Investing

Technology Still Dominates the Current Top 10 Holdings in Hedge Funds

Lee Jackson

Published: June 12, 2018 12:09 pm

Last Updated: January 11, 2020 10:27 pm

We have always maintained here at 24/7 Wall St. that keeping portfolio holdings a secret among managers at hedge fund and mutual funds is probably not their best quality, as they tend to talk among themselves and share ideas, but one thing is for sure: They find big winners, and they ride them until there is nothing left. That is one of the big reasons that mega cap technology dominates the top 10 hedge fund holdings again this year.

A new research report from RBC once again does a deep dive into the holdings of the top hedge funds. Here’s what RBC said in discussing its methodology.

We’ve been tracking two screens of S&P 500 stocks with the heaviest ownership by 340 major hedge funds with significant investments in US equities. The first, our Hedge Fund Hot Dogs screen, captures those with the most hedge fund dollars invested in them. These are the names most commonly associated with hedge fund crowding. The Hedge Fund Hotels is the second screen of S&P 500 names with heavy hedge fund ownership that we track. These are the S&P 500 companies with the highest percent of their market cap owned by hedge funds. This screen does a good job of identifying stocks that investors may not realize have high hedge fund ownership.

We pulled the top 10 stocks from RBC’s Hedge Fund Hot Dogs screen.

Facebook
The huge social media leader has been volatile recently after the disclosure of user data being compromised, but absolutely blew out earnings last week. Facebook Inc. (NASDAQ: FB) is the largest social network with over 2 billion monthly active users and over 1.4 billion daily active users. The company generates revenue from advertising and payments, with over 95% of its revenue coming from advertising. The company generates close to 50% of its revenue in the US and Canada and is expanding rapidly in International markets.

The company’s offerings also include Instagram, a mobile application that enables people to take photos or videos, customize them with filter effects, and share them with friends and followers in a photo feed or send them directly to friends; Messenger, a messaging application for mobile devices and the web that enables people to reach others instantly, as well as businesses to engage with customers; and WhatsApp Messenger, a mobile messaging application.

The Wall Street consensus price target for the company is $219.72. The shares closed trading on Monday at $191.54.

Alphabet
The search giant continues to expand and is even working on a driverless car now. Alphabet Inc. (NASDAQ: GOOGL) is a global technology company focused on key areas, such as search, advertising, operating systems and platforms, enterprise and hardware products. The company generates revenue primarily by delivering online advertising and from selling apps and contents on Google Play as well as hardware products. The company provides its products and services in more than 100 languages and in 190 countries, regions and territories.

Google offers performance and brand advertising services. Its Google segment includes internet products, such as search, ads, commerce, maps, YouTube, apps, cloud, Android, Chrome and Google Play, as well as technical infrastructure and newer efforts, such as virtual reality.

The Wall Street consensus price target estimate is $1,264.51. The shares closed Monday at $1,140.90.

Microsoft
This is a top old-school technology stock that posted all-time highs this year and has a massive $138.6 billion sitting on its balance sheets. Microsoft Inc. (NASDAQ: MSFT) continues to find an increasing amount of support from portfolio managers who have been adding the software giant to their holdings at an increasingly faster pace all this year and last.

Many Wall Street analysts feel that Microsoft has become a clear No. 2 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 Web Services. Several analysts maintain that Microsoft is discounting Azure for large enterprises, so that Azure may be cheaper than AWS for larger users. The cloud was big in the recent earnings report, which was outstanding.

Microsoft shareholders currently receive a 1.83% dividend. The consensus price objective for the company is $111.06. The shares closed Monday at $101.05.

Amazon
This company is the absolute leader in online retail and a dominant player in the cloud storage business and it remains a top pick on Wall Street. Amazon.com Inc (NASDAQ: AMZN) serves consumers through retail websites, such as Amazon.com and Amazon.ca, which primarily include merchandise and content purchased for resale from vendors and offerings fromthird-party sellers.

Amazon Web Services is also the undisputed leader in the cloud realm now, and many top analysts see the company expanding and moving up the enterprise information value chain and targeting a larger total addressable market. 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.

The Wall Street consensus target is $1,834.52. The shares closed Monday at $1,689.12.

Time Warner
The company is still being pursued by AT&T Inc. (NYSE: T) and a final ruling could come as soon as today. Time Warner Inc. (NYSE: TWX) operates as a media and entertainment company in the United States and internationally. It has three segments: Turner, Home Box Office and Warner Bros. The Turner segment creates and programs branded news, entertainment, sports, and kids multiplatform content for consumers. It operates about 175 channels in 200 countries and territories.

The Home Box Office segment provides premium pay and basic tier television, and video content services including HBO and Cinemax. HBO also operates HBO Now, a video content service, and sells original programming through physical and digital formats. And the division licenses original programming through international television networks and video content services.

