Unless you are very wealthy or an institutional investor, the world of hedge funds is closed to the average investor; thus, it’s a good idea to look at the stocks hedge funds are buying. That’s not necessarily a bad thing because these funds operate on a 2-and-20 fee structure. They skim 2% off the top based on their assets under management (AUM) to pay staff and expenses. Another 20% is taken for performance to incentivize executives and portfolio managers.
There is a reason they are called “smart money.” They figured out how to get paid exorbitant fees when you can make the same trades transaction-free at your local online brokerage. All it takes is reading their 13F forms filed with the SEC. While there is a delay between when they bought and when the transaction is made public, many times, you can get better prices on a stock than they did.
Still, it can be useful to know where billionaire traders are looking for investments. The three stocks below are stocks hedge funds are buying hand over fist that you may want to own, too.
Exxon Mobil (XOM)
Integrated oil and gas giant Exxon Mobil (NYSE:XOM) caught the eye of renown invest Ken Fisher of Fisher Investments. He bought 11.2 million shares in Q4, a 565% increase in his portfolio’s holdings of the stock. With a price range between $98 and $116 per share, the average purchase price is $105 per share, exactly when XOM stock trades today.
It is likely Fisher believes in a coming oil and gas boom. The International Energy Agency forecasts rising demand for fossil fuels in the coming years. OPEC+ countries also recently agreed to limit production for the foreseeable future. Higher prices will enable Exxon to generate larger profits.
West Texas Intermediate (WTI) is just under $80 a barrel, while Brent crude trades at $83 a barrel. Because renewable energy sources can’t hope to replace oil and gas anytime soon, there remains a large runway of growth for Exxon.
The stock is down 12% off recent highs, but 10% above the lows it hit in January. As the largest publicly traded oil and gas stock, buying Exxon Mobil now lets you get in on the demand boost that will soon hit.
Mastercard (MA)
Ray Dalio runs the world’s biggest hedge fund, Bridgewater Associates, which has $124.3 billion in AUM. He increased his stake in Mastercard (NYSE:MA) by 118,000 shares, representing a 74% increase in the fund’s holdings. With an average purchase price of almost $402 per share over Q4, Dalio has an unrealized gain so far of around 16%.
Mastercard is the second-largest payment processor behind Visa (NYSE:V). It has almost 3.3 billion cards in circulation globally and generated some $2.3 trillion in global gross dollar volume. For an economy that is still unsure if a recession is on the horizon or not, Mastercard represents a hedge against that possibility.
Mastercard never entered the money lending business. Despite billions of cards floating around with its name emblazoned on the front, Mastercard’s credit is not extended to cardholders. It is only a branding feature, and Mastercard sticks to processing payments. That eliminates the risk of missed payments and defaults if the economy sours.
Of course, a recession would alter spending habits. Mastercard’s downside risk is protected because such downturns tend not to last very long in comparison to bull markets.
Disney (DIS)
Disney (NYSE:DIS) is turning in a surprisingly strong effort so far in 2024. Shares are up 25% year-to-date and are 43% off their lows. That makes Ken Griffin’s purchase of DIS stock for his Citadel hedge fund at an average price of $88 a timely one. With the stock trading around $112 a share, Griffin is sitting on profits of 27% for the 6.3 million shares he bought.
Considering the state of Disney’s movie studios, it is a surprising gain. Of the eight movies the entertainment giant released in 2023, only Guardians of the Galaxy made the studio any money. Even then, it was negligible. Disney, instead, has been relying upon its theme parks for support. Rising revenue amidst tepid attendance has bolstered the segment’s performance.
DIS stock is also rising because of the proxy fight billionaire investor Nelson Peltz is bringing to the company. He is looking to overhaul operations to restore the magic at Disney. It might be an uphill battle for seats on the board of directors. The market, however, sees the potential for improved operations regardless of who wins.
On the date of publication, Rich Duprey held a LONG position in XOM stock. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
