Fund Manager Favorites
A comprehensive breakdown of the 9 stocks that fund managers seem to like the most right now.
5.7 Trillion Reasons to Learn More About These Stocks
In this post, I’ll be sharing nine stocks that 788 hedge funds and 534 mutual funds seem to like the most right now. As it relates to the hedge funds, this includes $2.6 trillion of gross equity positions and over $3.1 trillion in assets under management for the mutual funds. A total of $5.7 trillion in monetary value.
No fluff, just data.
In case you’re curious about the “Seeking Alpha Quant Rating” included in each of these summaries, read more here.
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1. Fiserv, Inc. (FISV)
The first stock on our list describes themselves as someone who “provides payment and financial services technology worldwide.” The company operates through three main business segments — Acceptance, Fintech, and Payments.
Acceptance provides POS merchant acquiring and digital commerce services, mobile payment services, and security and fraud protection products.
Fintech offers customer deposit and loan accounts, provides digital banking, financial and risk management, cash management, consulting, and item processing and source capture.
Payments offers card transaction services, card production, print, and various network services.
Throughout the last 5 years, the company has done a fantastic job of generating free cash flow for their shareholders — $1.0 billion in 2016 and $3.4 billion in 2021. Gross profit margins continue to expand and revenue seems to be growing by high single digits.
Current Price: $98 / share
Wall Street 12-month PT: $128 / share
Seeking Alpha Quant Rating: Hold, 3.0
2. General Motors (GM)
This company is a lot more well-known than the first company mentioned. General Motors designs, builds, and sells trucks, crossovers, cars, and automobile parts and accessories around the world.
It markets its vehicles primarily under Buick, Cadillac, Chevrolet, GMC, Holden, Baojun, and Wuling brand names. Beyond selling their cars to dealers and retail customers, the company also sells to fleet customers — including daily rental car companies, commercial fleet customers, leasing companies, and governments.
General Motors has had a rocky 7-8 years. The company was free cash flow positive in 2013 ($2.2 billion), then after years of revenue contraction found themselves releasing -$19.2 billion in free cash flow in 2017.
2022 is supposed to be the year this company finally turns their almost decade long fight with FCF around — forecasted to print $3.2 billion in FCF, catalyzed by a +25% bump in revenue.
Current Price: $47 / share
Wall Street 12-month PT: $75 / share
Seeking Alpha Quant Rating: Strong Buy, 4.5
3. Mastercard (MA)
Number three on our list is another household name, of which you’re likely already a customer. Mastercard provides transaction processing and other payment-related products / services to the United States and internationally. It facilitates the processing of payment transactions, including authorization, clearing, and settlement.
The company offers integrated products and value-added services for account holders, merchants, financial institutions, businesses, governments, and other organizations. Further, it provides open banking and digital identity platform services.
Mastercard’s stock has performed incredibly well since their IPO in 2006 — up nearly 77X. They’re a free cash flow printing machine, having generated $4.0 billion in FCF throughout 2016 and now $8.6 billion in 2021.
The company is forecasted to nearly double their FCF over the coming 4 years — $10.5 billion in 2022, $12.7 billion in 2023, $15.2 billion in 2024, and $18.4 billion in 2025.
Current Price: $371 / share
Wall Street 12-month PT: $430 / share
Seeking Alpha Quant Rating: Hold, 3.2
4. ServiceNow, Inc. (NOW)
Another incredible IPO-winner, ServiceNow provides enterprise cloud computing solutions that defines, structures, consolidates, manages, and automates services for enterprises worldwide.
It operates for workflow automation, artificial intelligence, machine learnings, robotic process automation, data benchmarking, and collaboration and development tools.
This fast-growing tech company has done very well over the last several years — revenue growing by +30% compounded annually, gross profit margins expanding from 65% to 81%, and free cash flow flipping from negative -$455 million to positive $300 million in 5 years.
On track to 5X their free cash flow between 2021 and 2022 — ServiceNow is definitely moving in the right direction.
Current Price: $580 / share
Wall Street 12-month PT: $700 / share
Seeking Alpha Quant Rating: Hold, 3.2
5. Charles Schwab Corp. (SCHW)
Number five on our list is a company you might have heard of — some of you are likely already customers. Charles Schwab provides wealth management, securities brokerage, banking, asset management, custody, and financial advisory services. The company operates in two segments — Investor Services and Advisor Services.
Investor Services provides retail brokerage and banking, retirement plan, and other corporate brokerage services.
Advisor Services offers custodial, trading, banking, and support services — including cash management capabilities, mutual funds, and clearing services.
