It doesn’t seem like it based on the mercurial valuations of certain innovators but a rotation away from technology could open doors for stocks hedge funds are buying. Basically, it may be time to consider following the money.
According to a Reuters report, investors dumped tech stocks at the fastest rate on record. Not only that, they poured money into investment-grade bonds and cash equivalents earlier this month. That’s coming from Bank of America, which cited data from EPFR, which provides fund flows and asset allocation information.
To be sure, the message here isn’t to spark a panic. However, because public tech enterprises have shot up so much, it may be time to do some trimming. If volatility strikes, it could strike fast and hard. With the funds acquired, you can instead consider the stocks hedge funds are buying.
Exxon Mobil (XOM)
Although it may represent an old industry, Exxon Mobil (NYSE:XOM) is still a powerhouse. That’s mainly because of the underlying scientific realities. Few energy sources command the density of hydrocarbons. As it turns out, the big dogs understand this point well. It’s one of the stocks hedge funds are buying.
Per data from HedgeFollow, in the fourth quarter of last year, major institutions bought $9.42 billion worth of XOM stock. The biggest acquisition came from Fisher Asset Management, which bought $1.22 billion worth of shares. Next up is State Street (NYSE:STT) at $765.04 million, followed by BlackRock (NYSE:BLK) at $544.59 million.
Another factor to consider is the passive income. Right now, the company offers a forward dividend yield of 3.36%. Further, the payout ratio is very reasonable at 41.39%. Further, around 63% of XOM stock investors are institutional players, thus providing stability.
Analysts rate Exxon Mobil a moderate buy with a $125.31 price target. The high-side target goes up to $140, making it one of the compelling stocks hedge funds are buying.
Visa (V)
To be fair, Visa (NYSE:V) features many elements of technical innovation, particularly in the software department. Still, at the core, the company specializes in financial services, particularly with payment cards. Given the record amount of debt that Americans racked up, I must say that V stock presents higher risks. Still, it does happen to be one of the stocks hedge funds are buying.
Per HedgeFollow, large investors acquired $7.5 billion worth of Visa shares during Q4. The biggest investor was State Street, with a bill that ran up to $461.37 million. Next up was BlackRock at $375.5 million. Coming in third place was Epoch Investment Partners, which clocked in at $267.35 million.
Now, Visa didn’t exactly light up the board last fiscal year. However, each of the past four quarters featured a beat against earnings per share. Overall, the average positive earnings surprise came out to 3.45%. Q1 2023 came up with the biggest surprise at 5%. For fiscal 2024, analysts believe Visa will post EPS of $9.92 against sales of $35.85 billion.
Last year, the company posted EPS of $8 on sales of $29.78 billion. Combined with a near-unanimous strong buy rating, Visa is looking good.
UnitedHealth Group (UNH)
As a healthcare giant, UnitedHealth Group (NYSE:UNH) is quite far away from the wild swings of technology-oriented securities. Per its public profile, UnitedHealth operates through four segments: UnitedHealthcare, Optum Health, Optum Insight, and Optum Rx. The company is essentially a one-stop shop for healthcare-related services. It’s boring but it’s also one of the stocks hedge funds are buying.
Per HedgeFollow, large investors acquired $7.39 billion worth of UNH stock during Q4. The biggest investor was Jennison Associates LLC, ringing up $616 million. Next up was a usual suspect, State Street at $562.45 million. Finally, Qube Research & Technologies rounded out the top three with $324.48 million.
Some institutional investors may be looking at UnitedHealth’s forward yield of 1.52%. While it’s not the most generous yield, the payout ratio sits at 30.55%. Also, UnitedHealth is one of the most relevant enterprises available. For fiscal 2024, analysts believe the company’s EPS will reach $27.77 on sales of just over $401 billion.
Last year, EPS landed at $25.12 on revenue of $371.62 billion. Experts rate a strong buy with a $591.29 price target.
Eli Lilly (LLY)
Another healthcare giant, Eli Lilly (NYSE:LLY) discovers, develops and markets human pharmaceuticals worldwide. The company offers therapeutics for various conditions and diseases, including obsesity, diabetes, rheumatoid arthritis and neuropathic pain, among many others. Since the start of the year, LLY stock gained 30% of equity value. Over the past 52 weeks, it’s up nearly 133%.
