We have been tracking the most popular stocks among hedge funds for more than a year now. Hedge funds are known to be short-term oriented but when we look at the most popular stocks among hedge funds we see that they are focused on the long-term more than expected. Apple (AAPL) and Microsoft (MSFT) have been among the top three most popular stocks since at least the end of 2010 (see the 10 most popular stocks at the end of September). This is consistency and both stocks outperformed the market over the last year. For the past two quarters Google (GOOG) joined them. Even George Soros bet more than $150 million on the stock. We are bullish about Google as well. In fact mega-cap technology stocks are trading at very low forward price multiples compared to the market. Apple will probably make around $40 per share in 2012. The stock has more than $100 per share in net cash, so its 2012 price-earnings ratio is a paltry 10 excluding cash. This is a stock that is expected to increase its earnings by nearly 20% for the next 5 years. On the other hand utility stocks that are expected to grow at less than 5% annually have P/E ratios around 13-14.
Hedge funds’ message cannot be clearer. Technology stocks are undervalued and sooner or later the rest of the market will recognise this. Hedge funds are also buying mega-cap banks. Citigroup (C) is the most popular financial stock followed by Bank of America (BAC) and JP Morgan (JPM). Warren Buffett‘s favourite Wells Fargo (WFC) is the fourth most popular bank and ranks ninth overall. Another stock that is trading at a ridiculously low multiple is David Einhorn‘s favourite General Motors (GM). For the past 10 years hedge funds’ top 10 stock picks managed to beat the market by around 2 percentage points annually. It isn’t too much but it sure is better to buy these stocks in your IRA account than an index fund. Check out the rest of the list yourself. This list is based on the fourth quarter 13F filings of 375 hedge funds and prominent stock pickers followed by Insider Monkey. Here are the 10 most popular stocks among hedge funds:
1. Apple: 127 hedge funds, $16 billion
2. Google: 108 hedge funds, $10.9 billion
3. Microsoft: 95 hedge funds, $6 billion
4. Citigroup: 92 hedge funds, $4.8 billion
5. Bank of America: 85 hedge funds, $2.3 billion
6. General Motors: 80 hedge funds, $2.2 billion
7. JP Morgan: 79 hedge funds, $4.6 billion
8. Pfizer (PFE): 69 hedge funds, $3.5 billion
9. Wells Fargo: 68 hedge funds, $15.3 billion
10. Qualcomm (QCOM): 64 hedge funds, $4.1 billion
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