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.
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
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
While a rough start to the year for equities was generally good news for hedge funds, the market's massive rebound since April has them collectively lagging once again.
The Barclay Hedge Fund Index delivered a total return (price change plus dividends) of 11.7% for the year to date through the end of October. The S&P 500, by comparison, generated a total return of 17.5% over the same span.
We won't know how hedge funds are dealing with the current market environment until they disclose their fourth quarter buys and sells in mid-February. But we do know what they were up to in Q3 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, 10 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 component than a no-name small-cap stock if restive clients start grumbling about their returns.
What's interesting about the latest data is how hedge funds collectively piled into a number of 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 Q3.
Company (ticker) | Number of hedge funds holding | Net change in hedge fund share ownership |
|---|---|---|
Microsoft (MSFT) | 896 | 63,434,090 |
Amazon.com (AMZN) | 875 | -8,943,163 |
Meta Platforms (META) | 795 | -4,465,842 |
Alphabet (GOOGL) | 789 | -17,736,969 |
Nvidia (NVDA) | 782 | 4,643,642 |
Apple (AAPL) | 714 | 18,581,208 |
Broadcom (AVGO) | 626 | 7,895,774 |
Visa (V) | 625 | 9,108,457 |
JPMorgan Chase (JPM) | 591 | -7,897,429 |
Berkshire Hathaway (BRK.B) | 579 | 2,660,580 |
Taiwan Semiconductor Manufacturing (TSM) | 544 | -8,564,252 |
Johnson & Johnson (JNJ) | 531 | -424,882 |
Netflix (NFLX) | 525 | -3,723,123 |
Eli Lilly (LLY) | 520 | -2,605,775 |
Mastercard (MA) | 519 | -7,718,628 |
Oracle (ORCL) | 512 | -6,188,178 |
Tesla (TSLA) | 508 | 8,406,819 |
Walmart (WMT) | 505 | 19,223,766 |
UnitedHealth Group (UNH) | 501 | -23,634,170 |
Exxon Mobil (XOM) | 501 | -845,025 |
Home Depot (HD) | 495 | 216,923 |
Source: WhaleWisdom and the Securities and Exchange Commission.
Related Content
-
How Much Would a $50,000 HELOC Cost Per Month?Thinking about tapping your home’s equity? Here’s what a $50,000 HELOC might cost you each month based on current rates.
-
My First $1 Million: Self-Employed Trader, 50, San FranciscoEver wonder how someone who's made a million dollars or more did it? Kiplinger's My First $1 Million series uncovers the answers.
-
Think You Know How to Be Happy in Retirement? These 9 Stats May Surprise YouWhen it comes to your retirement happiness, don't believe everything you hear. We've turned to solid research for the facts on finding your bliss in retirement.
-
If You're Retired or Soon-to-Be Retired, You Won't Want to Miss Out on These 3 OBBB Tax BreaksThe OBBB offers some tax advantages that are particularly beneficial for retirees and near-retirees. But they're available for only a limited time.
-
Waiting for Retirement to Give to Charity? Here Are 3 Reasons to Do It Now, From a Financial PlannerYou could wait until retirement, but making charitable giving part of your financial plan now could be far more beneficial for you and the causes you support.
-
Are You Ghosting Your Finances? What to Do About Your Money StressAvoidance can make things worse. You can change your habits by starting small, talking with a family member or friend and being consistent and persistent.
-
Stocks Keep Climbing as Fed Meeting Nears: Stock Market TodayA stale inflation report and improving consumer sentiment did little to shift expectations for a rate cut next week.
-
Crypto Trends to Watch in 2026Cryptocurrency is still less than 20 years old, but it remains a fast-moving (and also maturing) market. Here are the crypto trends to watch for in 2026.
-
Time Is Running Out to Make the Best Moves to Save on Your 2025 TaxesDon't wait until January — investors, including those with a high net worth, can snag big tax savings for 2025 (and 2026) with these strategies.
-
I'm an Insurance Pro: If You Do One Boring Task Before the End of the Year, Make It This One (It Could Save You Thousands)Who wants to check insurance policies when there's fun to be had? Still, making sure everything is up to date (coverage and deductibles) can save you a ton.
-
4 Smart Ways Retirees Can Give More to Charity, From a Financial AdviserFor retirees, tax efficiency and charitable giving should go hand in hand. After all, why not maximize your gifts and minimize the amount that goes to the IRS?
