10 Best S&P 500 Stocks to Buy According to Hedge Funds

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This article by Usman Kabir with my picture is in Yahoo! Finance

In this article, we discuss 10 best S&P 500 stocks to buy according to hedge funds. If you want to read about some more S&P 500 stocks, go directly to 5 Best S&P 500 Stocks to Buy According to Hedge Funds.

The Bureau of Labor Statistics in the United States recently released new inflation numbers that have brought into question the aggressive rate hike policy of the Federal Reserve. Per the latest figures, the consumer price index showed that prices in the country during the month of September were 8.2% higher compared to prices over the same period last year. The rate represents yet another decline for the benchmark inflation index in the months following June. The inflation rate had peaked at over 9% in June, the highest in nearly four decades. 

Due to aggressive rate hikes by the central bank to tame inflation, investors have been pulling money from the stock market to invest in less riskier ventures, pushing the US towards a recession. Benchmark market indexes like the S&P 500, the NASDAQ Composite, and the Dow Jones Industrial Average are all trading in the red since the past few months. They have registered year-to-date declines of 22%, 31%, and 16%, respectively. The chaos is spreading to global markets in the meanwhile as well. 

However, this slowdown has created several buying opportunities at the market where prominent names like Johnson & Johnson (NYSE:JNJ), Pfizer Inc. (NYSE:PFE), and The Proctor and Gamble Company (NYSE:PG) are all trading at discounted prices due to the overall macro uncertainty. Investors can pick up the shares of these businesses at bargain rates and since the bear market is expected to wind down in the coming months, these stocks could be the first to rally as the economy recovers. 

Our Methodology

The companies that feature on the S&P 500 were selected for the list. In order to provide readers with some context for their investment choices, the business fundamentals and analyst ratings for the stocks are also discussed. Data from around 900 elite hedge funds tracked by Insider Monkey in the second quarter of 2022 was used to identify the number of hedge funds that hold stakes in each firm.

Best S&P 500 Stocks to Buy According to Hedge Funds

10. Berkshire Hathaway Inc. (NYSE:BRK-B)

Number of Hedge Fund Holders: 109      

Berkshire Hathaway Inc. (NYSE: BRK-B) engages in the insurance, freight rail transportation, and utility businesses. It is one of the best large cap stocks to invest in. On October 14, the company announced that it had received the regulatory approvals needed for the purchase of specialty insurance firm Alleghany in a deal worth more than $11.5 billion. 

Among the hedge funds being tracked by Insider Monkey, Chicago-based investment firm Bill and Melinda Gates Foundation Trust is a leading shareholder in Berkshire Hathaway Inc. (NYSE: BRK-B), with 34.7 million shares worth more than $9.5 billion. 

Just like Johnson & Johnson (NYSE:JNJ), Pfizer Inc. (NYSE:PFE), and The Proctor and Gamble Company (NYSE:PG), Berkshire Hathaway Inc. (NYSE: BRK-B) is one of the best S&P 500 stocks to buy according to hedge funds. 

In its Q1 2022 investor letter, Diamond Hill Capital, 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:

“Diversified holding company Berkshire Hathaway Inc. (NYSE: BRK-B) reported strong earnings during the quarter and benefited from continued share repurchases below intrinsic value. The company also announced significant deployments of excess cash during the quarter, including the acquisition of Alleghany and a large increase in its stake in Occidental Petroleum.”

9. Salesforce, Inc. (NYSE:CRM)

Number of Hedge Fund Holders: 116   

Salesforce, Inc. (NYSE:CRM) provides customer relationship management technology that brings companies and customers together worldwide. It is one of the top large cap stocks to invest in. On September 20, Meta Platforms said that it will integrate its WhatsApp messaging service with Salesforce services. After the integration, businesses would be able to directly chat directly with their customers in the messaging app. 

On September 22, BMO Capital analyst Keith Bachman maintained an Outperform rating on Salesforce, Inc. (NYSE:CRM) stock and lowered the price target to $190 from $207, noting that the company’s management maintained the $50 billion FY26 revenue target despite macro and FX headwinds.

At the end of the second quarter of 2022, 116 hedge funds in the database of Insider Monkey held stakes worth $7.9 billion in Salesforce, Inc. (NYSE:CRM), compared to 114 in the preceding quarter worth $9.9 billion. 

In its Q3 2022 investor letter, Oakmark Funds, an asset management firm, highlighted a few stocks and Salesforce, Inc. (NYSE:CRM) was one of them. Here is what the fund said:

“Salesforce, Inc. (NYSE:CRM) has become a dominant global player in sales, customer service, commerce and marketing software over the past 20 years. The company earns 80% gross margins and grows 20% organically. Plus, virtually all of its revenue is recurring. We see Salesforce as a great business that we’ve admired from afar for a long time. More recently, the organization has made some changes at the top that prompted us to take a closer look at the stock. New CEO Bret Taylor and CFO Amy Weaver are bringing a culture of financial discipline. We believe this renewed focus on profitability and capital return, combined with Salesforce’s strong underlying business characteristics, will yield strong results. The current valuation of 3.9x next year’s revenues represents a significant discount compared to publicly traded peers and recent private market values in the software space that have similar growth profiles. We view this discount as an opportunity to invest in a great business at a good value.”

