In this article, we discuss the 9 stocks better than Apple according to hedge funds. If you want to skip our detailed analysis of these stocks, go directly to the 4 Stocks Better than Apple According to Hedge Funds.
Bloated valuations and questionable earnings growth are some of the most important factors that seasoned investors take into account before pouring money into a market that is dominated by technology stocks. Apple Inc. (NASDAQ:AAPL), the California-based multinational technology company with core interests in the consumer electronics business, is one of the few tech firms that has managed to leverage a world-leading consumer product ecosystem over the past decade or so to consistently improve cash flows and justify a valuation of over $2 trillion.
Since the launch of the first Apple iPhone in 2007, Apple Inc. (NASDAQ:AAPL) has built a loyal customer base, nurtured a culture around innovation, and increased earnings consistently to the delight of long term investors. However, the stock is now trading at multiples that go far beyond the basic earnings, spooking investors who believe that this is a result of low interest rates. For those thinking along these lines, there are some stocks that offer a similar growth profile with varying degrees of risk attached to them.
Some of the stocks that hedge funds seem to prefer over Apple include Amazon.com, Inc. (NASDAQ:AMZN), Facebook, Inc. (NASDAQ:FB), and Microsoft Corporation (NASDAQ:MSFT), among others discussed in detail below. At the end of the second quarter of 2021, 138 hedge funds in the database of Insider Monkey held stakes worth $145 billion in Apple Inc. (NASDAQ:AAPL), up from 127 in the preceding quarter worth $131 billion. This indicates that the stock, valuation concerns notwithstanding, is still a hot item on Wall Street.
The China Factor
There are also murmurs about the impact of the housing market crisis in China and the impact it could have on Apple Inc. (NASDAQ:AAPL) since it is the fastest growing market for the firm – sales in the region were up 58% at the end of June 2021. An economic crisis in the Asia country would certainly be a short-term headwind for the firm. However, even as the China market grows, the sales of iPhones, a key product of the firm, are falling. In 2020, they were down 20%. Investors should keep an eye on these developments and evaluate them before rushing into investments in the perhaps the most famous company in the world.
Why is Satori Fund Shorting Apple?
Earlier this month, just before Apple Inc. (NASDAQ:AAPL) announced a new lineup of iPhone models, Dan Niles, the founder and senior portfolio manager of Satori Fund, announced that his fund was shorting the stock of the California-based tech firm. Niles predicted an up to 20% correction in the stock before the end of the year, highlighting that the firm could witness slower sales as margins compress amid inflation-driven cost increases. He also noted that the company would find it difficult to sustain year-over-year comparisons because the pandemic had boosted numbers far beyond normal last year.
Photo by Alexandr Bormotin on Unsplash
Our Methodology
With this context in mind, here is our list of the 9 stocks better than Apple according to hedge funds. These were picked from a database of hedge funds tracked by Insider Monkey. Only those companies that have more hedge funds with stakes in them, as compared to Apple Inc. (NASDAQ:AAPL), at the end of the second quarter of 2021 were selected for the list.
The stocks mentioned in this article have a better hedge fund sentiment when compared to Apple.
The list is ranked according to the number of hedge funds having stakes in each company. Data from the 873 funds tracked by Insider Monkey was used for this purpose.
Special importance was assigned to outlining the analyst ratings and business fundamentals for each firm to provide readers with some context so they can make more informed investment choices.
Why should we pay attention to stock picks by hedge funds? Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 86 percentage points since March 2017. Between March 2017 and July 2021 our monthly newsletter’s stock picks returned 186.1%, vs. 100.1% for the SPY. Our stock picks outperformed the market by more than 86 percentage points (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
Stocks Better than Apple According to Hedge Funds
9. PayPal Holdings, Inc. (NASDAQ:PYPL)
Number of Hedge Fund Holders: 143
PayPal Holdings, Inc. (NASDAQ:PYPL) is placed ninth on our list of 9 stocks better than Apple Inc. (NASDAQ:AAPL) according to hedge funds. The firm markets digital payments services and is headquartered in California.
