To say that hedge fund and mutual fund managers tend to follow the herd is an incredible understatement and always has been. While publicly they sometimes seem reluctant to discuss their holdings, especially stocks they are short sellers of, the reality is that managers tend to talk among themselves as they run in the same circles, and often the discussions are centered on their portfolios and what is in them.
In a new research report, Savita Subramanian, the superb BofA Securities equity and quant strategist, and her team look at mutual fund and hedge fund holdings. As per usual, many of the top stocks are incredibly crowded. The report said this about current conditions:
Several of the largest stay-at-home beneficiaries are more crowded by funds today than a year ago: The world looks completely different than a year ago. A year ago, the consumer heavily relied on e-commerce and shifted their consumption from services to goods. But today, reopening is well underway and the consumer is increasing their services consumption (sometimes at the expense of goods), hitting e-commerce.
We were interested in the stocks that fund managers with the highest relative overweight percentage in their portfolios, and the five stocks that lead that category are very strong ideas for growth investors with a degree of risk tolerance. Portfolio weight is the percentage of an investment portfolio that a particular holding or type of holding comprises. The most basic way to determine the weight of an asset is by dividing the dollar value of a security by the total dollar value of the portfolio.
The five stocks are listed here in order of the highest relative weighting by fund managers, and they all have Buy ratings at top Wall Street firms. It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
This somewhat contrarian play makes sense for investors looking for quality energy exposure. Baker Hughes Co. (NYSE: BKR) is an international industrial service company and one of the world’s largest oil field services companies. It provides the oil and gas industry with products and services for oil drilling, formation evaluation, completion, production and reservoir consulting. It is the second-largest oilfield services and equipment company in the world by market cap.
Baker Hughes prides itself on being a self-described energy technology company that provides solutions to energy and industrial customers worldwide. Built on a century of experience and with operations in over 120 countries, the firm’s innovative technologies and services are taking energy forward.
Goldman Sachs has a Buy rating and said this recently:
Baker Hughes is the core equipment provider and has 90%+ market share in the global LNG liquefaction development market, which we expect will drive EBITDA and margin growth.
Fund managers have a 3.35% relative weighting on this one. Shareholders receive a 3.05% dividend. The $29 Goldman Sachs price target for Baker Hughes stock compares with a $27.90 consensus target and a Wednesday’s closing print of $21.51.