In this article, we will take a look at the 10 Dow Jones Stocks to Buy According to Hedge Funds. To skip our analysis of the Dow Jones Industrial Average Index, its performance, and weighting of the components, you can go directly to see the 5 Dow Jones Stocks to Buy According to Hedge Funds.
The Dow Jones Industrial Average Index (DJIA), commonly referred to as the Dow Jones, is a stock market index of 30 prominent and leading Blue-Chip companies listed on the stock exchanges in the United States. It is one of the oldest and most commonly followed equity index that was launched on May 26, 1896. The index uses a price-weighted method and covers all industries except transportation and utilities.
Since the index uses a price-weighted measure for weighting its component stocks, the stocks with higher prices are given greater weight in the index, as compared to the stocks with lower prices. This results in a higher impact on the index values from changes in higher-priced components. As of September 19, 2022, Health Care, Information Technology, and Financials had the highest weight allocation at 21.4%, 20.09%, and 16.29%.
There are multiple exchange traded funds (ETFs) that track the DJIA Index. SPDR Dow Jones Industrial Average ETF Trust is one of the most prominent ETF tracking the DJIA Index. As of June 30, 2022, the Index had an annualized total return of 11.70% over the course of last 10 years, a dividend yield of 2.21%, and an average market cap of approximately $395 billion.
Some of the notable members of the DJIA include Walmart Inc. (NYSE:WMT), Goldman Sachs Group, Inc. (NYSE:GS), Apple Inc. (NASDAQ:AAPL), Microsoft Corporation (NASDAQ:MSFT), The Boeing Company (NYSE:BA), and Visa Inc. (NYSE:V), among others.
Given the markets have been volatile with the Federal Reserve raising rates, stocks could decline if economic data doesn't meet expectations. Nevertheless, there's also opportunity for long term investors who buy quality blue chip stocks.
Francisco Amaral Leitao / shutterstock.com
We took 10 Dow Jones stocks, and we sorted them based on the number of hedge funds in our database that owned shares in the stock at the end of Q2 2022.
10. Travelers Companies, Inc. (NYSE:TRV)
Number of Hedge Fund Holders: 31
Travelers Companies, Inc. (NYSE:TRV) is a leading provider of property casualty insurance for auto, home, and business. It offers its services primarily through independent agents and brokers and employs nearly 30,000 personnel across the United States and select international markets.
In July, the board of directors of Travelers Companies, Inc. (NYSE:TRV) declared a quarterly cash dividend of $0.93 per share. Travelers Companies, Inc. (NYSE:TRV)has a strong dividend history with 19 years of consecutive dividend raises.Given a forward payout ratio of 25.2% and earnings growth estimates, the company could raise its dividend again next year.
As of Q2 2022, 31 out of the 895 hedge funds tracked by Insider Monkey were bullish on Travelers Companies, Inc. (NYSE:TRV) and held its shares valued at $434 million. First Eagle Investment Management was the largest shareholder holding 3.1 million shares valued at $523 million.
Alongside Salesforce, Inc. (NYSE:CRM), Apple Inc. (NASDAQ:AAPL), and Microsoft Corporation (NASDAQ:MSFT), Travelers Companies, Inc. (NYSE:TRV) is a Dow Jones stock widely owned by hedge funds in our database at the end of Q2 2022.
9. Honeywell International Inc. (NYSE:HON)
Number of Hedge Fund Holders: 42
Charlotte, North Carolina-based Honeywell International Inc. (NYSE:HON) is a multinational conglomerate with a focus on providing solutions across aerospace, building technologies, performance materials & technologies, and safety & productivity solutions.
In July, Honeywell International Inc. (NYSE:HON) released the financial results for Q2 2022. Its total revenue increased by 2% y-o-y to $8.95 billion, while its net income declined by 13% y-o-y to $1.3 billion, for three months ended June 30, 2022. It reported a normalized EPS of $2.10, beating the consensus by $0.07.
