In this article, we discuss the 10 stocks getting the attention of elite hedge funds. If you want to skip our detailed analysis of these stocks, go directly to the 5 Stocks Getting Attention of Elite Hedge Funds.
Hedge funds have not performed well in the past decade. In fact, hedge funds have been more a part of conversations around investing in relation to diversification as opposed to returns. However, this may be changing. In 2020, amid one of the most largest stock sell-offs in market history, the assets under management for hedge funds reached a record high of $3.6 trillion. According to investment bank Barclays, this was a result of performance since the outflows from the first half of the year were not offset by inflows in the second half.
In a report titled 2021 Global Hedge Fund Industry Outlook and Trends, based on survey data collected from 240 investors who had $725 billion in hedge funds, Barclays claimed that hedge funds were likely to attract $30 billion from investors this year. This would mark the first annual net inflow for hedge funds since 2017. Barclays also identified some popular hedge fund strategies in the report that included sector-specific equity managers, market-neutral stock-pickers and discretionary macro funds.
Some of the stocks presently getting attention from the elite hedge funds include Amazon.com, Inc. (NASDAQ: AMZN), UnitedHealth Group Incorporated (NYSE: UNH), Nuance Communications, Inc. (NASDAQ: NUAN), and Lithia Motors, Inc. (NYSE: LAD), among others. As hedge funds brace for more investments - more than 40% respondents to a Barclays survey said they would boost investments in hedge funds this year - investors should be wary of a focus on diversity and alternative investments as possible disruptors in the investing arena.
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The entire hedge fund industry is feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and July 2021 our monthly newsletter’s stock picks returned 186.1%, vs. 100.1% for the SPY. Our stock picks outperformed the market by more than 115 percentage points (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
Our Methodology
The main aim of this article is to acquaint readers with the companies that have generated significant investments from elite hedge funds in the past few months.
The firms were selected using data from the 873 funds tracked by Insider Monkey. Only those that saw an increase in the number of hedge fund holders by 15 in the second quarter, as compared to the first quarter of 2021, were picked. The list is compiled according to the number of hedge fund holders in each stock.
Special importance was assigned to the basic business fundamentals and analyst ratings for each firm to provide readers with some context so they can make more informed investment choices.
Clarivate Plc (NYSE: CLVT) is placed tenth on our list of 10 stocks getting the attention of elite hedge funds. The firm markets analytics and information systems services. It is headquartered in the United Kingdom.
On August 16, investment advisory Bank of America initiated coverage of Clarivate Plc (NYSE: CLVT) stock with a Buy rating and a price target of $28, noting the firm had “quality data assets and a predictable business model”.
At the end of the second quarter of 2021, 41 hedge funds in the database of Insider Monkey held stakes worth $5.3 billion in Clarivate Plc (NYSE: CLVT), up from 26 the preceding quarter worth $4.7 billion.
Just like Amazon.com, Inc. (NASDAQ: AMZN), UnitedHealth Group Incorporated (NYSE: UNH), Nuance Communications, Inc. (NASDAQ: NUAN), and Lithia Motors, Inc. (NYSE: LAD), Clarivate Plc (NYSE: CLVT) is one of the stocks attracting hedge fund interest.
In its Q4 2020 investor letter, Madison Funds, an asset management firm, highlighted a few stocks and Clarivate Plc (NYSE: CLVT) was one of them. Here is what the fund said:
“Clarivate is a leading provider of various data and analytics for scientific, pharmaceutical, and intellectual property markets, with several different subsidiaries assembled through acquisitions. Among university academics, its Web of Science product is a household name as a deep and broad database covering academic studies published dating back to the 19th century. It’s the de facto standard of reference for a scientist or student looking for what’s been published in the past. Clarivate’s Derwent unit is similar to Web of Science, but for patent filings. Its database contains 98% of all patents filed globally, and is the reference standard used by law firms, corporations, and governments to research patents. Its most recent acquisition, CPA Global, is a leading provider of software that helps companies and law firms manage and process their portfolio of patents and trademarks.
Clarivate’s products are very sticky with high margins. Over 80% of its revenues are in subscription form, and the relatively mission critical nature of its products gives it very high customer retention and good pricing power. As you might imagine, the shares in such a company do not come cheap. However, we believe it’s cheaper than it looks. It has good organic growth potential, but also can continue to be a platform for further acquisitions. The ace in the hole here is Chairman and CEO Jerre Stead. If that name sounds familiar, that’s because it should. Stead was the entrepreneur and executive who built IHS into the information services powerhouse company that we invested in some years ago. He retired soon after selling IHS to Markit in 2016, but it turns out he didn’t really retire. He decided to take what he learned at IHS and apply it to a new set of information service businesses. Clarivate is the result. As investors in IHS, we benefitted from the success of Jerre 2.0, when he returned from his first retirement with renewed energy when his successor didn’t pan out. With Clarivate, we have Jerre version 3.0, and we hope that it’s another upgrade once again.”
