As we have noted before, over the past couple of years hedge fund performance, especially by some of the bigger funds, has trailed overall market performance. Part of the problem for some funds, especially those that are long/short, is that market volatility for the most part has remained tepid.
That all changed back in March and April when the market plunged 35% in less than a month, and the CBOE Volatility Index (VIX) exploded up to the 85 level. While the VIX has settled down since, currently trading at about 26, the volatility is still much more than we saw for the past few years.
Despite the underperformance of some managers, the holdings of the top hedge funds are always of interest to investors, and with good reason. Since portfolio managers tend to talk among themselves, good ideas are spread around and often end up in many portfolios.
A new Jefferies research report covers in detail the holdings of hedge funds. Here, we focus on the stocks added the most to long-only portfolios now. Seven companies are on the list, and they all are good ideas for long-term growth investors. It’s important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
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Accenture
This is a great way for investors to play information technology. Accenture PLC (NYSE: ACN | ACN Price Prediction) provides consulting, technology and outsourcing services worldwide.
The company’s Communications, Media & Technology segment provides professional services for clients to accelerate and deliver digital transformation, develop industry-specific solutions and enhance efficiencies and business results for communications, media, high-tech, software and platform companies.
The Financial Services segment offers services for profitability pressures, industry consolidation, regulatory changes and the need to adapt continually to new digital technologies for banking, capital market and insurance industries.
Its Health & Public Service segment provides consulting services and digital solutions to help clients deliver social, economic, and health outcomes for health care payers and providers, government departments and agencies, public service organizations, educational institutions and nonprofit organizations.
Shareholders receive a 1.45% dividend. The Wall Street consensus price target is $224.88, which is below Monday’s closing price of $227.18 a share.
Kellogg
It should come as no surprise the hedge funds are adding this cereal maker, given the recent stay-at-home edicts. Kellogg Co. (NYSE: K) is a multinational food manufacturing company. Its principal products include crackers, crisps, savory snacks, toaster pastries, cereal bars, granola bars and bites, ready-to-eat cereals, frozen waffles, veggie foods and noodles.
The company offers its products under the Kellogg’s, Cheez-It, Pringles, Austin, Parati, RXBAR, Kashi, Bear Naked, Eggo, Morningstar Farms, Choco Krispies, Crunchy Nut, Nutri-Grain, Special K, Squares, Zucaritas, Sucrilhos, Pop-Tarts, K-Time, Split Stix, Be Natural, Coco Pops, Rice Krispies Squares, Vector and Gardenburger brand names.
Shareholders receive a 3.30% dividend. The consensus price target stands at $69.00, but Kellogg stock closed at $69.35 on Monday.
Roku
This stock has been on fire and is a pandemic winner. Roku Inc. (NASDAQ: ROKU) provides a streaming platform for television. It operates through the following business segments.
The Player segment consists of net sales of streaming media players and accessories through retailers and distributors, as well as directly to customers through the company’s website. The Platform segment includes fees received from advertisers and content publishers, and from licensing the company’s technology and proprietary operating system to service operators.
With many people cutting the proverbial cable and satellite cord, this is a great way to play the sector.
The consensus price target is $137.36. Roku stock closed way above that level at $161.82, up almost 5% on Monday.
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Texas Instruments
This old-school legacy semiconductor tech company offers solid value at current levels and is a great pick for investors who are more conservative. Texas Instruments Inc. (NASDAQ: TXN) is a broad-based supplier of semiconductor components, ranging from digital signal processors to high-performance analog components, to digital light-processing technology and calculators.
Some 65% of the company’s sales are exposed to the well-diversified, business-to-business industrial, automotive, communications infrastructure and enterprise markets. While business from those sectors, especially automotive, could suffer in the near term, the analyst feels the solid dividend should support the shares.
The company is also a big Apple supplier, so the long-term outlook for this venerable leader makes it a safer bet for accounts with less risk tolerance.
Investors receive a 2.82% dividend, and the consensus target is $139.68. Texas Instruments stock was last seen trading at $129.32.
UPS
With many Americans at home due to lockdown rules, the delivery business has been red hot. United Parcel Service Inc. (NYSE: UPS) provides logistics, freight (air, sea, ground, rail) forwarding, international trade management and customs brokerage.
The company has roughly 481,000 employees (390,000 in the United States) and serves more than 220 countries and territories. It operates a fleet of 237 UPS aircraft, as well as a ground fleet of more than 110,000 delivery vehicles. More than 46% of its volume is business-to-consumer, and it delivers more than 18 million packages per day globally.
UPS said earlier this year that it aims to more than double weekend deliveries in 2020 as package carriers look for ways to satisfy the always-on demands of e-commerce customers, including rising rival Amazon.com. UPS is vying also to attract more retailers that want to keep pace with Amazon shipping speeds, while holding on to its Amazon business, which accounts for almost 20% of company volume.
Shareholders receive a 2.83% dividend. UPS has blown through the consensus price objective of $136.61, closing Monday at $142.18 after posting huge earnings last week.
Whirlpool
A potential increase in new home sales would be a big positive for this company. Whirlpool Corp. (NYSE: WHR) manufactures and markets home appliances and related products. Its principal products include refrigerators, freezers, ice makers and refrigerator water filters; laundry appliances and related laundry accessories; cooking and other small domestic appliances; and dishwasher appliances and related accessories, as well as mixers.
Whirlpool markets and distributes its products primarily under the Whirlpool, Maytag, KitchenAid, JennAir, Amana, Roper, Admiral, Affresh, Gladiator, Speed Queen, Hotpoint, Bauknecht, Indesit, Ignis, Laden, Privileg, KIC, Consul, Brastemp, Acros, Ariston, Diqua and Royalstar brands.
Investors receive a 3% dividend. The consensus target price is $159. The last Whirlpool stock trade on Monday hit the tape at $164.61.
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Western Union
While nobody is sending telegrams these days, many are sending money, and this is a solid way to play cash transfer. Western Union Co. (NYSE: WU) provides money movement and payment services worldwide. The company operates in two segments.
The Consumer-to-Consumer segment facilitates money transfers between two consumers, primarily through a network of third-party agents. This segment offers international cross-border transfers and intra-country transfers, as well as money transfer transactions through websites and mobile devices.
The Business Solutions segment provides payment and foreign exchange solutions, primarily cross-border and cross-currency transactions for small and medium-size enterprises, other organizations and individuals, as well as foreign currency forward and option contracts.
Holders of Western Union stock receive a 3.71% dividend. The $22.06 consensus price objective is less than the most recent close at $23.90 per share.
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The COVID-19 theme runs right through this list of new companies being added by hedge fund managers. The pandemic has drastically changed life over the past six months, and while things eventually will return to normal, for the foreseeable future, we could remain pretty much where we stand now.
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