With a lot of uncertainty in the market from geopolitics down to monetary policy, jittery investors may find comfort in hedge fund picks. Specifically, ideas that the alpha wolves of the market have put their money into may offer both confidence and upside.
When I think about this theme, I can’t help but recall the film “Wall Street” (the original one). The antihero of the movie, Gordon Gekko, remarks that he hates losses. Instead, he prefers sure things, which eventually moves the narrative forward (I won’t give it away). And that’s why hedge fund picks are intriguing – these institutions hate losses.
Of course, the risk factor is that these entities can often absorb the consequences of their mistakes. You, on the other hand, might not be able to. So, take these ideas with a grain of salt. Nevertheless, if you’re looking for high-success-probability ideas, the below hedge fund picks may be a good place to start.
Microsoft (MSFT)
Software and technology hardware giant Microsoft (NASDAQ:MSFT) may have a reputation for being boring. However, boring appears to be gold in this environment. According to HedgeFollow, major institutions have acquired $40.83 billion worth of MSFT stock based on 13F filings in the fourth quarter of last year. The biggest player is Vanguard Group, which acquired $5.43 billion worth of shares.
It’s not difficult to see why the big dogs appreciate Microsoft – it’s consistent. In the last fiscal year, the company’s positive earnings surprise came out to 8.4%. Its best performance in 2023 was in the third quarter, posting earnings per share of $2.73. This print beat out the estimate of earnings of $2.42 per share.
For the current fiscal year, experts are looking for EPS of $11.64. That’s well above last year’s result of $9.81 EPS. Further, revenue may clock in at $244.22 billion, 15.2% above last year’s tally of $211.91 billion. With its investments in artificial intelligence, Microsoft could easily reach these targets. It’s one of the hedge fund picks to consider.
Amazon (AMZN)
While Amazon (NASDAQ:AMZN) may be a predictable idea among hedge fund picks, it’s also a compelling one. Fundamentally, e-commerce transactions as a share of total retail sales continue to rise since Q2 2022. That’s encouraging for AMZN stock amid all the inflation concerns. Not surprisingly, then, the major institutions have picked up on this development, buying up $24.1 billion worth of AMZN shares in Q4.
As with Microsoft above, investors appreciate Amazon for its consistency. What makes the company stand out, though, is the high baseline. It’s not just that Amazon beat its bottom-line targets last year. Rather, the average positive earnings surprise landed at 55.15%. That’s extremely impressive, even for a hot tech player.
For fiscal year 2024, covering experts anticipate EPS of $4.13. That’s well above last year’s tally of $2.90. Further, they’re looking for revenue to hit $641.35 billion or 11.6% up from 2023’s result of $574.78 billion. Combined with a unanimous strong buy rating (among 41 expert voices), AMZN is one of the hedge fund picks to add to your portfolio.
Broadcom (AVGO)
While it might not get the spotlight like some other tech players, Broadcom (NASDAQ:AVGO) is vital to the overall ecosystem. As a designer, developer and supplier of various semiconductor devices, it plays an indispensable role in the innovation industry. Therefore, it’s not surprising that it’s one of the favorites among hedge fund picks. In the final quarter of 2023, major entities bought just over $16 billion worth of AVGO stock.
As with the other ideas on this list, Broadcom benefits from consistency. In fiscal 2023, the company beat all its bottom-line targets. Its average positive earnings surprise came out to a decent 2.8%. Its best performance last year came in Q4, when it delivered EPS of $10.99. In contrast, experts were anticipating EPS of $10.29.
For the current fiscal year, covering experts believe Broadcom will post earnings of $46.91 per share. That’s a significant boost from last year’s result of $42.25 EPS. Not only that, the average revenue target stands at $50.35 billion, up 40.6% from last year’s haul of $35.82 billion.
Alphabet (GOOGL)
As an internet technology giant among other specialties, it’s no surprise that Alphabet (NASDAQ:GOOGL) ranks highly among hedge fund picks. You really can’t do much these days without Alphabet’s myriad services. For example, even if you don’t use the company’s Gmail system, you’re more than likely using Google to conduct searches. With that, hedge funds have put in $14.81 billion in GOOGL stock in Q4 last year.
This figure should only rise in the years ahead. As a well-established business, Alphabet probably isn’t going to make prospective investors rich. However, it should be a stable anchor during rough waters. Last year, the company’s average positive earnings surprise came out to 6.7%. Its best performance was in Q1, producing a positive surprise of 9.3%.
For fiscal 2024, analysts are hoping for the tech firm to post EPS of $6.82. That’s a big boost from $5.80, though it seems reasonable given the historical performance. Also, revenue could soar to $342.35 billion, up 11.4% from last year. Combined with a strong buy consensus view, GOOGL is one of the top hedge fund picks.
Meta Platforms (META)
Starting life as a social media network called Facebook – you may have heard of it – Meta Platforms (NASDAQ:META) has branched out into other avenues. Right now, it’s focused on the metaverse, which represents the next wave of connectivity. While many experts have questions about this directive, Meta’s sales of related hardware – such virtual reality headsets – offer upside potential.
As such, the big dogs have invested $14.08 billion into META stock in the final quarter of 2023. With the company announcing a dividend, it could attract more institutional players. Financially, the benefit of owning META comes down to robust performances. Last year, the company posted an average positive earnings surprise of nearly 10%.
For the current fiscal year, analysts are looking for EPS of $20.03. That’s a huge jump from last year’s print of earnings of $14.87 per share. Also, experts believe Meta will keep on expanding, delivering sales of $158.39 billion. That’s up 17.4% from the prior year. With so many positives, META ranks as one of the top-tier hedge fund picks.
Uber Technologies (UBER)
A simultaneously risky but compelling idea, Uber Technologies (NYSE:UBER) shows that the big dogs like to speculate at times too. What makes UBER a tough idea for hedge fund picks is the question mark hanging over discretionary consumer sentiment. People are looking to save money during this juncture, especially with inflation possibly about to worsen.
On the other hand, UBER makes for an intriguing idea because of its travel implications. According to Deloitte, the phenomenon known as revenge traveling might have come to an end. Nevertheless, people are still prioritizing destinations and experiences. If that continues to hold, Uber could be an enticing speculative bet. Sure enough, institutional investors bought up $10.84 billion worth of UBER stock.
Notably, the experts are excited about the ride-sharing specialist too. For the current fiscal year, they’re projecting EPS to land at $1.36. That’s noticeably above last year’s print of 87 cents. Also, revenue could clock in at $43.32 billion, up 16.2% from 2023. Even better, fiscal 2025 sales could hit $50.42 billion.
Exxon Mobil (XOM)
At this moment, Exxon Mobil (NYSE:XOM) may be an investment that sells itself. Yes, the geopolitical backdrop presents volatility risks for all sectors, including the crude oil space. However, the world continues to run on oil. So, if global tensions – already simmering from recent actions – spiral out of control, supply chains could be disrupted.
Cynically, this dynamic could be a positive for XOM in terms of sales and profits. Even if blistering costs hurt the wallet, economies just can’t stop moving altogether. And because hydrocarbons represent a critical commodity, both people and institutions will find a way to pay. With that in mind, it’s not shocking that hedge funds acquired $9.42 billion worth of XOM stock.
With the recent market dip, the institutional players could acquire even more shares. To be sure, the average consensus view of $9.27 EPS on sales of $334.88 billion imply a top-and-bottom-line decrease from last year’s results. Still, given the latest reality, the high-side estimate of $11.08 EPS on sales of $384.24 billion could be in play.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.