We recently learned what stocks hedge funds have been buying, selling, and holding, thanks to their third-quarter 13-F filings. Personal finance website WalletHub recently released a report that analyzed the filings of more than 400 hedge funds, and listed the most-bought (and most-sold) stocks by the biggest money managers during Q3.
10 stocks hedge funds have been buying
According to WalletHub's analysis, these were the 10 most-bought stocks by hedge funds during the third quarter.
- Bank of America (NYSE:BAC)
- General Electric (NYSE:GE)
- Microsoft (NASDAQ:MSFT)
- Symantec (NASDAQ:SYMC)
- Crown Castle International (NYSE:CCI)
- UnitedHealth Group (NYSE:UNH)
- Becton, Dickinson and Co. (NYSE:BDX)
- Gilead Sciences (NASDAQ:GILD)
- Netflix (NASDAQ:NFLX)
- Eli Lilly and Co. (NYSE:LLY)
A few observations about this list:
First, the main reason Bank of America tops the chart isn't because a bunch of hedge funds were loading up on the stock. Rather, it's because of one massive buy Warren Buffett made for Berkshire Hathaway. However, it wasn't really a "buy" at all. Buffett acquired warrants to purchase 700 million shares of Bank of America stock several years ago, and this purchase was simply the result of those warrants being exercised. In other words, this investment has been in Berkshire's portfolio for awhile, but instead of being in the form of warrants, it is now in the form of common stock.
Second, it may surprise you to see General Electric near the top of the list, given the problems it has been having. This could certainly be a case of hedge funds trying to buy a winning stock while it's down, but it's interesting to note that GE's share price has fallen significantly since Q3 ended, especially in light of its announcement regarding new restructuring efforts, its dividend cut. The hedge fund managers who bought GE last quarter haven't done too well from the investment yet.
Finally, in terms of sectors, there has been a significant shift in terms of what hedge funds are buying. In the second quarter, seven spots on the 10 most-bought list were occupied by tech stocks. Just three landed on this quarter's list; it appears that after the massive rally by the largest and most popular tech stocks, hedge fund managers may see less value in the sector. Healthcare appears to be the new favorite, holding four of the 10 slots on the Q3 list.
Stocks hedge funds are selling
On the other side of the equation, here are the top five stocks hedge funds were selling. It's interesting to note that four are in the tech sector, which as I mentioned, was the most-bought in the previous quarter.
- Apple (NASDAQ:AAPL)
- International Business Machines (NYSE:IBM)
- Starbucks (NASDAQ:SBUX)
- Amazon.com (NASDAQ:AMZN)
- Alphabet (NASDAQ:GOOGL)
This can be a good guide – but do your own research
It can certainly be interesting to follow, and learn from, the investing styles of Wall Street's billionaires. I've personally learned some great lessons from the actions of Warren Buffett, Carl Icahn, George Soros, and others.
Having said that, I would never suggest that you buy or sell any particular stock simply because a billionaire did. Without knowing why each holding was bought or sold, there's no way to make an informed decision. For example, as I mentioned earlier, Buffett's Bank of America "investment" was essentially one he had made years ago -- it simply changed form. And these hedge fund managers may sell stocks for reasons unrelated to the health of the underlying businesses, such as to take profits, or book losses for tax reasons.
The point is that while this list can be a good starting point for helping you figure out which are the most popular stocks among the most successful investors, it's still important to do your own research and determine if a particular stock is right for you.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Teresa Kersten is an employee of LinkedIn and is a member of The Motley Fool's board of directors. LinkedIn is owned by Microsoft. Matthew Frankel owns shares of Apple, Bank of America, and Berkshire Hathaway (B shares). The Motley Fool owns shares of and recommends Alphabet (A shares), Amazon, Apple, Berkshire Hathaway (B shares), Crown Castle International, Gilead Sciences, Netflix, and Starbucks. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool recommends Becton Dickinson and UnitedHealth Group. The Motley Fool has a disclosure policy.