Beyond Obvious Hedge Fund Favorites: JPMorgan, Citi (Go Figure), Pfizer and More
Goldman Sachs’ (GS) David Kostin notes that the hedge funds’ favorite stocks – the ones big funds are depending on most for long-term gains – are doing a lot better this year than the hedge funds themselves. Makes us wonder if the rest of us can make hedge-worthy money on them without all that complicated shorting.
The popular stocks, outlined in Kostin’s quarterly “Hedge Fund Trend Monitor,” represent the companies that appear most often in the Top 10 holdings lists of fundamentals-driven hedge funds. The Top 3 favorites are no surprise -- Apple (AAPL), Google (GOOG), Microsoft (MSFT) -- and neither is Qualcomm (QCOM) at spot 5. Hedge funds have relied heavily on these growth vehicles for years, and yes, we all wish we’d bought them back when many of those funds did.
The other six of the Top 10 favorites are more interesting. They include, in order of popularity: JPMorgan Chase, Citigroup, Pfizer, Liberty Media, LyondellBasell Industries and Anadarko Petroleum. YCharts looks at the attractions and complications of each of them.
JPMorgan Chase (JPM)
JPMorgan is the darling of the banking sector now, what with Warren Buffett singing management’s praises and its CEO all-but promising record growth. It seems to have emerged from the various sector crises less scathed than others, and investors expect dividend hikes and other wealth-sharing soon.
Citicorp is sort of JPMorgan’s antithesis – the company that’s still in such trouble that it’s a big turnaround play. Citi reports lingering legal problems involving subprime loans, as well as recent investment banking losses. It faces stress tests from regulators like its peers, but its potential for doing well in them is less certain. While investors have pushed up its shares some this year, Citi’s price still lingers close to 2009 levels.
Pharmaceutical company Pfizer is expected to unveil a drug later this year aimed at halting the progression of Alzheimer’s. Investors see this as potentially tens of billions of dollars in new annual revenue. If it doesn’t work, the company could see revenue growth (and probably its share price) slag off again as it loses revenues to patent expirations.
The 4%-plus dividend yield makes the risks more palatable.
Liberty Media Corp. (LMCA)
Liberty Media looks more like a private equity company than a traditional media outfit. It owns the Atlanta Braves as well as stakes in numerous media companies, like Sirius XM Radio (SIRI), and Time Warner Cable (TWC). Those two have done well lately.
Liberty Media only started trading in September. It’s a split off from Liberty Interactive Corp. (LINTA), best known for its ownership of television shopping site QVC.
LyondellBasell Industries (LYB)
Plastics and chemical company LyondellBasell missed fourth-quarter earnings forecasts a few weeks ago, but its share price is still up nearly 30% this year.
The company, based in The Netherlands, emerged from bankruptcy in 2010. Investors believe low natural gas prices and other favorable operating conditions will give it a better shot at success now.
Anadarko Petroleum (APC)
Anadarko has been a delightful driller for anyone who bought its shares about 18 months ago. They’ve more than doubled in value since then. With the company taking full advantage of an upswing in domestic drilling, investors believe this $42.3 billion market cap company still has a lot to gain.
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