4 Stocks That Hedge Fund Managers Are Buying

The stock market’s bull run has been slowing down, driven by the sharp slowdown in macroeconomic growth and consumer spending. This is evident in the benchmark S&P 500 index’s 1.3% gains over the past week. Also, according to Oppenheimer technical analyst Ari Wald, “Over the last 30 years, there has been a tendency for the market to pause in mid-November ahead of a resumption of strength in December into year-end.”

Hedge fund managers are known to capitalize on such market slowdowns to rake in substantial profits by identifying fundamentally strong stocks that possess tremendous growth potential. Therefore, tracking activist hedge funds can allow investors to identify key investment opportunities now.

Despite the current market pause, hedge funds have been investing heavily in renowned industry leaders Pfizer Inc. (PFE – Get Rating), AT&T Inc. (T – Get Rating), Marathon Oil Corporation (MRO – Get Rating), and Coty Inc. (COTY – Get Rating). These companies are expected to generate substantial growth over the next few months despite the slowdown in consumer spending and supply chain concerns, thereby delivering an adequate return on investments (ROI).

Pfizer Inc. (PFE – Get Rating)

PFE is one of the biggest pharmaceutical companies in the world, currently ranked #77 on the Fortune 500 list. The New York City-based company gained significant traction during the COVID-19 pandemic last year because it was one of the first companies to introduce a vaccine. PFE, in collaboration with BioNTech SE (BNTX), received the world’s first authorization to commercially develop a vaccine to combat the pandemic. Furthermore, the PFE-BNTX COVID-19 vaccine has a 95% efficacy, making it one of the most effective vaccines in the world.

PFE’s revenues have increased 134% year-over-year to $24.09 billion in the third quarter (ended October 3, 2021), owing to a 749.3% rise in vaccine sales. Its net income came in at $8.15 billion, up 454.5% from the same period last year. EPS improved 446.2% from the year-ago value to $1.26.

The company has been taking steps to boost its COVID-19 vaccine sales over the past couple of months. Its COVID-19 booster shot was approved by the FDA last week, and the company is currently in the process of obtaining authorization for its oral COVID-19 antiviral drug PAXLOVID. PFE plans to supply 2 billion COVID-19 vaccine doses to poor and middle-income countries by 2022. As part of its long-term growth strategy, PFE entered an agreement to acquire clinical-stage immune-oncology company Trillium Therapeutics for $2.26 billion, which is expected to be finalized in the current quarter or the first quarter of 2022.

As a result, hedge funds have been actively investing in PFE to capitalize on its accelerating growth. Hedge funds have increased their holdings in PFE by 4.30 million shares over the last quarter. Top hedge fund managers, including Cathie Wood, Greg Poole, Andrew Law, and others, have invested heavily in the stock. Shares of PFE have outperformed the benchmark S&P 500 index to gain 38% in price year-to-date, reflecting bullish investor sentiment.

A $24.35 billion consensus revenue estimate for the fiscal fourth quarter (ending December 2021) indicates a 108.4% improvement year-over-year. Analysts expect the company’s EPS to rise 113.3% in the current quarter to $0.90.

It is no surprise that PFE has an overall A rating, which equates to Strong Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

The stock has an A grade for Growth, and a B grade for Value and Quality. In addition, it is ranked #11 out of 199 stocks in the Medical – Pharmaceuticals industry. In addition to the grades I have highlighted, you can view PFE ratings for Momentum, Sentiment, and Stability here.

 

Click here to checkout our Healthcare Sector Report for 2021

 

AT&T Inc. (T – Get Rating)

T is the biggest telecom company and wireless carrier in the United States. The  Dallas, tex.-based company controlled 44.8% of the wireless subscriptions market share in the U.S. as of the first quarter of 2021. The company has capitalized on the growing demand for seamless connectivity in the work-from-home era over the past year. Moreover, T has emerged as a leading player in the current 5G race. It has been named as “America’s Best 5G Network” by Global Wireless Solutions (GWS) and is accessible to more than 250 million people across 50 states. Also, T has been labeled as America’s Best Wireless Network for the fourth consecutive year in 2021 by GWS.

T has been reorganizing its business structure to reduce its debt burden, causing its revenues to dip slightly from the prior year. However, such structural reorganization is expected to strengthen its liquidity and solvency and improve its profit margins significantly. T has divested several business segments over the past few months. The company sold its Vrio Corp. business to Grupo Werthein in July and its Crunchyroll anime business to Sony Pictures Entertainment in August. Also, T spun off its DIRECTV, AT&T TV, and U-verse video services in collaboration with global alternative asset firm TPG.

Despite a slight dip in revenues, T’s net income increased more than…

 

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