Welbilt, Inc. (NYSE: WBT) is ranked ninth on our list of 10 stocks getting the attention of elite hedge funds. The firm makes and sells food service equipment for commercial purposes and operates from Florida.
In earnings results for the second quarter, posted on August 3, Welbilt, Inc. (NYSE: WBT) reported earnings per share of $0.22, beating estimates by $0.09. The revenue over the period was close to $400 million, up 92% year-on -year.
Out of the hedge funds being tracked by Insider Monkey, Florida-based investment firm Icahn Capital LP is a leading shareholder in Welbilt, Inc. (NYSE: WBT) with 11 million shares worth more than $258 million.
In addition to Amazon.com, Inc. (NASDAQ: AMZN), UnitedHealth Group Incorporated (NYSE: UNH), Nuance Communications, Inc. (NASDAQ: NUAN), and Lithia Motors, Inc. (NYSE: LAD), Welbilt, Inc. (NYSE: WBT) is one of the stocks on the hedge fund radar.
Dun & Bradstreet Holdings, Inc. (NYSE: DNB) is a New Jersey-based business data and analytics firm. It is placed eighth on our list of 10 stocks getting the attention of elite hedge funds.
On July 7, investment advisory RBC Capital assumed coverage of Dun & Bradstreet Holdings, Inc. (NYSE: DNB) stock with an Outperform rating and a price target of $30, noting the recent pullback in the share price was a buying opportunity.
At the end of the second quarter of 2021, 45 hedge funds in the database of Insider Monkey held stakes worth $869 million in Dun & Bradstreet Holdings, Inc. (NYSE: DNB), up from 29 in the previous quarter worth $835 million.
Along with Amazon.com, Inc. (NASDAQ: AMZN), UnitedHealth Group Incorporated (NYSE: UNH), Nuance Communications, Inc. (NASDAQ: NUAN), and Lithia Motors, Inc. (NYSE: LAD), Dun & Bradstreet Holdings, Inc. (NYSE: DNB) has also attracted attention from top hedge funds.
In its Q1 2021 investor letter, Weitz Investment Management, an asset management firm, highlighted a few stocks and Dun & Bradstreet Holdings, Inc. (NYSE: DNB) was one of them. Here is what the fund said:
“Dun & Bradstreet collects and provides proprietary data used by businesses to understand the credit risk of their counterparties. Under the management of its Chairman Bill Foley and CEO Anthony Jabbour, who both joined the company in 2019, Dun & Bradstreet has moved to modernize its technology, improve its sales and contracting practices, invest in new data and capabilities to enhance its value to customers, and evaluate potential acquisitions to boost each of these efforts.”
Proofpoint, Inc. (NASDAQ: PFPT) is a California-based security services provider. It is ranked seventh on our list of 10 stocks getting the attention of elite hedge funds.
In earnings results for the second quarter, posted on July 29, Proofpoint, Inc. (NASDAQ: PFPT) reported earnings per share of $0.63, beating expectations by $0.15. The revenue over the period was $308 million, up 31% year-on-year.
Out of the hedge funds being tracked by Insider Monkey, Naples-based investment firm Pentwater Capital Management is a leading shareholder in Proofpoint, Inc. (NASDAQ: PFPT) with 2.5 million shares worth more than $437 million.
Amazon.com, Inc. (NASDAQ: AMZN), UnitedHealth Group Incorporated (NYSE: UNH), Nuance Communications, Inc. (NASDAQ: NUAN), and Lithia Motors, Inc. (NYSE: LAD) are on the list of stocks getting a lot of interest from hedge funds, alongside Proofpoint, Inc. (NASDAQ: PFPT).
Marvell Technology, Inc. (NASDAQ: MRVL) is placed sixth on our list of 10 stocks getting the attention of elite hedge funds. The company makes and sells semiconductors and related products. It is headquartered in Delaware.
On August 27, investment advisory Citi maintained a Buy rating on Marvell Technology, Inc. (NASDAQ: MRVL) stock and raised the price target to $70 from $64, identifying the firm as a “multi-year data centre growth story”.
At the end of the second quarter of 2021, 51 hedge funds in the database of Insider Monkey held stakes worth $1.3 billion in Marvell Technology, Inc. (NASDAQ: MRVL), up from 33 in the previous quarter worth $683 million.
Amazon.com, Inc. (NASDAQ: AMZN), UnitedHealth Group Incorporated (NYSE: UNH), Nuance Communications, Inc. (NASDAQ: NUAN), and Lithia Motors, Inc. (NYSE: LAD) are some of the best stocks that hedge funds recommend, just like Marvell Technology, Inc. (NASDAQ: MRVL).
In its Q1 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and Marvell Technology, Inc. (NASDAQ: MRVL) was one of them. Here is what the fund said:
“We also purchased Marvell Technology Group, in the IT sector, a semiconductor maker with exposure to the fast growing 5G and data center markets whose shares sold off in the latest rotation out of growth stocks. Marvell just acquired data center supplier Inphi, a name we have held in other ClearBridge portfolios, which should increase the chipmaker’s cross-selling opportunities in a strong demand environment for chips.”
