In this article, we discuss the top 10 stock picks from BlackRock’s Q1 2022 portfolio.
The investment management company, BlackRock, based in the US, is owned by Laurence D. Fink, who founded it with seven partners and has managed to grow the firm into one of the leading names in investment and technology solutions. Enjoying the title of one of the ‘World’s Best CEOs’ for 15 consecutive years, Fink continues to help investors secure stronger financial futures through his company. BlackRock has the largest clientele as compared to any other investment company in the world and has a stake in popular companies such as Apple Inc. (NASDAQ:AAPL), Microsoft Corporation (NASDAQ:MSFT), and Amazon.com, Inc. (NASDAQ:AMZN) as of Q1 2022.
The world’s largest asset management firm manages funds belonging to big institutions like pension funds, university endowments, and small-time individual investors. It manages nearly $10 trillion in investments and has yielded healthy returns to its millions of investors through index funds. For the first quarter of 2022, BlackRock shared negative returns as the geopolitical uncertainty and unsure path for the Fed increased volatility.
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Our Methodology
In this article, we will be going through the top 10 stock picks of BlackRock for Q1 2022. These top 10 holdings have a cumulative value of $738.31 billion and occupy 19.95% of the total portfolio.
10. Meta Platforms Inc. (NASDAQ:FB)
BlackRock’s Stake Value: $33,347,618
Percentage of BlackRock’s 13F Portfolio: 0.89%
Number of Hedge Funds as of December 31: 224
Meta Platforms Inc. is a California-based corporation that is the parent organization of social media giants Facebook and Instagram. In a note issued to investors on May 13, Justin Post at Bank of America reiterated a Buy rating on Meta Platforms Inc. with a target price of $262, assuming a potential upside of 32% from the last closing price. The analyst highlighted that the reports regarding a slowdown in hiring and the spending cut at Reality Labs show the company’s efforts to cut down its expenses. This is in line with the revised annual expenses guidance of $87 billion to $92 billion that was provided by the firm in April.
The analyst further added that the cut down in expenses and the slowdown in hiring is not something only Meta Platforms Inc. is doing, but it is a theme prevalent across the tech sector. Uber Technologies, Inc. (NYSE:UBER) also announced that it would also take some belt-tightening measures to control its expenses and improve its profitability.
Giverny Capital mentioned Meta Platforms Inc. in its Q1 2022 investor letter. Here’s what the asset management firm said about the company:
“If there is any good news, I don’t believe this group suffered material impairments to their long-term earnings trajectory. Rather, relatively small earnings misses or reductions to short-term guidance led to large stock declines. I added to several of these positions during the quarter.
However, our holding Meta Platforms, the detested social media business formerly known as Facebook, deserves some attention. It suffered an earnings miss in the fourth quarter of 2021 and provided sobering future guidance. While this qualifies as disappointing news, I think the market reaction was more of a primal scream than a considered response.
As a person who manages other people’s money for a living, I can tell you with confidence that clients don’t like Meta. A few of you won’t own it, restricting me from buying it for you. Others defer to me, grudgingly. There is no other security in our portfolio like this. When a company is so widely disliked, the main reason to hold it is because it is “working,” to use the horrible Wall Street parlance. In other words, your manager owns it because it keeps going up. Once it stops going up, professional money managers happily accept the chance to sell it. No more cranky calls from clients questioning their ethical compass.
The rub, however, is that despite the bad earnings news, the economics of Meta’s social media businesses remain exceptionally good. In 2021, for every dollar of revenue generated Meta spent 63 cents on expenses and reported 37 cents of pretax profit. That was considered disappointing, even though very few businesses generate 37% profit margins. On top of that, fully one-third of expenses, or 21 cents on the dollar of revenue, is spent on research & development, which is investment in future growth. In Meta’s case, this amounts to about $25 billion a year invested in various new projects, the most important of which is the metaverse. R&D is not completely discretionary as companies have to invest in innovation or stagnate. But management certainly has flexibility as to the pace of spending…” (Click here to see the full text)
Of the 924 hedge funds being tracked by Insider Monkey, 224 funds held a stake in Meta Platforms Inc. at the end of Q4 2021.
