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Microsoft and 3 Other Stocks That Hedge Fund Managers Love

Microsoft and 3 Other Stocks That Hedge Fund Managers Love

By    |   Wednesday, 25 May 2016 08:56 AM

Information about hedge fund holdings has become much more plentiful in recent years.

24/7 Wall Street reported that a recent research report from FactSet “presented a mountain of hedge fund data that was as of the conclusion of the first quarter. While most of it was sector allocation, and the biggest buys and sells, we were intrigued by the top holdings.”

24/7 Wall Street digested the data and offers the top holdings, “starting from the largest by the end-of-the-quarter market value.”

  • Kraft Heinz: The funds’ top holding is KHC, the third-largest food and beverage company in North America and the fifth largest in the world, with eight $1 billion brands. “Kraft Heinz shareholders are paid a tasty 2.8% dividend. The Thomson/First Call consensus price target for the stock is $90.29.”
  • Allergan: This company remains the second largest hedge fund holdings despite the deal with Pfizer falling through due to regulatory issues. Allergan Inc. (AGN) “is an industry leader in research and development, with one of the broadest development pipelines in the pharmaceutical industry and a leading position in the submission of generic product applications globally.”
  • Microsoft: “This old-school technology stock (MSFT) gives investors a degree of mega-cap tech safety, and there is a massive $99 billion sitting on the balance sheet. Microsoft investors are paid a very solid 2.88% dividend, and the forward valuation remains compelling. The consensus price objective is $57.65.”
  • Facebook: "The huge social media leader (FB) has Instagram, from which some analysts see revenues tripling in 2017 over 2016. Premium video and graph search capabilities will strengthen the social media giant’s earnings flow."
So now that we know the top four stocks that hedge funds love, let's face the reality: not everyone loves hedge funds all that much anymore.

“Let’s face it: if you go back to the 1990s, hedge funds delivered something very special: high returns or very differentiated returns that you could not get elsewhere, and that is what hedge fund investors have been looking for,” Neil Chriss, founder of Hutchin Hill Capital, a fund with more than $4bn in assets that caters for big institutions, told the Financial Times.

“The problem is, since the crisis, a lot of hedge funds have not been delivering. Returns have been mediocre,” he said.

"Flows of money from big institutions have transformed hedge funds, which were once primarily a vehicle for rich families. Today, large pension funds account for about a quarter of the money managed by hedge funds. Since the market hit its post-crisis bottom in March 2009, passive, low-cost equity fund investors have thrived while hedge fund returns have underperformed the S&P 500 by 51 percentage points," the FT explained.

To be sure, New York City's largest public pension is exiting all hedge fund investments in the latest sign that the $4 trillion public pension sector is losing patience with these often secretive portfolios at a time of poor performance and high fees, Reuters reported.

The board of the New York City Employees Retirement System (NYCERS) voted to leave blue chip firms such as Brevan Howard and D.E. Shaw after their consultants said they can reach their targeted investment returns with less risky funds.

The move by the fund, which had $51.2 billion in assets as of Jan. 31, follows a similar actions by the California Public Employees' Retirement System (Calpers), the nation's largest public pension fund, and public pensions in Illinois, Reuters reported.

"Hedges have underperformed, costing us millions," New York City's Public Advocate Letitia James told board members in prepared remarks. "Let them sell their summer homes and jets, and return those fees to their investors."

(Newsmax wire services contributed to this report).

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Information about hedge fund holdings has become much more plentiful in recent years.
stocks, hedge, funds, own
Wednesday, 25 May 2016 08:56 AM
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