In this article, we discuss the 5 stocks that hedge funds were right about in 2021. If you want to read our detailed analysis of these stocks, go directly to Hedge Funds Were Right About These 10 Stocks in 2021.
5. Berkshire Hathaway Inc. (NYSE:BRK-B)
Number of Hedge Fund Holders: 106
Year-to-Date Gain in Share Price: 28%
Berkshire Hathaway Inc. (NYSE:BRK-B) is a conglomerate with interests in 69 different businesses. Led by Warren Buffett, it has become the ultimate value holding for investors in a growth-heavy market. The stock has outperformed the tech-laden S&P 500 so far this year by nearly 5 percentage points. With an impressive yield and nearly $150 billion in cash, Berkshire Hathaway Inc. (NYSE:BRK-B) is even stronger when viewed in context of rising inflation and the upcoming hike in interest rates which are likely to lead to a broad correction in valuations of growth companies.
In the trailing twelve month period, Berkshire Hathaway Inc. (NYSE:BRK-B) generated $268 billion in revenue and $87 billion in net income from operating businesses. At the end of the third quarter of 2021, 106 hedge funds in the database of Insider Monkey held stakes worth $19 billion in Berkshire Hathaway Inc. (NYSE:BRK-B).
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. 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 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.”
4. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 120
Year-to-Date Gain in Share Price: 35%
Apple Inc. (NASDAQ:AAPL) is on track to become the first company in the world to cross $3 trillion in market capitalization. Heading into the new year, there is a consensus in investor circles and analysts alike that the company will achieve that milestone. Citi analyst Jim Suva recently raised the price target on Apple Inc. (NASDAQ:AAPL) stock to $200 from $170 and kept a Buy rating, underlining that the demand for Apple Inc. (NASDAQ:AAPL) products and services would remain resilient in 2022 with new launches adding to value for investors.
Apple Inc. (NASDAQ:AAPL) has also been in the news recently on the back of reports that it will launch an AR headset next year. Apple Inc. (NASDAQ:AAPL) is also reportedly working on the development of driverless cars. As it invests in futuristic products, the demand for iPhones and MacBooks remains strong, and the company will likely grow revenues in 2022 compared to 2021 levels.
Apple Inc. (NASDAQ:AAPL) has been a constant feature in the top picks of hedge funds for the past several years. At the end of the third quarter of 2021, 120 hedge funds in the database of Insider Monkey held stakes worth $146 billion in Apple Inc. (NASDAQ:AAPL).
In its Q1 2021 investor letter, Distillate Capital, an asset management firm, highlighted a few stocks and Apple Inc. (NASDAQ:AAPL) was one of them. Here is what the fund said:
“Apple is an even more notable situation and one that highlights our free cash valuation methodology and bears further discussion given its Q3 ‘20 sale from our strategy. For an extended period, Apple was extraordinarily inexpensive on a free cash flow basis and was the largest position in our strategy, exceeding 5% of the portfolio.”
3. Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders: 250
Year-to-Date Gain in Share Price: 53%
The pandemic has fundamentally altered how many businesses operate. Microsoft Corporation (NASDAQ:MSFT), the software giant headquartered in Washington, has been one of the biggest beneficiaries of this boom. It offers an array of hardware and software for the workplace and analysts have backed Microsoft Corporation (NASDAQ:MSFT) to take advantage of the $2 trillion opportunity in the metaverse of work market by 2025. The firm also has solid pricing power and operating efficiencies.
Fisher Asset Management is a leading shareholder in Microsoft Corporation (NASDAQ:MSFT) with 25 million shares worth more than $7 billion. At the end of September, 250 hedge funds held stakes in Microsoft Corporation (NASDAQ:MSFT) worth $65 billion. This compared favorably to the end of the second quarter when 238 funds had held shares worth $62 billion in Microsoft Corporation (NASDAQ:MSFT).
At the end of the third quarter of 2021, 250 hedge funds in the database of Insider Monkey held stakes worth $6.5 billion in Microsoft Corporation (NASDAQ:MSFT), down from 238 in the preceding quarter worth $6.2 billion.
In its Q1 2021 investor letter, Polen Capital, an investment management firm, highlighted a few stocks and Microsoft Corporation (NASDAQ:MSFT) was one of them. Here is what the fund said:
“We have written extensively about Microsoft in recent commentaries. It was our leading contributor last year and one of our largest weightings within the Portfolio. It continues to experience business momentum through several dominant, essential, and competitively advantaged businesses, like Office 365 and Azure. The markets it competes for are enormous, which gives the company the ability to compound at scale. In the past quarter alone, the company generated over $40 billion in revenue, representing a 17% growth rate. The inherent operating leverage in Microsoft’s business model continues and led to 34% earnings growth this past quarter. Despite the broad rotation we saw in the first quarter and Microsoft’s robust performance in 2020, we think its business fundamentals continue to exhibit strength, and the stock continues to reflect the fundamentals.”
2. Wells Fargo & Company (NYSE:WFC)
Number of Hedge Fund Holders: 88
Year-to-Date Gain in Share Price: 61%
Wells Fargo & Company (NYSE:WFC) is another large-cap bank that has performed exceptionally well this year. The outlook for 2022 remains rosy as well. Wells Fargo & Company (NYSE:WFC) is still trading far below future EPS potential and investors have the opportunity to pick shares up at a cheap price. Wells Fargo & Company (NYSE:WFC) has also continued to produce impressive bottom line results despite a lot of negative news around the firm regarding regulation and a Fed-imposed asset cap.
Despite these headwinds, hedge funds remain bullish on Wells Fargo & Company (NYSE:WFC). At the end of the third quarter of 2021, 88 hedge funds in the database of Insider Monkey held stakes worth $6 billion in Wells Fargo & Company (NYSE:WFC).
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 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 in particular, will, over time, lower their costs and successfully grow their businesses.”
1. Alphabet Inc. (NASDAQ:GOOG)
Number of Hedge Fund Holders: 156
Year-to-Date Gain in Share Price: 70%
Alphabet Inc. (NASDAQ:GOOG) stock has been one of the best performers of the year so far, certainly among the five big tech firms that dominate the S&P 500. The shares have climbed nearly $3,000 from $1,100 compared to March 2020. The forays of Alphabet Inc. (NASDAQ:GOOG) into cloud computing have put it on track to register higher margins on sales and expansion of business by 20% annually for several years. Alphabet Inc. (NASDAQ:GOOG) remains a hedge fund favorite heading into 2022.
Among the hedge funds being tracked by Insider Monkey, London-based investment firm TCI Fund Management is a leading shareholder in Alphabet Inc. (NASDAQ:GOOG) with 2.9 million shares worth more than $7.8 billion.
In its Q1 2021 investor letter, Artisan Partners, an asset management firm, highlighted a few stocks and Alphabet Inc. (NASDAQ:GOOG) was one of them. Here is what the fund said:
“Large-cap tech companies have been resilient through the pandemic—Alphabet among them. A top contributor, Alphabet’s Play Store and Google Cloud are in demand as businesses accelerate online activity which, along with strong YouTube user growth, is helping stabilize temporarily weaker search ad revenue trends. Through the lens of our disciplined bottom-up research process, we view Alphabet as one of the best businesses in the world, capable of expanding revenues at a rapid rate for years to come, with a bullet proof balance sheet and an average asking price. It’s a name we’ve owned since 2012 and for which we continue to have high hopes regarding future prospects.”
You can also take a peek at 10 Best Stocks to Buy According to Billionaire Ken Fisher and 10 Best Stocks to Buy for the Next Ten Years.