9. UnitedHealth Group Incorporated (NYSE:UNH)
BlackRock’s Stake Value: $35,196,406
Percentage of BlackRock’s 13F Portfolio: 0.94%
Number of Hedge Funds as of December 31: 96
UnitedHealth Group Incorporated is a Minnesota-based diversified healthcare company that provides health benefit plans to public and private sector employers. UnitedHealth Group Incorporated’s diversified health services business Optum is in the middle of a merger with Change Healthcare Inc. (NASDAQ:CHNG) for $8 billion. The merger announced in January 2021 aims to leverage the revenue cycle management technology of Change Healthcare and align it with Optum’s offering to improve clinical workflow, easy access to clinical data, and make the payment process efficient. However, the merger hit a snag after the Antitrust Division of the Department of Justice (DoJ) filed a civil lawsuit to stop the merger deal. The Antitrust Division claims that the merger will weaken the competition in the commercial health insurance and healthcare technology segments by allowing UnitedHealth Group Incorporated backdoor access to the payer information of its competitors.
UnitedHealth Group Incorporated was mentioned by Wedgewood Partners in its Q1 2022 investor letter. Here’s what the asset management firm said about the company:
“UnitedHealth Group contributed to performance during the quarter as the Company’s longterm, mid-teens earnings growth algorithm remained intact. Further, as political wrangling in the U.S. continues unabated, we suspect investors have become more confident that little will be done on the legislative front to derail the status quo between private health insurance and Medicare/Medicaid. COVID trends continue to ebb throughout the healthcare system; however, there is a sustainable benefit to the cost structure of U.S. healthcare – particularly related to virtual care. Virtual care is not only becoming more acceptable but is now preferred by many patients and care providers which should lead to less overhead (e.g., office space) that can be reinvested in better patient outcomes. Last, the Centers for Medicare and Medicaid Services proposed a nearly 8% hike in revenue for Medicare Advantage 2023, which should allow for ample flexibility in benefit enhancement and continued incentive to grow this franchise.”
Overall, 96 funds held a stake in UnitedHealth Group Incorporated out of the 924 hedge funds tracked by Insider Monkey at the end of Q4 2021.
8. Johnson & Johnson (NYSE:JNJ)
BlackRock’s Stake Value: $35,587,638
Percentage of BlackRock’s 13F Portfolio: 0.95%
Number of Hedge Funds as of December 31: 83
Johnson & Johnson is one of the biggest healthcare companies in the world, with a headcount of over 130,000 employees. Johnson & Johnson is involved in the research, development, and manufacturing of a broad range of healthcare-related products globally through its three divisions, namely Consumer Health, Pharmaceuticals and Medical Devices. However, the company announced in November 2021 that it intends to spin off its Consumer Health segment as a separate publicly listed entity by November next year. This was an update that investors have been waiting for for an extended period. They want Johnson & Johnson to focus on its core competency of researching, developing, and manufacturing therapeutics and offload its non-core assets. Johnson & Johnson is also a member of the Dividend Aristocrat list, which comprises companies that have been increasing their dividends for the past 25 years.
In its Q2 2021 investor letter, Distillate Capital mentioned Johnson & Johnson. Here’s what was said by the asset management company:
“The largest additions in the rebalance, Johnson & Johnson was around 50 and 40 basis points incrementally. J&J underperformed in the quarter while its normalized free cash flows held steady and so its position size was topped off to match the stable cash flows.”
7. Berkshire Hathaway Inc. (NYSE:BRK-B)
BlackRock’s Stake Value: $36,104,748
Percentage of BlackRock’s 13F Portfolio: 0.97%
Number of Hedge Funds as of December 31: 108
Berkshire Hathaway Inc. is a Nebraska-based conglomerate corporation led by the famous investor Warren Buffett. It is one of the largest publicly listed companies in the world and completely owns notable companies like BNSF Railway, Dairy Queen, Duracell, GEICO, and Shaw Industries. Meanwhile, the company holds a minority interest in prominent organizations like the Kraft Heinz Company (NASDAQ:KHC), Coca-Cola Company (NYSE:KO), and Bank of America Corporation (NYSE:BAC).
