Best Blue Chip Stocks: 21 Hedge Fund Top Picks

Blue chip stocks dominate the list of hedge funds' most popular equity investments.

hedge funds Top Blue Chip Stocks to buy
(Image credit: Getty Images)

Blue chip stocks, thanks to their massive market capitalizations and deep liquidity, are a natural home for hedge funds and other large pools of institutional capital.

And since hedge funds are the putative smart money, who wouldn't want to know which blue chip stocks they're chasing with their capital?

True, hedge funds collectively have a rather poor long-term track record vs the broader market. It should also go without saying that not all blue chip stocks are created equal.

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Yet there's still something irresistible about knowing what hedge funds have been up to. And even if the industry tends to generate disappointing returns, you've got to give it credit when credit is due.

Big-time investors are willing to pay up for complicated strategies offering exposure to uncorrelated assets. So it's not necessarily possible to tell from the outside if a hedge fund is providing its clients with the performance they expect.

It's also important to know that hedging strategies, by definition, limit upside when stocks are rising. That helps explain the industry's tendency to underperform in a bull market.

By the same token, however, hedging strategies limit downside when everything is selling off. And goodness knows investors saw plenty of red on their screens not that long ago.

"Despite the challenges from a bear market, hedge funds delivered resilient performance in 2022," notes Barclays Capital Solutions. "In a year when the MSCI World Index fell 18%, hedge funds captured only a fraction of the drawdown, thus offering the best downside protection since the dot-com bubble burst."

Blue chip stocks: timing is everything

So it should come as no surprise that a rough start to the year for equities has been good for hedge funds.

The Eurekahedge Hedge Fund Index delivered a total return (price change plus dividends) of almost 1% for the year to date through the end of April. The S&P 500, by comparison, generated a total return of -5% over the same span.

We won't know how hedge funds are dealing with the current market environment until they disclose their second quarter buys and sells in mid-August. But we do know what they were up to in Q1 thanks to a recent batch of regulatory filings.

As usual, hedge funds were heavily invested in most of the market's biggest and bluest of blue chip stocks – particularly Dow Jones stocks. Indeed, 11 of the 21 names listed below are components of the blue-chip barometer.

That's partly a function of Dow stocks' massive market caps and attendant liquidity, which, as noted, provide ample room for institutional investors to build or pare large stakes.

Big-name blue chip stocks also carry lower levels of reputational risk for professional money managers. It's a lot easier to justify holding a large stake in a Dow stock than a no-name small cap if restive clients start grumbling about their returns.

What's interesting about the latest data is how hedge funds collectively cut exposure to Magnificent 7 stocks.

Have a look at the chart below to see hedge funds' 21 top blue chip stock picks as of the end of Q1.

Swipe to scroll horizontally
Hedge funds' top blue chip stocks

Company (ticker)

Number of hedge funds holding

Net change in hedge fund share ownership

Microsoft (MSFT)

858

-7,516,183

Amazon.com (AMZN)

849

-26,222,214

Meta Platforms (META)

763

-8,859,321

Alphabet (GOOGL)

761

-29,519,651

Nvidia (NVDA)

742

-77,313,073

Apple (AAPL)

712

-7,264,565

Visa (V)

612

-17,000,372

JPMorgan Chase (JPM)

598

-17,533,108

Broadcom (AVGO)

569

2,899,408

Berkshire Hathaway (BRK.B)

566

495,167

Mastercard (MA)

533

5,284,163

Eli Lilly (LLY)

525

-1,263,230

UnitedHealth Group (UNH)

523

3,530,266

Johnson & Johnson (JNJ)

512

929,527

Exxon Mobil (XOM)

511

11,507,300

Netflix (NFLX)

496

-5,233,869

Home Depot (HD)

492

-322,319

Taiwan Semiconductor Manufacturing (TSCM)

487

-9,073,524

Walmart (WMT)

486

-27,323,434

Procter & Gamble (PG)

481

-8,078,196

Costco (COST)

477

1,299,894

Source: WhaleWisdom and the Securities and Exchange Commission.

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Dan Burrows
Senior Investing Writer, Kiplinger.com

Dan Burrows is Kiplinger's senior investing writer, having joined the publication full time in 2016.

A long-time financial journalist, Dan is a veteran of MarketWatch, CBS MoneyWatch, SmartMoney, InvestorPlace, DailyFinance and other tier 1 national publications. He has written for The Wall Street Journal, Bloomberg and Consumer Reports and his stories have appeared in the New York Daily News, the San Jose Mercury News and Investor's Business Daily, among many other outlets. As a senior writer at AOL's DailyFinance, Dan reported market news from the floor of the New York Stock Exchange.

Once upon a time – before his days as a financial reporter and assistant financial editor at legendary fashion trade paper Women's Wear Daily – Dan worked for Spy magazine, scribbled away at Time Inc. and contributed to Maxim magazine back when lad mags were a thing. He's also written for Esquire magazine's Dubious Achievements Awards.

In his current role at Kiplinger, Dan writes about markets and macroeconomics.

Dan holds a bachelor's degree from Oberlin College and a master's degree from Columbia University.

Disclosure: Dan does not trade individual stocks or securities. He is eternally long the U.S equity market, primarily through tax-advantaged accounts.