The company’s revenue more than doubled throughout the last 5 years, from $7.6 billion in 2016 to $19.0 billion in 2021. Their free cash flow, however, more than 3X’d from $1.6 billion in 2016 to $5.6 billion in 2021 — amazing.
Current Price: $86 / share
Wall Street 12-month PT: $104 / share
Seeking Alpha Quant Rating: Hold, 3.4
6. UnitedHealth Group (UNH)
It’s always great to see one of your largest holdings noted as a fund manager favorite. UnitedHealth Group operates through four business segments — UnitedHealthcare, Optum Health, Optum Insight, and Optum Rx.
UnitedHealthcare offers consumer-oriented health benefit plans and services for national employers, public sector employers, mid-sized employers, small businesses, and individuals.
OptumHealth provides access to networks of care provider specialists, health management services, care delivery, consumer engagement, and financial services.
OptumInsight offers software and information products, advisory consulting arrangements, and managed services outsources to hospital systems and other organizations.
OptumRx provides pharmacy care services and programs — including retail network contracting, home delivery, specialty, and compounding pharmacy.
As I’m sure you would imagine, UnitedHealth Group has done an incredible job diversifying revenue streams while generating substantial free cash flow growth. UNH’s revenue increased +55% between 2016 and 2021, while free cash flow increased +145% during the same period of time.
Massive holding for my own portfolio — very excited for this company in the coming 3-5 years.
Current Price: $475 / share
Wall Street 12-month PT: $525 / share
Seeking Alpha Quant Rating: Hold, 3.4
7. Visa, Inc. (V)
Another familiar face, Visa operates as a payment technology company worldwide. The company facilitates digital payments among consumers, merchants, financial institutions, businesses, strategic partners, and government entities.
In addition, the company offers card products, platforms, and value-added services.
Similar to Mastercard, Visa had a very fruitful IPO and has done exceptionally well since — having 14X’d in value since mid-2008.
Over the last 5 years, Visa has been able to grow their revenue by low-double digits compounded annually while maintaining a healthy gross profit margin of ~80%. The company also more than doubled their free cash flow from $6.0 billion in 2016 to $12.4 billion in 2021.
Current Price: $216 / share
Wall Street 12-month PT: $270 / share
Seeking Alpha Quant Rating: Hold, 3.4
8. WorkDay, Inc. (WDAY)
Next up is WorkDay, a company that provides enterprise cloud applications worldwide. Its applications help its customers manage critical business functions and optimize their financial and human resources.
WorkDay offers a suite of financial management applications, which enable CFOs to maintain accounting information in the general ledger, manager financial processes, and identify real-time financial, operational, and management insights.
The company also provides a suite of human capital management applications that allow organizations to manage the entire employee lifecycle from recruitment to retirement.
2022 is a big year for the company — just yesterday guiding +22% revenue growth and wider operating margins. This year is also the first year since going public in 2013 that they’ll be free cash flow positive.
The company is expected to rake in nearly $1 billion in FCF during 2022, or about $4 in FCF per share.
Current Price: $247 / share
Wall Street 12-month PT: $315 / share
Seeking Alpha Quant Rating: Hold, 2.9
9. Wells Fargo & Company (WFC)
This widely-known bank defines themselves as a diversified financial services company — providing banking, investment, mortgage, and consumer and commercial finance products and services in the United States and internationally.
The bank operates four main business segments — Consumer Banking & Lending, Commercial Banking, Corporate & Investment Banking, and Wealth & Investment Management.
Consumer Banking & Lending offers diversified financial products and services for consumers and small businesses — including checking and savings account, credit and debit cards, as well as home, auto, personal and small business lending services.
Commercial Banking provides financial solutions to private, family owned, and certain public companies.
Corporate & Investment Banking offers a suite of capital markets, banking, and financial products and services to corporate, government, and institutional clients.
Wealth & Investment Management provides personalized wealth management, investment, and retirement products and services to clients — including financial planning, private banking, credit, and other services to high-net worth individuals and families.
Wells Fargo nearly tripled their free cash flow year-over-year in 2021, as well as more than 5X’d their earnings per share. 2022, however, seems to be less certain.
Current Price: $53 / share
Wall Street 12-month PT: $63 / share
Seeking Alpha Quant Rating: Hold, 3.5
Boom! There you have it — the nine stocks that seem to be fund managers’ favorites right now. If you haven’t already, be sure to check out this post where I dive deep into where we could be within the market cycle after a “bubble.”
If you’re looking for the next big asset to invest in, consider watching the podcast episode below. I chop it up with the co-founder and CEO of Creative Juice, Sima Gandhi, about the millions of dollars her company is investing toward content creators on YouTube.
Disclaimer: This is not financial advice or recommendation for any investment. The content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.