Following the earnings release, Citi analyst Andrew Kaplowitz raised the price target for Honeywell shares to $222 from $211 and maintained a ‘Buy’ rating.
As of Q2 2022, 42 hedge funds out of the 895 hedge funds tracked by Insider Monkey held shares of Honeywell International Inc. (NYSE:HON), valued at $1.0 billion. Its largest shareholder was D E Shaw with ownership of 1.3 million shares valued at $220 million.
8. 3M Company (NYSE:MMM)
Number of Hedge Fund Holders: 54
Saint Paul, Minnesota-based 3M Company (NYSE:MMM) is a diversified technology company with a global presence in the following businesses: Safety and Industrial; Transportation and Electronics; Health Care; and Consumer.
In September, 3M Company (NYSE:MMM) announced that it had finalized the separation of its food safety business through a merger with Neogen Corporation (NASDAQ:NEOG). As part of the transaction, 3M Company (NYSE:MMM) will receive approximately 50.1% of the combined company, with the remaining shares held by existing Neogen shareholders.
On September 9, 2022, UBS analyst Chris Snyder increased the price target on 3M Company (NYSE:MMM) shares to $126 from $118 and upgraded the rating to ‘Neutral’ from ‘Sell’.
As of Q2 2022, 54 of the 895 hedge funds tracked by Insider Monkey owned shares of 3M Company (NYSE:MMM), valued at $1.4 billion. Its largest shareholder was Ken Fisher’s Fisher Asset Management with ownership of 6.2 million shares valued at $802 million.
7. Walmart Inc. (NYSE:WMT)
Number of Hedge Fund Holders: 67
Bentonville, Arkansas-based Walmart Inc. (NYSE:WMT) is a leading global discount retailer operating more than 10,500 stores and clubs under 46 banners in 24 countries and eCommerce websites.
Walmart Inc. (NYSE:WMT) is one of the largest companies in the world with economies of scale and financial resources. Given its growth, Walmart Inc. (NYSE:WMT) has also increased its dividend for 49 consecutive years. With a forward payout ratio of 38.33% and analyst estimating the company to earn even more money next year, Walmart Inc. (NYSE:WMT) will likely continue to raise its dividend next year.
As of Q2 2022, 67 of the 895 hedge funds tracked by Insider Monkey were long Walmart Inc. (NYSE:WMT), holding shares worth $3.8 billion. Its largest hedge fund shareholder is GQG Partners with ownership of 9.8 million shares valued at $1.2 billion.
6. American Express Company (NYSE:AXP)
Number of Hedge Fund Holders: 67
American Express Company (NYSE:AXP) is a globally integrated payments company focused on card-issuing, merchant-acquiring, and card network businesses. It provides payment products and services to consumers, small businesses, mid-sized companies, and large corporations around the world. It had 71.4 million proprietary cards-in-force worldwide, as of December 31, 2021.
American Express Company (NYSE:AXP) released the financial results for the quarter ended June 30, 2022, in July. Its total net revenue increased by 20% y-o-y to $13 billion, while its net income shrunk by 14% y-o-y to $2 billion. It reported a normalized EPS of $2.57 for the quarter, beating the consensus by $0.16. It declared a cash dividend of $0.52 per share for the quarter, bringing the dividends for first half of 2022 to $1.04 per share.
As of Q2 2022, 67 of the 895 hedge funds tracked by Insider Monkey owned shares of American Express Company (NYSE:AXP), valued at $25.2 billion. Warren Buffet’s Berkshire Hathaway is its largest shareholder with ownership of 151.6 million shares valued at $21 billion.
Like American Express Company (NYSE:AXP), Salesforce, Inc. (NYSE:CRM), Apple Inc. (NASDAQ:AAPL), and Microsoft Corporation (NASDAQ:MSFT) are Dow Jones stocks widely held by hedge funds in our database at the end of Q2 2022.
Click to continue reading and see5 Dow Jones Stocks to Buy According to Hedge Funds.