The Warner Bros. segment produces, distributes, and licenses television programming and feature films. It distributes digital and physical home entertainment products; and produces and distributes games, as well as licenses consumer products and brands.

Time Warner Inc. serves cable system operators, satellite service distributors, telephone companies and virtual multichannel video programming distributors, as well as digital distributors.

Shareholders are paid a 1.7% dividend. The Wall Street consensus price target for the company is $104.43. The shares closed Monday at $96.17.

Netflix
This Wall Street darling and FANG constituent could offer solid upside. Netflix Inc. (NASDAQ: NFLX) is the world’s leading Internet television network with more than 120 million global subscribers in over 190 countries enjoying in excess of 125 million hours of TV shows and movies per day, including original series, documentaries and feature films. Members can watch as much as they want, anytime, anywhere, on nearly any internet-connected screen. Netflix subscribers can play, pause and resume watching, all without commercials or commitments.

Netflix is available on virtually any device that has an internet connection, including personal computers, tablets, smartphones, smart TVs and game consoles. The service automatically provides the best possible streaming quality based on the available bandwidth. Many titles, including Netflix original series and films, are available in high-definition with Dolby Digital Plus 5.1 surround sound and some in Ultra HD 4K. Advanced recommendation technologies (for as many as five user profiles) help members discover entertainment they’ll love.

The consensus price objective across Wall Street is set at $334.95. The shares closed Monday at $361.45.

Visa
This top credit card issuer is becoming a huge leader in digital pay. Visa Inc. (NYSE: V) operates the world’s largest retail electronic payments network. The company provides processing services and payment product platforms, including consumer credit, debit, prepaid and commercial payments, that are offered under Visa and related brands. According to Nielsen estimates, the company is the largest global credit network (as measured by volume) and the second largest global debit network.

Visa is not a bank and does not issue cards, extend credit or set rates and fees for consumers. Visa’s innovations, however, enable financial institution customers to offer consumers more choices: pay now with debit, pay ahead of time with prepaid or pay later with credit products.

Shareholders are paid a small 0.7% dividend. The Wall Street consensus price target is posted at $143.76. The shares closed Monday at $133.91.

Aetna
This top health care provider has traded sideways February and looks poised to break out. Aetna Inc. (NYSE: AET) is one of the nation’s largest managed care organizations, covering roughly 24 million members. The company focuses on three main business segments: health care (health insurance, dental, behavioral health and pharmacy benefit products), group insurance (including life, disability and long-term care insurance products) and large-case pension (a legacy business that is largely in runoff).

Aetna has agreed to be purchased by drugstore chain CVS in a massive $69 billion acquisition. While there has been some concerns over regulatory approval, top CVS management has confirmed recently it is making solid progress with state regulators, and they expect the deal to be closed later this year.

Shareholders are paid a small 0.81% dividend. The Wall Street consensus is $203.19. The shares closed Monday at $181.01.

Twenty-First Century Fox
This company is being pursued by Comcast and Disney. Twenty-First Century Fox Inc (NASDAQ: FOXA) is a diversified international media and entertainment company with balanced and high-growth assets.

The company’s operating segments include: filmed entertainment (20th Century Fox), TV (the Fox broadcast network and owned and operated stations) and cable networks like the Fox News Channel and FX. The company also has a significant equity investment in direct-to-home satellite TV provider Sky.

Shareholders are paid a 0.9% dividend. The Wall Street consensus price objective is at $40.40. The shares closed Monday at $40.13.

Bank of America
The company posted solid first-quarter results. Bank of America Corp. (NYSE: BAC) is a ubiquitous presence in the United States providing various banking and financial products and services for individual consumers, small and middle market businesses, institutional investors, corporations and governments in the United States and internationally. It operates 5,100 banking centers, 16,300 ATMs, call centers, online and mobile banking platform.

Bank of America’s earnings rose in the first quarter, and the company said it plans to open 500 new branches as it issued upbeat financial results that topped Wall Street forecasts. The bank reported net income of $6.9 billion, or 62 cents per share, beating the predictions of $6.3 billion and 59 cents from financial analysts surveyed by S&P Capital IQ. Revenue for the January-to-March period totaled $23.1 billion, a rise from $22.2 billion for the same stretch last year, and higher than the analysts’ forecast.

Bank of America investors are paid a small 1.6% dividend. The Wall Street consensus price target is posted at $34.76. The shares closed Monday at $30.06.

There you have it — the top 10 stocks that hedge funds own right now. One company whose fall out of the top 10 comes as a surprise is Apple Inc. (NASDAQ: AAPL), which slid to No. 18 from No. 8 this year. All of these large-cap behemoths make good sense for long-term growth accounts with a degree of risk tolerance.