The 7 Top Stocks That Hedge Funds Are Buying Now

While you shouldn’t automatically follow the masses with every decision, the stocks that hedge funds are buying now may provide considerable value to retail investors. Fundamentally, hedge funds typically own the best research tools, platforms, and resources. Even better, they hire the best analysts. So, when they acquire something, they’re doing it with a greater magnitude of conviction.

Also, stocks that hedge funds are bullish on may generate a self-fulfilling cycle. Basically, you have articles like this one broadcasting the top hedge fund favorites to a wide public audience. Invariably, this action will pique curiosity, leading to further investigations and perhaps acquisitions. To be fair, these aren’t the most groundbreaking ideas ever collected. However, the big dogs really love them. So, without further ado, below are compelling hedge fund stocks.

Itau CorpBanca (ITCB)

According to data from HedgeFollow, Itau CorpBanca (NYSE:ITCB) ranks as the top name among stocks that hedge funds are buying. Based on various regulatory filings since the beginning of the first quarter of 2023, institutional investors acquired a total of $4.36 trillion worth of ITCB stock. Ranking as the fourth-largest commercial bank in Chile, Itau CorpBanca represents an oddity for hedge fund stocks. With banking sector concerns that originated in the U.S. regional financial space spreading to other nations, the massive wager on ITCB stands as a huge risk. So far, though, ITCB has been resilient. Since the beginning of this year, shares gained over 12% of equity value.

To be fair, investors may want to cautiously consider this name. As a foreign bank, you must really understand the home market and economy. Also, Wall Street analysts don’t cover ITCB so you’ll be navigating a lonely road.

Microsoft (MSFT)

A fan favorite among retail investors, software (and hardware) technology stalwart Microsoft (NASDAQ:MSFT) also ranks among stocks that hedge funds are buying. According to HedgeFollow, institutional investors bought up $58.61 billion worth of MSFT stock. Here, the biggest procurer was Norges Bank at $20.4 billion.

Although the dramatic spike in inflation and the Federal Reserve’s monetary policy response imposed a tough backdrop for the tech sector broadly, MSFT performed relatively well. Since the Jan. opener, Microsoft shares gained over 19% in equity value. In the trailing one-year period, they’re up 2%.

As an enterprise offering myriad relevancies for both consumers and enterprise-level clients, Microsoft unsurprisingly features robust financials. Notably, its Altman Z-Score pings at 9, indicating a very low risk of bankruptcy. In addition, its trailing-year net margin comes in at 33.05%, outpacing 96.75% of its peers. Finally, analysts peg MSFT as a consensus strong buy with a price target of $299.93 implying nearly 5% upside potential. As a relatively safe idea, MSFT stands among the hedge fund favorites.

Apple (AAPL)

Coming in third place among the stocks that hedge funds are buying now is Apple (NASDAQ:AAPL). An iconic tech giant, regulatory filings during Q1 2023 reveal that institutional investors bought up $55.33 billion worth of AAPL stock. Individually, the top procurer was once again Norges Bank at $22.44 billion.

Although Apple suffered alongside other tech plays during a difficult time last year, the market’s top dogs appear determined to spark a recovery. Since the January opener, AAPL gained slightly over 32% of its equity value. In the past 365 days, AAPL barely poked its head above water.

Nevertheless, the tech stalwart should continue operating as one of the stocks that hedge funds are bullish on. It really comes down to the financials. Operationally, Apple’s three-year revenue growth rate pings at 20%, outpacing 85.43% of its rivals. Also, its trailing-year net margin hits 24.56%, an impressive figure. Lastly, covering analysts peg AAPL as a consensus strong buy. Their average price target is $171.16, implying nearly 4% upside potential.

Amazon (AMZN)

Another unsurprising name among stocks that hedge funds are buying now is e-commerce and tech giant Amazon (NASDAQ:AMZN). Per HedgeFollow, institutional investors acquired a total of $41.28 billion worth of AMZN stock. Again, Norges Bank leads the pack among the big dogs, acquiring $9.69 billion.

