If there are two constants on Wall Street, one is that portfolio managers tend to talk among themselves, and they also do what is called “talking their book,” which is getting out in a public forum to discuss a trade they have on. While both are totally legal, it can contribute to trades being crowded. At 24/7 Wall St., we like to show our readers the most widely held stocks by the hedge fund universe, as it gives a basic overview as to what they are thinking structurally.
A recent report from FactSet dug into the holdings of the hedge fund world and came up with the 50 top positions that the portfolio managers are holding now. Far from being an eclectic group of “hidden gems,” they are some of the best-run and most prolific large cap companies around. Some may be no surprise at all, and some may raise an eyebrow or two.
Time Warner Cable
Time Warner Cable Inc. (NYSE: TWC) is the top position at hedge funds with a stunning 29 funds holding the stock. It was purchased by Charter Communications in a massive $54 billion deal that was announced last year but has yet to close. The company is among the largest providers of video, high-speed data and voice services in the United States, connecting 16 million customers to entertainment, information and each other.
Time Warner Cable Business Class offers data, video and voice services to businesses of all sizes, cell tower backhaul services to wireless carriers and enterprise-class, cloud-enabled hosting, managed applications and services. Time Warner Cable Media, the advertising sales arm of the company, offers national, regional and local companies innovative advertising solutions.
Time Warner Cable is essentially in a holding pattern as the $195 per share Charter offer is still being scrutinized by the Federal Communication Commission. Most on Wall Street feel the deal will get done, and executives said last year they felt that final FCC approval would come in the first quarter of this year.
Investors receive a 1.57% dividend. The Thomson/First Call consensus price target is $199.89, and shares were trading midday Tuesday at $190.27.
Apple
Apple Inc. (NASDAQ: AAPL) evolutionized personal technology with the introduction of the Macintosh in 1984, but UBS recently decided it was time to be removed after a long stay on the Q-GARP list. Apple leads the world in innovation with iPhone, iPad, Mac, Apple Watch and Apple TV. Its four software platforms — iOS, OS X, watchOS and tvOS — provide seamless experiences across all Apple devices and empower people with breakthrough services including the App Store, Apple Music, Apple Pay and iCloud.
The stock has been hit hard since posting all-time highs last summer. Many managers may have added the blue chip technology giant in the fourth quarter as the stock dropped over 20% from the 2015 summer highs. A whopping 24 hedge funds own the stock now.
Apple investors receive a 2.17% dividend. The consensus price target is $135.92. Shares were trading Tuesday $95.34.
Allergan
This company is being bought by pharmaceutical giant Pfizer in a massive $160 billion deal. Allergan Inc. (NYSE: AGN) focuses on developing, manufacturing and commercializing innovative branded pharmaceuticals, high-quality generic and over-the-counter medicines, and biologic products for patients around the world.
It markets a portfolio of best-in-class products that provide valuable treatments for the central nervous system, eye care, medical aesthetics, gastroenterology, women’s health, urology, cardiovascular and anti-infective therapeutic categories, and it operates the world’s third-largest global generics business, providing patients around the globe with increased access to affordable, high-quality medicines. Allergan is an industry leader in research and development, with one of the broadest development pipelines in the pharmaceutical industry and a leading position in the submission of generic product applications globally.
Some 28 hedge funds own the stock and continue to wait as the Treasury Department announced recently that it is working on new rules for corporate tax inversions, which is potentially what the Pfizer/Allergan deal would be, and could possibly throw wrench into the negotiations. Pfizer executives maintain that the government will not scuttle the deal.
The consensus price objective is posted at $366.07. The shares traded on Tuesday at $285.64.
Microsoft
This old-school technology company has a massive $99 billion sitting on the balance sheet, and 24 hedge funds own the stock now. Microsoft Inc. (NASDAQ: MSFT) develops, licenses and supports software products, services and devices worldwide.
Its Devices and Consumer Licensing segment licenses Windows operating system and related software, Microsoft Office for consumers and the Windows Phone operating system. Its Computing and Gaming Hardware segment provides Xbox gaming and entertainment consoles and accessories, second-party and third-party video games and Xbox Live subscriptions, as well as Surface devices and accessories and Microsoft personal computer (PC) accessories.
Numerous Wall Street analysts feel that Microsoft has become a clear number two in the public or hyper-scale cloud infrastructure market with Azure, which is the company’s cloud computing platform offering. Some have flagged Azure as a solid rival to Amazon’s AWS service. This could be one major reason so many hedge funds are bullish on Microsoft.
Investors receive a very solid 2.78% dividend, and the forward valuation remains compelling. The consensus price target is $58.56. Shares were trading on Tuesday at $51.36.
Amazon
This is the absolute leader in online retail and also a dominate player in cloud storage business, but it missed estimates badly and got hit hard in January. Amazon.com Inc. (NASDAQ: AMZN) serves consumers through retail websites, which primarily include merchandise and content purchased for resale from vendors and those offered by third-party sellers. In addition, the company serves developers and enterprises through Amazon Web Services (AWS) that provides compute, storage, database, analytics, applications and deployment services that enable virtually various businesses.
Amazon’s fourth-quarter results were below Wall Street estimates on almost all metrics, and the guidance for the first quarter was somewhat mixed. While the North American revenues rose a solid 24%, they came in below some estimates. While the stock was pounded, many remain buyers on this weakness, as the e-commerce giant has a distinct fulfillment advantage and remains a core technology holding. A total of 21 hedge funds own the stock, and given the steep sell-off this year, more may be adding to positions.
The consensus price objective is set at a whopping $739.57. Shares were trading on Tuesday at $550.01.
After a disastrous 2015, many hedge funds may be reassessing their positions and going with solid large cap companies that have outstanding prospects. All five of these companies certainly fit that bill.
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