These Hedge Fund Favorites Could Be Great Long-Term Plays
Although investors should never blindly follow the market moves of a hedge fund, there’s something intriguing about checking out the moves that “smart money” is making each quarter. This is especially true in 2022, as market volatility and complex macroeconomic factors are playing a big role in equities this year. While investors won’t have direct insight into the purchases that hedge funds made in Q1 until the next batch of regulatory filings are made public in May, it never hurts to take a look at some of the stocks that large investors tend to favor.
Certain stocks become hedge fund favorites over time for a variety of reasons, and paying attention to the names that come up time and time again in their holdings can help you have extra conviction in purchases. That’s why we’ve put together the following list of 3 hedge fund favorite stocks to buy now so that you can get a better idea about the stocks that institutional investors are holding. Let’s take a deeper look below.
First up is MercadoLibre, a growth stock that offers exposure to emerging markets in Latin America. While we know that high-valuation stocks have been out of favor in 2022, this hedge fund favorite could be a great buy-the-dip opportunity given that shares are down over 21% year-to-date. MercadoLibre Operates the largest e-commerce marketplace in Latin America, which is certainly a solid reason to consider adding shares given how consumer preferences have quickly shifted to online shopping. The company also has an advertising business, payment and financing operations, logistics solutions, and more, which all complement the e-commerce business well.
It’s worth noting that Brazil’s Q4 GDP expanded, which could mean major import in Latin America are on the rebound. Additionally, the fact that the pandemic has likely accelerated the widespread use of digital payments in Latin America is another plus for MercadoLibre given its business model. The bottom line here is that MercadoLibre is a truly dominant force in the Latin American e-commerce industry, and adding for the long-term after such a dramatic pullback could be a wise decision.
Cisco Systems (NASDAQ:CSCO)
Next up is a blue-chip tech stock that hedge funds love, Cisco Systems. It’s the perfect type of company to consider adding in the current market environment, as it’s a “value tech” name that pays dividends. Cisco is a worldwide leader in communications equipment and a company that offers exposure to exciting trends like cloud, 5G, and cybersecurity, which means investors might be overlooking the stock’s upside for the long term. Cisco also offers investors a 2.71% dividend yield and trades at a very reasonable forward P/E ratio of 16.28, which are both numbers that stand out in the technology sector.
Cisco finished Q2 with a record backlog of $14 billion, which essentially confirms the fact that enterprise spending is picking up again in a big way after the pandemic. The company also saw its Q2 revenues grow by 6% year-over-year to reach $12.7 billion, boosted its dividend by 3%, and authorized an additional $15 billion for stock repurchases. With so many companies moving to hybrid cloud environments, Cisco is poised to see strong momentum in its business for years to come, which is likely why hedge funds are such big fans of the stock.
This cutting-edge visual computing company was scooped up by several high-profile hedge funds in Q4, including Ken Griffin’s Citadel fund, which increased its position by over 56% according to 13F filings. NVIDIA is clearly a hedge fund favorite, and the semiconductor powerhouse could be a great long-term buying opportunity considering shares have pulled back over 33% from recent highs. There aren’t many tech stocks out there that can provide exposure to so many exciting new technologies, as NVIDIA’s graphics processing units play a key role in artificial intelligence, personal computers, data centers, mobile phones, and even autonomous vehicles.
The company posted very strong Q4 results including sales of $7.6 billion, representing 53% year-over-year growth. NVIDIA also guided for a record Q1 to start its fiscal year, which likely signals to investors that the company is navigating supply chain issues well. Although semi stocks have not been off to a great start in 2022, it’s hard to argue against adding shares of this innovative and unique company for the long term. If the stock can reclaim the 200-day moving average in the coming weeks, we could one the verge of a new rally.
NVIDIA is a part of the Entrepreneur Indexwhich tracks some of the largest publicly traded companies founded and run by entrepreneurs.