To say that hedge fund and mutual fund managers tend to follow the herd is an incredible understatement and always has been. While publicly they sometimes seem reluctant to discuss their holdings, especially stocks they are short sellers of, the reality is that managers tend to talk among themselves as they run in the same circles, and often the discussions are centered on their portfolios and what is in them.
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In a new research report, Savita Subramanian, the superb BofA Securities equity and quant strategist, and her team look at mutual fund and hedge fund holdings. As per usual, many of the top stocks are incredibly crowded. The report said this about current conditions:

Several of the largest stay-at-home beneficiaries are more crowded by funds today than a year ago: The world looks completely different than a year ago. A year ago, the consumer heavily relied on e-commerce and shifted their consumption from services to goods. But today, reopening is well underway and the consumer is increasing their services consumption (sometimes at the expense of goods), hitting e-commerce.

We were interested in the stocks that fund managers with the highest relative overweight percentage in their portfolios, and the five stocks that lead that category are very strong ideas for growth investors with a degree of risk tolerance. Portfolio weight is the percentage of an investment portfolio that a particular holding or type of holding comprises. The most basic way to determine the weight of an asset is by dividing the dollar value of a security by the total dollar value of the portfolio.

The five stocks are listed here in order of the highest relative weighting by fund managers, and they all have Buy ratings at top Wall Street firms. It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.

Baker Hughes

This somewhat contrarian play makes sense for investors looking for quality energy exposure. Baker Hughes Co. (NYSE: BKR) is an international industrial service company and one of the world’s largest oil field services companies. It provides the oil and gas industry with products and services for oil drilling, formation evaluation, completion, production and reservoir consulting. It is the second-largest oilfield services and equipment company in the world by market cap.

Baker Hughes prides itself on being a self-described energy technology company that provides solutions to energy and industrial customers worldwide. Built on a century of experience and with operations in over 120 countries, the firm’s innovative technologies and services are taking energy forward.

Goldman Sachs has a Buy rating and said this recently:

Baker Hughes is the core equipment provider and has 90%+ market share in the global LNG liquefaction development market, which we expect will drive EBITDA and margin growth.

Fund managers have a 3.35% relative weighting on this one. Shareholders receive a 3.05% dividend. The $29 Goldman Sachs price target for Baker Hughes stock compares with a $27.90 consensus target and a Wednesday’s closing print of $21.51.

The remains a favorite destination for those looking to eat out, and the stock is a top pick across Wall Street. Chipotle Mexican Grill Inc. (NYSE: CMG) operates more than 2,400 fast-casual Mexican restaurants offering freshly made burritos, tacos, burrito bowls and salads.
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It is 100% company-operated and runs average unit volumes much higher than peers. The company has established a strong foundation with a focus on operations, supply chain and marketing over the past two years. The digital transformation brought about by the pandemic allows Chipotle to leverage its digital ecosystem, the strong mobile app, a rapidly growing loyalty program with over 20 million members in just two years, and third-party delivery and digital drive-thrus continue to drive top-line growth and improving margins.

Chipotle Mexican Grill posted incredible second-quarter results, beating Wall Street’s forecasts for both the top and bottom lines. Sales at restaurants open at least a year grew more than 31%, also coming in ahead of expectations. Many across Wall Street raised their price targets on the stock after the report.

Fund managers have a 2.64% relative weighting. Baird has a price target of $2,150 for Chipotle Mexican Grill stock, while the consensus target is $1,769.72. Wednesday’s closing price was $1,855.46 a share.

EOG Resources

This leading energy firm shows up well on many Wall Street screens. EOG Resources Inc. (NYSE: EOG) is one of the largest independent exploration and production companies operating in the United States, Canada, Trinidad, the United Kingdom and China.

The stock was hit hard earlier this summer and offering an outstanding entry point for investors looking for quality ideas in the sector. EOG has secured four years of drilling permits, while retaining flexibility to reallocate resources to other parts of the portfolio and off federal property. EOG has 3000 locations not on federal lands, which most on Wall Street expect to expand through its exploration.

Fund managers have a 2.55% relative weighting. Shareholders receive a 2.38% dividend. The price target at Piper Sandler is a whopping $110. The posted consensus target is $97.53, and EOG Resources stock closed at $69.46 on Tuesday.

This huge corporation might be a big beneficiary of an infrastructure build-out. Carrier Global Corp. (NYSE: CARR) provides heating, ventilating and air conditioning (HVAC), as well as refrigeration, fire, security and building automation technologies, worldwide.
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The HVAC segment provides products, controls, services and solutions to meet the heating and cooling needs of residential and commercial customers. Its products include air conditioners, heating systems, controls and aftermarket components, as well as aftermarket repair and maintenance services and building automation solutions.

The Refrigeration segment offers transport refrigeration products and services, including refrigeration and monitoring systems for trucks, trailers, shipping containers, intermodal and rail, as well as commercial refrigeration solutions, such as refrigerated cabinets, freezers, systems and controls.

The Fire & Security segment provides various residential and building systems, including fire, flame, gas, smoke and carbon monoxide detection; portable fire extinguishers; fire suppression systems; intruder alarms; access control systems; video management systems; and electronic controls. Its other fire and security service offerings comprise audit, design, installation and system integration, as well as aftermarket maintenance and repair and monitoring services.

Fund managers have a 2.53% relative weighting here. Carrier Global stock investors receive a 0.84% dividend. The Stephens price target of $65 is well above the $52.06 consensus target. Wednesday’s closing share price was $56.89.

Netflix

This Wall Street darling and FANG constituent offers a great entry point after selling off from all-time highs back in January, and it is on the firm’s US 1 list. Netflix Inc. (NASDAQ: NFLX) is the world’s leading internet television network, with more than 120 million members in over 190 countries enjoying more than 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. Members can play, pause and resume watching, all without commercials or commitments. Netflix is available on virtually any device with an internet connection, including personal computers, tablets, smartphones, smart TVs and game consoles, and it 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. It appears Netflix may be cracking down on password sharing. Many on Wall Street view such crackdowns as a tailwind, and Netflix is in a strong position to continue price increases this year.

Fund managers have a 2.52% relative weighting. The BofA Securities price target is $680. The consensus target is $613.68, and Netflix stock closed most recently at $512.40.

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These five stocks have the highest relative portfolio weightings for active fund managers. Given that the market continues to hit new all-time highs seemingly every other day, it may make sense to buy partial positions here and see if we get a pullback in the seasonally weak time of year.

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