On September 9, investment advisory DA Davidson maintained a Buy rating on PayPal Holdings, Inc. (NASDAQ:PYPL) stock with a price target of $325, noting that a new acquisition would help accelerate the growth of the company in Japan.
At the end of the second quarter of 2021, 143 hedge funds in the database of Insider Monkey held stakes worth $16.3 billion in PayPal Holdings, Inc. (NASDAQ:PYPL), the same as in the preceding quarter worth $14.7 billion.
Just like Amazon.com, Inc. (NASDAQ:AMZN), Facebook, Inc. (NASDAQ:FB), and Microsoft Corporation (NASDAQ:MSFT), PayPal Holdings, Inc. (NASDAQ:PYPL) is one of the stocks attracting the attention of elite hedge funds.
In its Q4 2020 investor letter, Polen Capital Management, an asset management firm, highlighted a few stocks and PayPal Holdings, Inc. (NASDAQ:PYPL) was one of them. Here is what the fund said:
“For the full year 2020, one of the top performers was PayPal, which we purchased in 2019, the company continues to take market share in digital payments and has seen an acceleration in user adoption and engagement, especially within their “silver tech” or older user demographic. We expect many more years of ongoing double-digit growth from their various business segments and new initiatives.”
8. Alibaba Group Holding Limited (NYSE:BABA)
Number of Hedge Fund Holders: 146
Alibaba Group Holding Limited (NYSE:BABA) is a China-based technology conglomerate with interests in several internet-related businesses. It is ranked eighth on our list of 9 stocks better than Apple Inc. (NASDAQ:AAPL) according to hedge funds.
On September 15, investment advisory Stifel maintained a Buy rating on Alibaba Group Holding Limited (NYSE:BABA) stock but lowered the price target to $210 from $260, underlining that the firm was exposed to regulatory risk in China and may face government scrutiny.
Out of the hedge funds being tracked by Insider Monkey, Washington-based investment firm Fisher Asset Management is a leading shareholder in Alibaba Group Holding Limited (NYSE:BABA) with 14 million shares worth more than $3.2 billion.
In its Q1 2021 investor letter, Polen Capital Management, an asset management firm, highlighted a few stocks and Alibaba Group Holding Limited (NYSE:BABA) was one of them. Here is what the fund said:
“Alibaba also detracted from performance as the company continues to remain under regulatory scrutiny from both the Chinese State Administration for Market Regulation on antitrust concerns and the U.S. Securities and Exchange Commission on ADR listing requirements. Despite the regulatory overhang, we believe that Alibaba’s competitive positioning and growth outlook remains intact, even if the company must pay fines or modify some business practices. We viewed the current valuation at <20x next twelve month’s earnings as a compelling opportunity to add to our position. Alibaba is the second largest position in the Portfolio.”
7. Alphabet Inc. (NASDAQ:GOOG)
Number of Hedge Fund Holders: 155
Alphabet Inc. (NASDAQ:GOOG) is a California-based technology company that owns and runs the internet search engine Google. The firm is split into Class A and Class C stocks. GOOG is the Class C stock of the firm. It is placed seventh on our list of 9 stocks better than Apple Inc. (NASDAQ:AAPL) according to hedge funds.
On September 17, investment advisory Jefferies reiterated a Buy rating on Alphabet Inc. (NASDAQ:GOOG) stock and raised the price target to 3,325 from 3,150, noting an improved margin profile and breakthrough growth of YouTube as some of the reasons behind the raise.
Out of the hedge funds being tracked by Insider Monkey, London-based investment firm TCI Fund Management is a leading shareholder in Alphabet Inc. (NASDAQ:GOOG) with 2.9 million shares worth more than $7.3 billion.
In addition to Amazon.com, Inc. (NASDAQ:AMZN), Facebook, Inc. (NASDAQ:FB), and Microsoft Corporation (NASDAQ:MSFT), Alphabet Inc. (NASDAQ:GOOG) is one of the stocks that hedge funds have been piling into.
