Stocks to buy

7 Stocks That Hedge Funds Can’t Get Enough Of

The most recent regulatory disclosures of hedge funds show that they have increasingly concentrated their investments in technology stocks. Especially with many tech stocks rebounding from a brutal 2022. In fact, artificial intelligence has reinvigorated many tech stocks, drawing the attention of hedge fund managers. Some of those top tech stocks include the following:

Alphabet (GOOG / GOOGL)

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Alphabet (NASDAQ:GOOG / NASDAQ:GOOGL) did not have a good start to the year. All on concerns that Alphabet had dropped the ball on artificial intelligence and was being surpassed by its competitors. However, GOOGL stock has since rallied 40% as the company successfully reassured analysts and investors that it remains a force when it comes to the AI story.

Hedge fund managers clearly saw the slump in GOOGL stock as an opportunity. In fact, it was among the top buys on Wall Street during Q1. Hedge funds also seem to have plenty of confidence in Alphabet’s leadership position in AI and its future outlook judging by the way they bought the company’s stock hand-over-fist during the first quarter. Alphabet’s stock has rallied strongly since the company’s investor day when it unveiled its near-term plans for AI.

 Microsoft (MSFT)

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Another top buy among hedge funds in Q1 was Microsoft (NASDAQ:MSFT). Also viewed as a way to play the AI revolution, hedge fund managers piled into MSFT stock as its share price lingered near a 52-week low in early Jan. By May, the stock hit a 52-week high thanks to expectations for AI and the development of OpenAI,  in which it has invested more than $10 billion. Microsoft has already integrated OpenAI’s ChatGPT artificial intelligence application into its Bing search engine, breathing new life into the search bar. Better, Microsoft remains a best-of-breed technology firm Helping, analysts at Jefferies (NYSE:JEF) recently raised its price target on MSFT stock to $400 and maintained a “buy” rating on the shares.

Meta Platforms (META)

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Another tech giant attracting the attention of hedge fund managers is Meta Platforms (NASDAQ:META). While Meta is also pushing into artificial intelligence, the main attraction to the stock appears to be its aggressive cost controls in developing the metaverse. In fact, CEO Mark Zuckerberg seems to have won hedge fund managers over with his assertion that 2023 will be the company’s “year of efficiency.”

In addition, Meta Platforms announced more than 20,000 job cuts since last fall and pulled back on its metaverse investments after losing more than $13 billion on the venture in 2022. The changes and renewed focus on costs and efficiencies have attracted investors. So far in 2023, META stock has gained 100%, doubling its share price since January and making it one of the top stocks of the year.

Uber Technologies (UBER)

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Uber Technologies (NYSE:UBER) has also been attractive to hedge funds. After being crushed during the pandemic, Uber has managed to redeem itself with a string of better-than-expected earnings and improving forward guidance. Hedge fund managers have applauded the turnaround in UBER stock and have been aggressively buying shares.

As a result, UBER stock has gained 55% this year, making it another top performer. While Uber remains unprofitable, its losses have been steadily improving, as has the company’s revenue. The company reported in early May that its Q1 revenue rose 29% from a year earlier. Gross bookings in Q1 rose 40% from a year ago. Hedge fund managers seem to like what they’re hearing from Uber and are willing to look past the lack of profits right now as the company’s situation evolves for the better.

 Nvidia (NVDA)

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Nvidia (NASDAQ:NVDA) is another hot tech stock hedge funds can’t get enough of.  After all, the company’s most advanced microchips are needed to train and run sophisticated AI models. Since Jan., the share price has exploded higher- especially with strong earnings. In fact, the company blew earnings out of the water.  Q1 EPS of $1.09 was 17 cents above expectations.  Revenue of $7.19 billion beat by $670 million. It even saw record data center revenue of $4.28 billion. Even better, the company just said it would pay its next quarterly cash dividend of four cents on June 30 to shareholders of record, as of June 8.

Amazon (AMZN)

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Like Meta Platforms, hedge fund managers seem to like the changes underway at e-commerce giant Amazon (NASDAQ:AMZN). The company has been rightsizing its operations after overbuilding and over-hiring during the pandemic. To help, the company just cut 27,000 jobs, closed warehouses and fulfillment centers, and put off several new projects, including plans to build a second headquarters in Virginia. While turning the ship has not been easy, indications are that the company is making progress toward becoming a leaner entity.

Hedge fund managers and other investors seem to like the changes being undertaken at Amazon. While it has lagged the increase in other mega-cap tech stocks this year, AMZN stock has still managed to gain 35% year to date. However, the stock remains well below its 52-week low, indicating more room to run. Multiple analysts continue to recommend AMZN stock, with many naming it one of their top picks for the remainder of this year.

MercadoLibre (MELI)

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A bit more unusual pick among hedge funds has been Argentine e-commerce and online auction company MercadoLibre (NASDAQ:MELI).  Hedge fund managers were all over MELI shares in Q1 of this year, buying up the stock as it rallied. So far in 2023, the company’s share price has increased 63%, bringing its gains over the last 12 months to 74%. At more than $1,300 a share and with a price-earnings ratio above 110, MELI stock is not cheap.

The main attraction to MELI stock appears to be the company’s massive growth and dominant position in Argentina and throughout Latin America. MercadoLibre reported that its revenue grew 49% from a year earlier to $10.5 billion in 2022. Full-year profits increased nearly 500% to $482 million in 2022 from only $83 million in 2021. The company’s online payments unit, Mercado Pago, is the fastest growing in Latin America, with payment volumes rising 60% last year. Hedge fund managers clearly like what they see from this company.

On the date of publication, Joel Baglole held long positions in GOOGL, MSFT, and NVDA. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.