Berkshire Hathaway Inc. is in the news for increasing its stake in Occidental Petroleum to 15.3% or 143 million shares after adding over 901,000 shares last week through two purchases. The value of Berkshire Hathaway Inc.’s (NYSE:BRK-B) stake stands at nearly $8.5 billion, and the recent purchases are adding fuel to the speculation that the Oracle of Omaha might increase his stake in the company to 20% or either completely acquire the E&P company. Increasing the stake to 20% would allow Berkshire Hathaway Inc. to change the accounting process of the stake and allow the firm to report 20% of its earnings in its results.
Berkshire Hathaway Inc. was mentioned by an asset management company, Black Bear Value Partners. Here’s what it said about Berkshire Hathaway Inc. in its Q1 2022 investor letter:
“Below is the rough Berkshire on-a-napkin valuation I like to do periodically. Recently BRK acquired Alleghany for $11.6BB. I assume a reduction in cash for this amount and an increase of $550MM in operating income. I do not give benefit to the increased float nor any synergies. Again, this is a rough exercise to sanity check our assumptions.
Cash of ~$103,000 per class A Share (vs. $104k 1 year ago)
-Down/Base/Up marks cash at book value to an 8% premium (vs. to 10% a year ago)
-Investments based on December prices ~$248,000 per class A share (vs. $194k a year ago)
Presume a range of stock prices that result in:
-Down = $149,000 per class A share (-40%- assumes portfolio is overpriced)
-Base = $211,000 per class A share (-15% – assumes portfolio is overpriced)
-Up = $285,000 per class A share (+15%)
Operating businesses that should generate ~$17,000 of pre-tax income per Class A share (vs. $15k)
-Down = 9x = $153,000 per share – equates to ~8% FCF yield
-Base = 12x = $204,000 – equates to ~6% FCF yield
-Up = 12x = $204,000 – equates to ~6% FCF yield
Overall (vs. $529,000 at quarter end)
-Down = $413,000 (-28%)
-Base = $526,000 (fairly priced)
-Up = $600,000 (13% underpriced)
Going forward I expect Berkshire to compound at good, not great returns. The likely question is why own it at all if we expect modest returns…
BRK is a collection of high-quality businesses, excellent management, and a good amount of optionality in their cash position. If the cash were to be deployed accretively the true value would be greater than an 8% premium (as mentioned above). The combination of a pie that is growing, an increasing share of said pie due to stock buybacks, upside optionality from cash and a tight range of likely business outcomes that span a variety of economic futures gives me comfort in continuing to own Berkshire.”
A total of 108 funds held a stake in Berkshire Hathaway Inc. at the end of Q4 2021.
6. NVIDIA Corporation (NASDAQ:NVDA)
BlackRock’s Stake Value: $49,355,380
Percentage of BlackRock’s 13F Portfolio: 1.32%
Number of Hedge Funds as of December 31: 110
NVIDIA Corporation is the developer and manufacturer of graphic processing units (GPUs) for desktop computers, laptops, mobile devices and notebooks. The world of cryptocurrency mining has given a whole different dimension to NVIDIA Corporation, as its GPUs are required to boost the computing power for mining Bitcoin, Ethereum and other cryptocurrencies. Furthermore, the data center segment is also a significant market for the firm.
In a note issued to investors on May 3, Joseph Moore at Morgan Stanley resumed coverage on NVIDIA Corporation with an Equal Weight rating and a price target of $217. The target price still reflects an upside of over 22% following the 9% rally in stock price on Friday, May 13. The analyst thinks that the company is one of the best growth stocks in the semiconductor industry. Moore sees a significant deceleration in demand from the gaming segment, but he expects it to be partially offset by the strong demand from the data center segment.
Here’s what ClearBridge Investments has to say about NVIDIA Corporation in its Q1 2022 investor letter:
“Gaming is an attractive end market within the media/technology sector with strong growth and a long runway, particularly in mobile gaming. Unity’s platform provides an engine and toolkit for development and monetization of games, e-commerce and industrial applications, adding to our industry exposure, which also includes Nvidia (NASDAQ:NVDA) in graphic processing chips.”
Out of the 924 hedge funds tracked by Insider Monkey at the end of Q4 2021, 110 funds held a stake in NVIDIA Corporation.
