Investors tend to have mixed opinions about the 13F reports that are released each quarter. On one hand, it’s great that retail investors get to see what some of the top holdings are for major institutions and hedge funds when these reports are made public. This is the type of transparency that can help to provide a level playing field for all market participants, no matter how big or small. With that said, some investors are hesitant to read too much into 13F reports, as the information could be outdated by the time it is released to the public.
While it might be a good idea to take these reports with a grain of salt, there are some valuable insights to be gained from getting a glimpse of what hedge funds are doing in the market. By determining which stocks are consistently hedge fund favorites, investors can use this information to make better long-term investment decisions within their time horizon and risk parameters. Keep reading below to learn about 3 stocks to buy that hedge funds love.
1. Palantir Technologies
First up is Palantir Technologies (NYSE:PLTR), a data-analytics company that went public via a direct-listing last year and has been seeing accumulation by major hedge funds according to the latest 13F reports. It’s a company that builds and deploys software platforms for institutions. Palantir’s Gotham platform was created for analysts at defense and intelligence agencies, while Palantir’s Foundry platform creates a central operating system for organizations’ data. According to the latest 13F reports, funds like Blackrock (NYSE:BLK), Vanguard Group, JP Morgan Chase (NYSE:JPM), and Credit Suisse (SIX:CSGN) all increased their holdings in Palantir for the filing period.
Palantir recently reported earnings that saw revenue grow by 40% year-over-year in the fourth quarter to $322 million. For the full year 2020, Palantir saw its revenue increase by 47% year-over-year to $1.1 billion. The company also added 21 new contracts each worth $5 million or more in total contract value, including deals with Rio Tinto (NYSE:RIO), PG&E (NYSE:PCG), U.S. Army, U.S. Airforce, and the FDA. With that said, the stock has faced selling pressure recently. There’s also the upcoming lockup period expiration this Thursday to look out for when insiders will have an opportunity to unload their shares. While this is a very compelling company for the long-term, waiting until after the current selling pressure subsides before initiating a position is probably the way to go.
2. Uber Technologies
Another hedge fund favorite that investors should also be interested in at this time is Uber Technologies (NYSE:UBER). As the global leader in on-demand ride-sharing services, Uber should benefit from widespread vaccine distribution and a post-pandemic world. The company is already seeing a bounce-back in revenue, as Uber reported 13% quarter-over-quarter revenue growth in Q4 to $3.2 billion. Plenty of hedge funds are probably thinking the same thing, as the latest 13F reporting confirms that major funds like Winslow Capital Management, Soros Fund Management, and Citadel Advisors increased their positions in the company.
Along with the reopening theme, Uber should also see strong revenue growth from its Uber Eats food delivery service that should benefit from cross-selling to ride-sharing users. The company has also made some interesting strategic moves recently including acquiring Cornershop and Postmates. Finally, you have to be intrigued by the company’s efforts to create autonomous vehicles, which could lead to significant cost reductions over the long term since Uber potentially won’t have to pay for drivers anymore.
3. Zillow Group
The final stock on our list is a company that offers a real estate platform that is changing the way people buy homes. Zillow's (NASDAQ:ZG) mobile and web platforms offer buying, selling, renting, and financing services for residential real estate. The stock saw some significant buying from hedge funds last quarter and offers investors exposure to the red-hot real estate market. With near record-low interest rates and plenty of people interested in moving thanks to newfound remote work flexibility, Zillow is experiencing incredibly strong growth that should continue in 2021.
Zillow recently reported impressive Q4 earnings results that confirm the company is benefitting from the current housing boom. Q4 revenue of $789 million exceeded the high end of the company’s Q4 outlook while the company’s full-year revenue came in at $3.3 billion, which was a 22% year-over-year increase. It’s also worth noting that the 2.2 billion visits to the company’s platforms in the quarter represents 27% year-over-year growth. Zillow is a hedge fund favorite for a reason and is a stock that growth investors should look to add on pullbacks.