Best Blue Chip Stocks: 21 Hedge Fund Top Picks

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

two blue poker chips, stacked under a spotlight
(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

While a rough start to the year for equities was generally good news for hedge funds, the market's rebound since April has them mostly lagging once again.

The Barclay Hedge Fund Index delivered a total return (price change plus dividends) of 6.1% for the year to date through the end of July. The S&P 500, by comparison, generated a total return of 7.8% 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-November. But we do know what they were up to in Q2 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, nine 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 Q2.

Swipe to scroll horizontally
Hedge funds' top blue chip stocks

Company (ticker)

Number of hedge funds holding

Net change in hedge fund share ownership

Amazon.com (AMZN)

879

115,476,546

Microsoft (MSFT)

875

-35,606,159

Nvidia (NVDA)

783

114,475,552

Meta Platforms (META)

778

-7,931,889

Alphabet (GOOGL)

764

26,119,352

Apple (AAPL)

724

111,134,352

Visa (V)

629

538,669

JPMorgan Chase (JPM)

612

-3,022,615

Berkshire Hathaway (BRK.B)

599

1,164,427

Broadcom (AVGO)

591

679,759

Mastercard (MA)

555

4,315,190

UnitedHealth Group (UNH)

533

12,636,979

Johnson & Johnson (JNJ)

528

11,027,135

Eli Lilly (LLY)

527

603,619

Exxon Mobil (XOM)

515

2,844,078

Taiwan Semiconductor Manufacturing (TSM)

512

-10,952,856

Netflix (NFLX)

511

-2,054,896

Walmart (WMT)

505

13,956,964

Oracle (ORCL)

502

9,498,564

Costco (COST)

499

-319,523

Bank of America (BAC)

496

3,761,198

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.