In addition to NVIDIA Corporation, popular companies such as Apple Inc., Microsoft Corporation, and Amazon.com, Inc. were also a part of BlackRock’s Q1 2022 portfolio.
5. Alphabet Inc. (NASDAQ:GOOGL)
BlackRock’s Stake Value: $57,580,702
Percentage of BlackRock’s 13F Portfolio: 1.55%
Number of Hedge Funds as of December 31: 158
Alphabet Inc. is a California-based technology conglomerate that is the parent of Google and other subsidiaries. During the keynote session of its annual I/O developer conference on May 11, Alphabet Inc. confirmed the long awaiting news of coming up with its smartwatch, which is expected to give Apple Watch a tough time. The Pixel Watch will be completely developed by Google and will have a deep connection with Fitbit. To expand its footprint, Alphabet Inc. also announced the arrival of the Pixel Tablet next year. The company brought forward the budget-friendly Pixel 6A in three colors for $449.
Furthermore, Alphabet Inc. provided a tease of its Pixel 7 phone, which is expected to arrive later this year in the fall. The company shared that it is bringing back Google Wallet, which will expand its offering from being a payment gateway. It will include features like boarding passes, remote car starts and student IDs.
Baron Funds, an asset management company, mentioned Alphabet Inc. in its Q1 2022 investor letter. Here’s what the firm said:
“We have modestly reduced the size of our position in Alphabet Inc. (NASDAQ:GOOG) (from 6.5% at the end of the fourth quarter of 2021 to 5.3% as of the end of the first quarter of 2022), after the stock rallied 64% in 2021 and continued outperforming during the first quarter, declining just 3%.”
4. Tesla, Inc. (NASDAQ:TSLA)
BlackRock’s Stake Value: 55,241,453
Percentage of BlackRock’s 13F Portfolio: 1.6%
Number of Hedge Funds as of December 31: 91
Tesla, Inc. is a Texas-based developer and manufacturer of electric vehicles and is the biggest publicly listed automobile company in the world. The company is facing challenges on multiple ends under the leadership of Elon Musk. Due to the COVID-19-related lockdown in China, Tesla, Inc. reported weak production and sales numbers for April 2022. Furthermore, investors have not positively welcomed the news of Musk’s plan to acquire social media company Twitter, Inc. (NASDAQ:TWTR). However, according to the most recent updates, Musk has temporarily put the $44 billion Twitter deal on hold following tough negotiations.
In addition, Tesla, Inc. has also put its plan to enter the Indian market on hold following a deadlock in negotiations with the government authorities regarding tariffs on imports. At present, tariffs on imported cars can be as much as 100%. The Indian government is not willing to compromise on the tariffs as it wants Tesla, Inc. to manufacture EVs locally.
Fiduciary Management mentioned Tesla, Inc. in its investor letter for Q1 2022. Here’s what it had to say:
“Remarkably, the Nasdaq-100 and Russell 2000 indices are up 6.25% and 3.90% through 3/31/22, respectively, since the war started. Tesla, Inc. went up 57% from its low on February 24 ($700) to the close on March 29th ($1099), which equates to an advance of $413 billion. To put that in perspective, the 24-trading day gain in Tesla was greater than the entire market value of Walmart, Inc.! Tesla trades for 120 times estimated 2022 GAAP2 earnings, compared to Walmart’s (NYSE:WMT) 21.8 multiple (1/2023 fiscal year).”
Of the 924 hedge funds tracked by Insider Monkey at the end of Q4 2021, 91 funds held a stake in Tesla, Inc..
3. Amazon.com, Inc. (NASDAQ:AMZN)
BlackRock’s Stake Value: $95,007,597
Percentage of BlackRock’s 13F Portfolio: 2.55%
Number of Hedge Funds as of December 31: 279
Amazon.com, Inc. is a Washington-based diversified technology company that is involved in a wide array of fields like artificial intelligence, e-commerce, cloud computing, digital streaming and electric vehicles. The stock of Amazon.com, Inc. fell to a 52-week low on May 10 following concerns related to the e-commerce industry due to rising inflation and interest rate hike.
