In this article, we discuss the top 5 value stocks hedge funds are buying in 2022. If you want to see more of the value stocks that elite investors are favoring, click Top 10 Value Stocks Hedge Funds are Buying in 2022.
5. Citigroup Inc. (NYSE:C)
Number of Hedge Fund Holders: 88
P/E Ratio as of May 26: 6.38
Citigroup Inc. (NYSE:C) is one of the top value stocks on the radar of elite hedge funds. Citigroup Inc. (NYSE:C) is a diversified financial services holding company, operating through two segments – Global Consumer Banking and Institutional Clients Group. In Q1 2022, 88 hedge funds were bullish on Citigroup Inc. (NYSE:C), with collective stakes exceeding $8.1 billion, compared to 97 funds in the prior quarter, holding stakes in the company valued at $6.60 billion.
On April 14, Citigroup Inc. (NYSE:C) posted earnings for Q1 2022, reporting an EPS of $2.02, beating estimates by $0.61. The $19.19 billion revenue surpassed Street forecasts by $1.07 billion. The company delivers a dividend yield of 3.82% as of May 27.
Credit Suisse analyst Susan Roth Katzke on May 27 downgraded Citigroup Inc. (NYSE:C) to Neutral from Outperform with an unchanged price target of $58. The analyst cited valuation for the downgrade, with the shares up 15% from their recent lows and within 10% of the price target.
According to Insider Monkey’s data, Warren Buffett’s Berkshire Hathaway held the biggest position in Citigroup Inc. (NYSE:C) as of Q1 2022, with more than 55 million shares worth about $3 billion.
Here is what Artisan Value Fund has to say about Citigroup Inc. (NYSE:C) in their Q4 2020 investor letter:
“We fully exited the position in Citigroup. Global financial services company Citigroup made a $900 million clerical error and received a public reprimand from federal regulators. This, after a decade focused on process control, information technology and risk systems, makes the error substantially more costly than just the $900 million mistake. Regulators believe the company’s risk management improvements have fallen short of expectations. To rectify the situation, a process and technology spending surge could negatively affect 2021-2022 profits by 10% to 20%. Trust and confidence are important in large financial institutions, and this incident combined with the CEO’s sudden retirement shook ours.”
4. Wells Fargo & Company (NYSE:WFC)
Number of Hedge Fund Holders: 93
P/E Ratio as of May 26: 9.48
Wells Fargo & Company (NYSE:WFC), an American diversified financial services company offering banking, investment, mortgage, and commercial finance products and services, is one of the top value stocks that hedge funds are buying in 2022. The stock’s price to earnings ratio on May 26 came in at 9.48.
On April 26, Wells Fargo & Company (NYSE:WFC) declared a quarterly dividend of $0.25 per share. The dividend is payable on June 1, to shareholders of record on May 6. Wells Fargo & Company (NYSE:WFC) posted on April 14 its Q1 2022 results, reporting earnings per share of $0.88, beating market consensus estimates by $0.07.
Barclays analyst Jason Goldberg raised the price target on Wells Fargo & Company (NYSE:WFC) on April 18 to $64 from $62 and kept an Overweight rating on the shares after the Q1 results. The analyst increased his 2022 net interest income and loan growth outlook while keeping the expense projections unchanged despite Q1 coming in higher than expected.
According to Insider Monkey’s database, 93 hedge funds were bullish on Wells Fargo & Company (NYSE:WFC) at the end of March 2022, with combined stakes worth $6.8 billion. Patrick Degorce’s Theleme Partners is the biggest position holder in Wells Fargo & Company (NYSE:WFC), with 18.2 million shares worth $884.7 million.
Here is what Davis Opportunity Fund has to say about Wells Fargo & Company (NYSE:WFC) in its Q4 2021 investor letter:
“The absolute level of revenues and profits generated by such companies is in fact so large that most of the major financial holdings in the portfolio produce enough annual operating income individually that a number of them could, in theory, purchase several entire businesses among hundreds of choices within the S&P 1500 Index, using just a year’s cash earnings without dipping into capital. This is theoretical, as financial companies would not be in the business of buying healthcare or technology companies, for example, but we point out these facts to illustrate the sheer scale of the economics produced by single financial companies in a given year, which is often a multiple of the cash earnings yielded by companies in a host of other industries.
Given this cash-generation power, we are naturally drawn to what we believe are strong and profitable financial institutions when the price is right. Presently, we believe the valuations of our financial holdings are not only reasonable, but extremely compelling, and our portfolio composition reflects this view. Representative financial holdings in the Fund include Wells Fargo.”
3. Bank of America Corporation (NYSE:BAC)
Number of Hedge Fund Holders: 99
P/E Ratio as of May 26: 10.46
Bank of America Corporation (NYSE:BAC) offers financial products and services to individual consumers, small and middle-market businesses, institutional investors, large enterprises, and governments worldwide. In Q1 2022, 99 hedge funds were long Bank of America Corporation (NYSE:BAC), up from 84 funds in the preceding quarter.