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Disclosure: None.10 Dow Jones Stocks to Buy According to Hedge Fundsis originally published on Insider Monkey.
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SPDR Dow Jones Industrial Average ETF Trust (DIA)
Overview: You don't have a lot to choose from when it comes to ETFs tracking the Dow Jones Industrial Average, but State Street Global Advisors comes through with this fund that tracks the 30-stock index of large-cap stocks.
The Dow Jones Industrial Average (DJIA) is a widely-watched benchmark index in the U.S. for blue-chip stocks. The DJIA is a price-weighted index that tracks 30 large, publicly-owned companies trading on the New York Stock Exchange (NYSE) and the Nasdaq.
Bridgewater is the world's largest hedge fund, with about $150 billion in capital. Since its founding in 1975, Bridgewater has returned $52.2 billion in gains to its investors – more than any other hedge fund on the planet.
Managers who engage in active fund management study trends in the market, analyze economic data, and stay current on company news. Based on this research, they buy and sell securities—stocks, bonds, and other assets—to rake in greater returns.
Here's why Google and Amazon probably will never be included in the Dow. Google-parent Alphabet and Amazon probably never will be in the Dow because their share prices are just too high. Including them would tip the scales heavily in the 30-stock index, which will see its oldest member, General Electric, exit next week ...
- New York Stock Exchange.
- Tokyo Stock Exchange.
- Shanghai Stock Exchange.
- Hong Kong Stock Exchange.
- London Stock Exchange.
- Shenzhen Stock Exchange.
The three most widely followed indexes in the U.S. are the S&P 500, Dow Jones Industrial Average, and Nasdaq Composite. The Wilshire 5000 includes all the stocks from the U.S. stock market.
The S&P 500 is considered a better reflection of the market's performance across all sectors compared to the Nasdaq Composite and the Dow. The downside to having more sectors included in the index is that the S&P 500 tends to be more volatile than the Dow.
|Index or Fund||1-Year Total Return||5-Year Annualized Return|
|S&P 500 Index||31.46%||18.63%|
|Vanguard S&P 500 ETF||31.35%||18.54%|
|iShares Core S&P 500 ETF||31.33%||18.54%|
|SPDR S&P 500 ETF Trust||31.28%||18.49%|
The S&P 500 stock market index is maintained by S&P Dow Jones Indices. It comprises 503 common stocks which are issued by 500 large-cap companies traded on American stock exchanges (including the 30 companies that compose the Dow Jones Industrial Average).
The Dow hit all-time closing highs on the first two trading days of January 2022. The most recent Dow record closing was on Jan 4. 2022 when the index closed at 36,799.65. The Dow set several new all-time highs throughout 2021, including one on the last trading day.
The bear market in the S&P 500 was confirmed on June 13th 2022, but the market began its slide on January 3rd 2022. With this date as the start of the current official bear market, the average bear market of 289 days means that it would finish on 19th October 2022.
Looking at the annualized average returns of these benchmark indexes for the 20 years ending June 30, 2019 shows: S&P 500: 5.90% Dow Jones Industrial Average: 7.03% Russell 2000: 7.70%
The largest hedge fund in the U.S. is BlackRock, with a revenue of $19.374 billion. As of 2022, the U.S. hedge funds have a market size of $111.3 billion. There are at least 3,841 Hedge Funds in the U.S.
Average gains of +4.00% lifted YTD average returns to +11.02%, past the level in 2019 (+10.07%) and to the highest level since 2009 (+19.44%). While average returns in 2020 were elevated, there have been several years of similar returns since 2009 (+10% in 2019, +9% in 2017, +10% in 2013 and +11% in 2010).