With stats like these, it’s no wonder that LLY ranks among the stocks hedge funds are buying. In Q4, Eli Lilly saw institutional investment inflows totaling $6.54 billion. The biggest investor was Vanguard Group, buying up $579.97 million worth of shares. Coming in second place was Citadel Advisors with $289.11 million. Rounding out the top three is Jane Street Group with $233.37 million.
For the current fiscal year, analysts anticipate that Eli Lilly’s EPS will land at $11.12 on revenue of $36.84 billion. Last year, the company posted per-share profits of $5.62 on sales of $30.32 billion.
Covering experts peg LLY a consensus strong buy with an average price target of $830.67. Notably, the high-side target stands at $1,000, implying almost 30% upside potential.
JPMorgan Chase (JPM)
One of the biggest powerhouse enterprises in the financial services sector, JPMorgan Chase (NYSE:JPM) operates through four segments: Consumer & Community Banking (CCB), Corporate & Investment Bank (CIB), Commercial Banking (CB) and Asset & Wealth Management (AWM). Since the January opener, JPM stock gained almost 16%. In the trailing year, it’s up nearly 57%.
Again, with such performance stats, it’s not a surprise that JPM is one of the stocks hedge funds are buying. In the final quarter of last year, big investors put in $6.37 billion into JPMorgan shares. State Street represented the most optimistic institutional investor, with an acquisition of nearly $503 million. Rounding out the top three are Arrowstreet Capital and BlackRock with $447.8 million and $358.34 million, respectively.
One of the attractive elements of JPM stock is its forward dividend yield of 2.34%. While not the most generous yield, the payout ratio sits at 25.26%. That’s about as dependable as you can get.
Overall, analysts rate JPM a consensus moderate buy but with a modest (downside) target of $196.50. However, the high-side estimate comes in at $221.
Veralto (VLTO)
Listed under the industrials sector – specifically under pollution and treatment controls – Veralto (NYSE:VLTO) provides water analytics, water treatment, marking and coding and packaging and color services worldwide. It operates through two segments: Water Quality (WQ) and Product Quality & Innovation (PQI). Since the beginning of the year, VLTO stock gained 11% of market value. Over the past 52 weeks, it’s up almost 12%.
Given the wider relevance of the business, Veralto makes for an intriguing idea for stocks hedge funds are buying. It’s about as far away from artificial intelligence-related tech stocks as you can get. In the final quarter of 2023, total institutional inflows amounted to $6.1 billion. Leading off was Vanguard Group with acquisitions of $2.16 billion. State Street acquired $730.24 million worth of shares, followed by AllianceBernstein (NYSE:AB) with $382.16 million.
For the current fiscal year, analysts forecast EPS to land at $3.29 on revenue of $5.14 billion. In 2023, the company posted EPS of $3.19 on sales of $5.02 billion.
Covering experts peg VLTO as a moderate buy with a $92.43 average price target.
Newmont (NEM)
An interesting idea for stocks hedge funds are buying, Newmont (NYSE:NEM) is part of the metals and mining industry. Specifically, it engages in the production of and exploration of gold. Further, Newmont also explores for copper, silver, zinc and lead. Along with its operations in North America, it features projects across multiple countries, including Argentina and Australia.
Since the beginning of the year, NEM lost almost 16% of its equity value. That seems an aggressive wager among institutional buyers though they may believe inflation could be stickier than projected. Either way, in Q4, NEM stock saw $5.18 billion worth of institutional inflows. Vanguard represented the top buyer with $1.42 billion worth of shares. BlackRock came in second at $1.03 billion, followed by Van Eck Associates at $731.09 million.
Notably, Newmont offers a forward yield of 2.92% although the payout ratio stands at a staggering 180.33%. For 2024, analysts anticipate EPS of $2.60 on sales of $21.86 billion. Last year, EPS was $2.19 on sales of $16.03 billion.
Analysts rate shares a moderate buy with a $43.32 average price target, implying over 25% upside.
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.