8. Apple Inc. (NASDAQ:AAPL)

Number of Hedge Fund Holders: 128     

Apple Inc. (NASDAQ:AAPL) designs, manufactures, and markets smartphones, personal computers, tablets, wearables, and accessories. It is one of the elite large cap stocks to invest in. On October 12, reports indicated that the firm was not offering certain new perks and benefits at its only unionized retailer store in Towson, Maryland. On October 12, analyst Gene Munster said that Apple and Meta are well positioned to become leaders in the tech sector.

On October 11, Barclays analyst Tim Long maintained an Equal Weight rating on Apple Inc. (NASDAQ:AAPL) stock and lowered the price target to $155 from $169, noting that there was upside to September quarter hardware revenue estimates despite currency headwinds.

At the end of the second quarter of 2022, 128 hedge funds in the database of Insider Monkey held stakes worth $143 billion in Apple Inc. (NASDAQ:AAPL), compared to 131 in the previous quarter worth $182 billion.

In its Q2 2022 investor letter, Alger 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 Inc.(NASDAQ:AAPL) is a leading technology provider in telecommunications. computing and services. Apple’s iOS operating system is the company’s unique intellectual property and competitive strength. This software drives extremely tight engagement with consumers and enterprises. The engagement is fostering the growing purchase of high-margin services like music, apps, and apple pay. Apple’s shares detracted from performance as management lowered its guidance for the second quarter due to headwinds from the war in Ukraine, adverse foreign currency shifts, and dampened consumer demand associated with the coronavirus in China. Additionally, many investors were concerned that lockdowns implemented to curtail the spread of COVID-19 would impact production of apple products, however the manufacturing facilities have resumed activity.”

7. Uber Technologies, Inc. (NYSE:UBER)

Number of Hedge Fund Holders: 129  

Uber Technologies, Inc. (NYSE:UBER) develops and operates proprietary technology applications worldwide. It is one of the premier large cap stocks to invest in. On October 6, Uber Technologies said that it has partnered up with Marqeta, Mastercard, and the Workforce platform to offer Uber drivers faster payouts as well as rewards on fueling. On October 6, Uber partnered up with Motional to expand a driverless car service in the US.

On August 3, MKM Partners analyst Rohit Kulkarni maintained a Buy rating on Uber Technologies, Inc. (NYSE:UBER) stock and raised the price target to $40 from $32, highlighting that the company beat the Q2 expectations.

At the end of the second quarter of 2022, 129 hedge funds in the database of Insider Monkey held stakes worth $5.3 billion in Uber Technologies, Inc. (NYSE:UBER), compared to 144 in the preceding quarter worth $8.5 billion. 

In its Q2 2022 investor letter, RiverPark Funds, an asset management firm, highlighted a few stocks and Uber Technologies, Inc. (NYSE:UBER) was one of them. Here is what the fund said:

“Uber Technologies, Inc. (NYSE:UBER) is a global technology platform that enables the transportation of people and products across cities and countries. The company’s three main business lines are 1) Mobility where the company is the number one or two player in the app-based personal transportation market in 10,000+ cities globally, 2) Delivery- (Uber Eats in the US) home delivery of prepared meals, grocery, liquor, and increasingly general retail products in seven of the top ten GDP markets globally, and 3) Freight- the largest global marketplace for end-to-end freight solutions including one million digitally connected truck drivers. In the company’s most recent quarter, it grew gross bookings 35% year over year, consummated transactions with 115 million unique customers, completed 1.7 billion trips a month, and all three divisions were adjusted EBITDA positive (…read more)

6. Mastercard Incorporated (NYSE:MA)

Number of Hedge Fund Holders: 137    

Mastercard Incorporated (NYSE:MA) is a technology company that provides transaction processing and other payment-related products and services. It is one of the major large cap stocks to invest in. On October 4, in its latest foray into cryptocurrency, Mastercard said that it is ready to launch a new tool which will help banks find and block suspicious transactions from any crypto exchange. Mastercard’s software uses artificial intelligence algorithms and data from blockchains for the purpose. 

On October 10, Keefe Bruyette analyst Sanjay Sakhrani maintained an Outperform rating on MasterCard Incorporated (NYSE:MA) stock and lowered the price target to $388 from $445, noting that the company remains relatively stable into Q3 despite the current headwinds. 

At the end of the second quarter of 2022, 137 hedge funds in the database of Insider Monkey held stakes worth $14.99 billion in Mastercard Incorporated (NYSE:MA), compared to 136 in the previous quarter worth $15.4 billion.

In addition to Johnson & Johnson (NYSE:JNJ), Pfizer Inc. (NYSE:PFE), and The Proctor and Gamble Company (NYSE:PG), Mastercard Incorporated (NYSE:MA) is one of the best S&P 500 stocks to buy according to hedge funds. 

In its Q2 2022 investor letter, Baron Funds, an asset management firm, highlighted a few stocks and Mastercard Incorporated (NYSE:MA) was one of them. Here is what the fund said:

“The Fund’s holdings in the Payments and Information Services themes also contributed to relative performance. Within Payments, lower exposure to this lagging theme and outperformance of Mastercard Incorporated (NYSE:MA) added the most value. These global payment networks are viewed as safe havens during market downturns but are also benefiting from resilient payment volumes and a sharp rebound in international travel.”

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