Bank of America Corporation (NYSE:BAC) declared on April 27 a $0.21 per share quarterly dividend, in line with previous. The dividend is distributable on June 24, to shareholders of record on June 23. Bank of America Corporation (NYSE:BAC) delivers a dividend yield of 2.29% as of May 27.
On May 3, Oppenheimer analyst Chris Kotowski maintained an Outperform rating on Bank of America Corporation (NYSE:BAC) but lowered the price target on the stock to $50 from $52. Loan growth and high interest rates are good for banks, and even amid a recession, the banking industry “would handle it better than any recession in history”, the analyst told investors.
According to Insider Monkey’s Q1 data, Harris Associates is a significant shareholder of Bank of America Corporation (NYSE:BAC), with more than 44 million shares worth $1.8 billion.
Here is what ClearBridge Investments has to say about Bank of America Corporation (NYSE:BAC) in its Q1 2021 investor letter:
“Higher long-term interest rates supported financials such as Bank of America, which has shown both defensive and offensive characteristics in the past year. We believe it continues to be the least risky large bank from a credit standpoint, with conservative underwriting and controlled risk taking, a leading consumer deposit franchise, scale and technology. It is also a leader in its commitments to sustainability, or as it terms it, responsible growth. Disclosure and reporting at all levels form a large part of this commitment, including gender diversity and equality, environmental commitments and support of communities in which it operates. In the first quarter Bank of America announced it is setting a goal of net-zero greenhouse gas (GHG) emissions in its supply chain and operations, and notably also in its financing activities, before 2050.”
2. Berkshire Hathaway Inc. (NYSE:BRK-B)
Number of Hedge Fund Holders: 104
P/E Ratio as of May 26: 7.85
Berkshire Hathaway Inc. (NYSE:BRK-B) is a Nebraska-based diversified conglomerate holding company that engages in the insurance, freight rail transportation, and utility businesses worldwide. Berkshire Hathaway Inc. (NYSE:BRK-B) is one of the top value stocks on the radar of institutional investors.
In the first quarter of 2022, 104 hedge funds were bullish on Berkshire Hathaway Inc. (NYSE:BRK-B), with collective stakes amounting to more than $19 billion. Bill & Melinda Gates Foundation Trust held the biggest position in the company, comprising 28.6 million shares worth over $10 billion.
On May 1, Keefe Bruyette analyst Meyer Shields lowered the price target on Berkshire Hathaway Inc. (NYSE:BRK-B) to $560,000 from $565,000 and reiterated a Market Perform rating on the shares. Berkshire Hathaway Inc. (NYSE:BRK-B)’s Q1 operating earnings per share of $4,774 outperformed the Street’s $4,278 estimate, due to higher than forecasted non-insurance earnings but offset in part by lower than projected insurance underwriting income and increased taxes, the analyst told investors in a research note.
1. JPMorgan Chase & Co. (NYSE:JPM)
Number of Hedge Fund Holders: 110
P/E Ratio as of May 26: 9.61
JPMorgan Chase & Co. (NYSE:JPM) is one of the most prominent American financial services companies. In Q1 2022, elite investors piled into JPMorgan Chase & Co. (NYSE:JPM). The number of hedge funds holding stakes in the company increased to 110 at the end of March from 107 in the earlier quarter.
On May 24, Societe Generale analyst Andrew Lim upgraded JPMorgan Chase & Co. (NYSE:JPM) to Buy from Hold with a price target of $150, up from $145. The company delivered positive guidance regarding net interest income, credit quality, and investment bank trading revenues, the analyst told investors. The analyst now has a more positive view on JPMorgan Chase & Co. (NYSE:JPM)’s surplus capital generation from 2023 and with the shares down significantly year-to-date, he thinks there is “too much negativity” factored in the price due to recession fears.
According to Insider Monkey’s Q1 data, Ken Fisher of Fisher Asset Management revealed a prominent stake in JPMorgan Chase & Co. (NYSE:JPM), comprising 7.76 million shares worth over $1 billion.
Here is what Ariel Investments has to say about JPMorgan Chase & Co. (NYSE:JPM) in its Q4 2021 investor letter:
“In our view, inflation will not just be a 2021 phenomenon. Inflationary expectations are only now working themselves into the labor market with historically low unemployment, resurgent labor unions, and higher wages. These labor cost pressures are only starting to show up in the Consumer Price Index. The most recent Producer Price Index showed a +9% year over year increase, the highest since it was created in 2010. Higher input prices generally lead to rising consumer prices.
“In our view, inflation will not just be a 2021 phenomenon.”
Consumer balance sheets are in excellent shape with lower unemployment and banked stimulus checks. A recent analysis from JP Morgan Chase (JPM) showed average checking accounts have 50% higher balances than pre-Covid. The U.S. money supply as measured by M2 (a calculation that includes cash, checking accounts, and “near cash” such as money market securities) is up +38% versus year-end 2019. Higher consumer cash holdings and higher money supply mean more spending and demand for goods. Some emphasize supply issues to explain current inflation. Going forward, we see very strong demand as well, too much money chasing too few goods.”
You can also take a look at 10 European Defense Stocks to Buy Now and 10 Growth ETFs to Buy Now.