In its Q1 2021 investor letter, Artisan Partners, an asset management firm, highlighted a few stocks and Alphabet Inc. (NASDAQ:GOOG) was one of them. Here is what the fund said:
“Large-cap tech companies have been resilient through the pandemic—Alphabet among them. A top contributor, Alphabet’s Play Store and Google Cloud are in demand as businesses accelerate online activity which, along with strong YouTube user growth, is helping stabilize temporarily weaker search ad revenue trends. Through the lens of our disciplined bottom-up research process, we view Alphabet as one of the best businesses in the world, capable of expanding revenues at a rapid rate for years to come, with a bullet proof balance sheet and an average asking price. It’s a name we’ve owned since 2012 and for which we continue to have high hopes regarding future prospects.”
6. Mastercard Incorporated (NYSE:MA)
Number of Hedge Fund Holders: 156
Mastercard Incorporated (NYSE:MA) is ranked sixth on our list of 9 stocks better than Apple Inc. (NASDAQ:AAPL) according to hedge funds. The firm markets transaction processing services and is headquartered in New York.
On August 17, investment advisory JPMorgan kept an Overweight rating on Mastercard Incorporated (NYSE:MA) stock and raised the price target to $430 from $427, noting that modern payments technology companies were outperforming the wider market.
Out of the hedge funds being tracked by Insider Monkey, Virginia-based investment firm Akre Capital Management is a leading shareholder in Mastercard Incorporated (NYSE:MA) with 5.8 million shares worth more than $2.1 billion.
Amazon.com, Inc. (NASDAQ:AMZN), Facebook, Inc. (NASDAQ:FB), and Microsoft Corporation (NASDAQ:MSFT) are some of the top stocks to buy right now, just like Mastercard Incorporated (NYSE:MA).
In its Q4 2020 investor letter, Bretton Fund, an asset management firm, highlighted a few stocks and Mastercard Incorporated (NYSE:MA) was one of them. Here is what the fund said:
“While consumers resumed much of their spending by summer, what and how they used their Visas and Mastercards changed. For obvious reasons, people shifted to contactless payments—one of the Covid-era changes we think is permanent—and replaced travel purchases with online shopping and food delivery. Consumers spent more on their debit cards and less on their credit cards; Visa and Mastercard make more per transaction on the latter. They also make more on cross-border transactions that come mostly from international travel, which ground to a halt early in the pandemic. Visa’s and Mastercard’s earnings per share fell by 7% and 16%, respectively, compared to their usual mid-teens growth. We’re not too worried, and we think they’ll catch up nicely in the post-vaccine world. Visa’s stock returned 17.1% and Mastercard’s 20.2%.”
5. Visa Inc. (NYSE:V)
Number of Hedge Fund Holders: 162
Visa Inc. (NYSE:V) is placed fifth on our list of 9 stocks better than Apple Inc. (NASDAQ:AAPL) according to hedge funds. The company provides payments technology services and is headquartered in California.
On September 3, investment advisory Morgan Stanley maintained an Overweight rating on Visa Inc. (NYSE:V) stock with a price target of $282, playing down a risk to the firm from interchange pricing issues with ecommerce giant Amazon.
At the end of the second quarter of 2021, 162 hedge funds in the database of Insider Monkey held stakes worth $27 billion in Visa Inc. (NYSE:V), down from 164 in the preceding quarter worth $26 billion.
Amazon.com, Inc. (NASDAQ:AMZN), Facebook, Inc. (NASDAQ:FB), and Microsoft Corporation (NASDAQ:MSFT) are some of the best stocks to buy right now, just like Visa Inc. (NYSE:V).
In its Q1 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and Visa Inc. (NYSE:V) was one of them. Here is what the fund said:
“To make room for these new names with more attractive outlooks related to the reopening, we sold out of companies where the thesis is not playing out at the pace we expected including Visa.”
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Disclosure. None. 9 Stocks Better than Apple According to Hedge Funds is originally published on Insider Monkey.