Overall, Amazon currently rides a comeback trek. Since the start of the year, AMZN gained over 19% of its equity value. However, in the past 365 days, it’s down nearly 33%. Naturally, skyrocketing inflation that sparked last year took a heavy toll on Amazon’s core e-commerce business.

Nevertheless, the fallout might offer a discounted opportunity for contrarians. Operationally, Amazon features a three-year revenue growth rate of 21.9%. Compared to other companies listed in the cyclical retail industry, Amazon ranks better than nearly 84% of its peers. Therefore, it continues to thrive as one of the hedge fund favorites. Notably, analysts peg AMZN as a consensus strong buy. Their average price target comes out to $135.85, implying almost 33% upside potential.

Berkshire Hathaway (BRK-A)

A multinational conglomerate, Berkshire Hathaway (NYSE:BRK-A) naturally commands intrigue because of its CEO, the Oracle of Omaha himself Warren Buffett. Essentially a bet on everything, you probably can’t go wrong with shares of Berkshire. Here, institutional investors bought up to $29.95 billion worth of Class A shares (the ones that cost $496,000 a pop). The biggest buyer is Perigon Wealth Management LLC.

Although BRK-A carries a boring reputation, it’s been one of the more interesting ideas among stocks that hedge funds are buying now. Since the Jan. opener, shares moved up nearly 6%. In the past 365 days, its red ink is now down to 4.5% below breakeven.

Financially, Berkshire admittedly seems a bit of a risky prospect. First, Gurufocus warns that the market prices BRK-A at 22.62 times forward earnings. Ranked worse than 85.21% of its peers, the investment resource states that BRK.A may be significantly overvalued. At the same time, you’re trading with one of the best minds in the investing game. Per Wall Street analysts, BRK-A ranks as a consensus moderate buy.

Tesla (TSLA)

As the leader in electric vehicles, it’s no shocker that Tesla (NASDAQ:TSLA) stands among the stocks that hedge funds are buying. Per regulatory filings posted in Q1 2023, institutional investors bought up $28.03 billion worth of TSLA stock. Once again, Norges Bank represented the top bull, procuring $5.31 billion.

Over the long run, the case for TSLA sells itself, particularly for those that have confidence in the electrification of mobility. Thus, it’s easily one of the hedge fund stocks that top investors target. However, it’s been a difficult ride. Sure, TSLA gained 71% of its equity value since the Jan. opener. However, in the trailing one-year period, it fell nearly 45%.

Financially, Tesla benefits from a robust balance sheet, particularly its cash-to-debt ratio of 3.86 times. Operationally, it posts a three-year revenue growth rate of 36.4% and a net margin of 15.45%. However, the value proposition (trading at 48.81 times forward earnings) keeps many on the sidelines. Still, analysts peg TSLA as a consensus moderate buy. Their average price target stands at $219.57, implying nearly 19% upside potential.

Charles Schwab (SCHW)

One of the oddest and riskiest names among stocks that hedge funds are buying, I must admit that I was perplexed when I came across Charles Schwab (NYSE:SCHW). Institutional investors acquired $23.93 billion worth of SCHW stock. In this case, Toronto-Dominion Bank (NYSE:TD) represented the top buyer at $17.47 billion.

A multinational financial services company, brewing recession fears don’t fundamentally bolster the underlying sector. As evidence, since the January opener, SCHW gave up 38% of equity value. In the past 365 days, it dropped more than 32%. Frankly, the financials don’t provide much in the way of confidence. For instance, its balance sheet is rather weak,  with a cash-to-debt ratio of 1.06 ranking worse than 66.62% of its peers. Also, its three-year revenue growth rate of 10.5% is a bit better than the industry median. However, its net margin is 34.6%, outpacing 78.51% of the competition.

Lastly, analysts peg SCHW as a consensus moderate buy. Their average price target stands at $74.83, implying over 47% upside potential.

On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.