On May 13, Amazon.com, Inc. stock closed 10% higher than its 52-week and still down over 40% from its all-time high of $3,773.08. Amazon’s stock gained prominence since the start of the COVID-19 pandemic as the demand for its e-commerce and streaming services surged. This resulted in the stock price rising from under the $1,700 level in March 2020 to its all-time high in mid-2021.
Oakmark Funds mentioned Amazon.com, Inc in its Q1 2022 investor letter. Here’s what it had to say:
“Amazon is the leading e-commerce and cloud-computing provider in the world. In e-commerce, two-thirds of U.S. households are Amazon Prime subscribers, and over half of all online product searches now start on Amazon. We believe the company’s strong customer loyalty and massive infrastructure are significant barriers to entry in a growing e-commerce market. Separately, Amazon Web Services (AWS) controls nearly half of the market in cloud computing. We believe AWS has become utility-like in nature and scale, and we expect healthy growth moving forward as IT workloads continue moving to the cloud. More recently, concerns about rising investment spending have weighed on the stock-as they have in times past-providing us another opportunity to purchase shares at an attractive multiple of normalized earnings and a discount to its peer-weighted enterprise value-to-sales multiple.”
Overall, 279 funds held a stake in Amazon.com, Inc. during Q4 2021.
2. Microsoft Corporation (NASDAQ:MSFT)
BlackRock’s Stake Value: $161,477,322
Percentage of BlackRock’s 13F Portfolio: 4.35%
Number of Hedge Funds as of December 31: 262
Microsoft Corporation is a Washington-based tech giant that develops and sells consumer electronics, personal computers, and software. Microsoft Corporation owns the business and employment-oriented service, LinkedIn.
In a note issued to investors on May 13, Dan Ives at Wedbush highlighted the current market correction is not a repeat telecast of the dot-com bubble of the late 1990s. He expects the tech sector to be divided into “clear haves and have nots.” Ives sees some companies going away in the form of bankruptcy or mergers but sees the strongest companies come out of the ashes more robust than ever. After reaching out to numerous IT professionals across various fields, Ives still sees strong spending in areas like artificial intelligence, big data, cloud computing and cyber security. He wrapped up by saying that the revenue estimates of Microsoft Corporation may require downward revisions due to the uncertain macroeconomic outlook, but the company does not offer more than a 10% downside from the current level.
Motiwala Capital mentioned Microsoft Corporation in its investor letter for Q4 2021. Here’s what it said:
“Microsoft re-enters our portfolio after a long gap. MSFT sells enterprise and consumer software products as well as hardware products such as the Xbox video game console and Surface laptops. All business segments experienced double-digit revenue growth and earnings per share have compounded in the mid-double digits over the last 5 years. We believe MSFT continues this momentum in the years ahead.”
A total of 262 funds held a stake in Microsoft Corporation as of Q4 2021.
1. Apple Inc. (NASDAQ:AAPL)
BlackRock’s Stake Value: $179,434,978
Percentage of BlackRock’s 13F Portfolio: 4.83%
Number of Hedge Funds as of December 31: 134
Apple Inc. is the biggest holding in BlackRock’s portfolio. The California-based tech giant is a specialist in the development, manufacturing, and selling of consumer electronics like smartphones, smartwatches, laptops, personal computers and wireless earphones.
In a note issued to investors on May 13, Ming-Chi Kuo at TF International Securities tweeted that Apple Inc. is expected to come out with a newer version of the Apple TV set-top box in the second half of 2022 with a better cost structure. The analyst thinks that Apple’s plan of bringing together content, hardware, and services will help in closing its gap against its competitors. In the set-top box segment, Apple is head-to-head with Amazon and Google.
An investment management firm, ClearBridge Investments, mentioned Apple Inc. in its Q4 2021 investor letter. Here’s what the firm said:
“Despite these mixed emerging growth results, the ClearBridge Global Growth Strategy outperformed the benchmark due to resilience among our secular and structural growth holdings. The bulk of these contributions came from U.S. mega-cap growth stocks Apple and Microsoft which continued to uniquely act both offensively and defensively as they have through most of the pandemic.”
You can also take a peek at the 10 Stocks to Buy in April According to Jim Cramer and 15 Most Valuable E-Commerce Companies.
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This article is originally published at Insider Monkey.
