies, Inc. (NYSE:LOW) is focused on taking market share and expanding margins. Pro penetration today is still only 25% of revenue as compared to Lowe’s medium-term target of 30% to 35%, providing a runway for continued above market growth. Management continues to execute against various operational initiatives (Lowe’s “Perpetual Productivity Improvement” program) designed to improve the customer experience while enhancing the company’s margins and long term earnings power. The company’s long-term outlook implies significant opportunity for continued margin expansion and earnings appreciation as it executes its business transformation.
Lowe’s currently trades at approximately 17 times forward earnings. Home Depot, its closest competitor, trades at approximately 22 times forward earnings despite Lowe’s Companies, Inc. (NYSE:LOW) superior prospective earnings growth. We find this valuation disparity to be anomalous in light of Lowe’s strong execution and potential for further operational optimization.”
5. Pfizer Inc. (NYSE:PFE)
Number of Hedge Fund Holders: 83
PE Ratio: 13.46
Pfizer Inc. (NYSE:PFE) makes and sells biopharma products. The hedge fund sentiment around the stock is overwhelmingly positive. At the end of the fourth quarter of 2021, 83 hedge funds in the database of Insider Monkey held stakes worth $5 billion in Pfizer Inc. (NYSE:PFE), up from 74 in the preceding quarter worth $2.6 billion.
As vaccine usage wanes, Pfizer Inc. (NYSE:PFE) has been working on the development of a COVID-19 pill named Paxlovid. Reports suggest that the company will overcome regulatory and production issues to make the pill available for in-home use by next year. The first supplies may be ready by late 2022.
In its Q1 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and Pfizer Inc. (NYSE:PFE) was one of them. Here is what the fund said:
“Our underweights in health care and staples contributed to relative performance during the period. As we continue to focus the portfolio on high-conviction ideas, we sold Pfizer Inc. (NYSE:PFE) in late 2020, in the health care sector.”
4. Johnson & Johnson (NYSE:JNJ)
Number of Hedge Fund Holders: 83
PE Ratio: 22.33
Johnson & Johnson (NYSE:JNJ) makes and sells healthcare products. On January 25, Citi analyst Joanne Wuensch maintained a Buy rating on the stock with a price target of $195, noting that the quarterly earnings of the firm reflected the resilience the stock had in a tough market situation.
Johnson & Johnson (NYSE:JNJ) is a top value stock in the finance world. At the end of the fourth quarter of 2021, 83 hedge funds in the database of Insider Monkey held stakes worth $7.3 billion in Johnson & Johnson (NYSE:JNJ), compared to 88 in the previous quarter worth $6.8 billion.
3. General Motors Company (NYSE:GM)
Number of Hedge Fund Holders: 90
PE Ratio: 6.16
General Motors Company (NYSE:GM) makes and sells automobiles. Elite hedge funds hold large stakes in the company. Among the hedge funds being tracked by Insider Monkey, Chicago-based investment firm Harris Associates is a leading shareholder in General Motors Company (NYSE:GM) with 33 million shares worth more than $1.9 billion.
On March 11, Benchmark analyst Michael Ward maintained a Buy rating on General Motors Company (NYSE:GM) stock with a price target of $75, highlighting that the firm looked set to produce record financial results while funding investment despite near-term headwinds due to chip supply problems.
Junto Investments, in its Q4 2020 investor letter, mentioned General Motors Company (NYSE:GM). Here is what the fund has to say about General Motors Company in its letter:
“General Motors Company (NYSE:GM) was the biggest gainer. We managed to buy it at a screamingly cheap price in the middle of March. A lot of interesting news has emerged about GM recently, including the new electric product delivery system BrightDrop and GM Cruise’s team-up with Microsoft Azure to commercialize self-driving cars in 2021. GM’s intrinsic value is crystallizing and General Motors Company (NYSE:GM) is worth a whole lot more than is still reflected in the market.”
2. Wells Fargo & Company (NYSE:WFC)
Number of Hedge Fund Holders: 94
PE Ratio: 10.03
Wells Fargo & Company (NYSE:WFC) is a diversified financial services firm. Hedge funds have been loading up on the stock as interest rates rise. At the end of the fourth quarter of 2021, 94 hedge funds in the database of Insider Monkey held stakes worth $6.11 billion in Wells Fargo & Company (NYSE:WFC), compared to 88 the preceding quarter worth $6.18 billion.
On January 18, Argus analyst Stephen Biggar reiterated a Buy rating on Wells Fargo & Company (NYSE:WFC) stock and raised the price target to $65 from $55, noting that after market-beating earnings, the firm had also offered robust guidance for 2022.
In its Q4 2020 investor letter, Davis Funds, an asset management firm, highlighted a few stocks and Wells Fargo & Company (NYSE:WFC) was one of them. Here is what the fund said:
“Detractors to performance relative to the index include financial services holdings such as Wells Fargo. While banks in general have suffered due to the recession and experienced credit losses, Wells Fargo & Company (NYSE:WFC) also suffered from operational missteps. It is our expectation, however, that our bank holdings in general will benefit from stronger economic growth as the pandemic recedes; and we believe Wells Fargo & Company (NYSE:WFC) in particular, will, over time, lower their costs and successfully grow their businesses.”
1. Berkshire Hathaway Inc. (NYSE:BRK-B)
Number of Hedge Fund Holders: 108
PE Ratio: 26.92
Berkshire Hathaway Inc. (NYSE:BRK-B) is an Omaha-based conglomerate with interests in transport, insurance, and other businesses. At the end of the fourth quarter of 2021, 108 hedge funds in the database of Insider Monkey held stakes worth $19.3 billion in Berkshire Hathaway Inc. (NYSE:BRK-B), compared to 106 in the preceding quarter worth $19.4 billion.
Berkshire Hathaway Inc. (NYSE:BRK-B) recently disclosed that it had bought back nearly $7 billion of its own stock during the fourth quarter of 2021, taking the total share buybacks in the year to over $27 billion, up from $24 billion purchased in 2020. During the fourth quarter, the operating earnings of the firm jumped 45% year-on-year.
In its Q1 2021 investor letter, Vltava Fund, an asset management firm, highlighted a few stocks and Berkshire Hathaway Inc. (NYSE:BRK-B) was one of them. Here is what the fund said:
“Despite the considerable rise in stock markets over the past year, there are still many attractive opportunities. Human nature also is playing a bit into our hands. Investor crowds often chase popular stocks, hot IPOs, or mysterious SPACs and completely leave aside stocks they consider boring and not sexy enough. A typical example of this category is our long-term largest position in Berkshire Hathaway Inc. (NYSE:BRK-B). Since we bought it for the first time, its price has nearly quadrupled and yet it remains just as undervalued today as it was at that time. Considering the current rate at which it is buying back its own shares and the amount of cash that Berkshire Hathaway Inc. (NYSE:BRK-B) has, my greatest wish as a shareholder is for the company’s share price to remain as low as possible for as long as possible.”
You can also take a peek at Why These 10 Stocks Are Trending on Monday and 10 ETFs to Buy and Hold for the Next 10 Years.
Follow Insider Monkey on Twitter
Suggested Articles:
- Hedge Funds Are Selling Palantir Technologies (PLTR) and 9 Other Tech Stocks
- 9 Stocks to Buy Now According to Munir Javeri’s 3G Sahana Capital Management
- 10 Most Popular NFTs in the World
Disclosure. None. 10 Value Stocks Hedge Funds Like in 2022 is originally published on Insider Monkey.