According to BarclayHedge, the average hedge fund generated net annualized returns of 7.2% with a Sharpe ratio of 0.86 and market correlation of 0.9 over the last five years through 2021.
|UNH||UnitedHealth group Incorporated||$525.98|
|LMT||Lockheed Martin Corporation||$384.83|
7 Stocks Hedge Funds Are Buying Right Now.
|KO||The Coca-Cola Company||$62.13|
A hedge fund can invest in anything—land, real estate, derivatives, currencies, and other alternative assets. Mutual funds, by contrast, usually have to stick to stocks or bonds.
Alphabet (GOOGL) split its two classes of shares (GOOG) by a 20-to-1 margin, a move that reduced the price of one share from just over $2,200 on Friday to about $110 on Monday. The stock split doesn't change Alphabet's market capitalization.
In contrast, the DJIA is composed of a mere 30 stocks, mainly of companies found on the New York Stock Exchange, with only a couple of Nasdaq-listed stocks such as Apple (AAPL), Intel (INTC), Cisco (CSCO), and Microsoft (MSFT).
Apple Inc. Stock Quote (U.S.: Nasdaq)
The New York Stock Exchange is the largest stock exchange in the world, with an equity market capitalization of just over 24.6 trillion U.S. dollars as of July 2022. The following three exchanges were the NASDAQ, the Shanghai Stock Exchange, and the Euronext. What is a stock exchange?
The market value is computed by multiplying the number of outstanding shares with the current market price of the stock. S.No. 1. Reliance Industries Ltd.
|Company and ticker symbol||Performance year to date (percent)|
|Match Group (MTCH)||-57.3%|
|Caesars Entertainment (CZR)||-53.9%|
|Stanley Black & Decker (SWK)||-53.3%|
- Never invest in a business you don't understand.
- Understand financial ratios.
- Watch out for value traps.
- Avoid chasing high yields.
- Check insider activity.
- Assess the economic moat.
- Understand market risk.
- Saudi Arabia. 9.58%
- Austria. 8.75%
- Latvia. 7.76%
- Belgium. 7.66%
- Dubai (UAE) 7.47%
- South Korea. 7.22%
- Hong Kong. 6.91%
- Norway. 6.89%
So, if you are looking to own a more diversified basket of stocks, the S&P 500 will be the right fit for you. However, those who are comfortable with the slightly higher risk for the extra returns that investing in Nasdaq 100 based fund might generate will be better off with Nasdaq 100.
Cumulatively, over the past 14 years, it has outperformed the S&P 500 by a wide margin. Even in 2020, the Nasdaq 100 outperformed the S&P 500 by more than 30%; its cumulative performance through the end of December 2021 was 803%, more than double the S&P 500's 333% return.
The S&P 500 tracks top companies in leading industries in the large-cap segment of the market as well. All of the stocks in The Dow are typically included in the S&P 500, where they generally make up between 25% and 30% of its market value.
Value of $8,000 from 1980 to 2022
$8,000 in 1980 is equivalent in purchasing power to about $28,754.47 today, an increase of $20,754.47 over 42 years. The dollar had an average inflation rate of 3.09% per year between 1980 and today, producing a cumulative price increase of 259.43%.
The main difference between index funds and ETFs is that index funds can only be traded at the end of the trading day whereas ETFs can be traded throughout the day. ETFs may also have lower minimum investments and be more tax-efficient than most index funds.
A three-fund portfolio is made up of three index funds or ETFs. Advisors typically suggest choosing a total U.S. stock market index fund, an international stock fund and broad market bond fund. The amount of money you allocate to each fund depends on your age, goals and risk tolerance.
- Apple Inc. (AAPL) Index Weighting: 7.1% ...
- Microsoft Corp. (MSFT) Index Weighting: 6.0% ...
- Amazon.com, Inc. ( AMZN) Index Weighting: 3.7% ...
- Tesla, Inc. (TSLA) Index Weighting: 2.4% ...
- Alphabet Inc. Class A (GOOGL) ...
- Alphabet Inc. Class C (GOOG) ...
- Nvidia Corp. (NVDA) ...
- Berkshire Hathaway Inc. (BRK.B)
Components of the S&P 500.
The 30 stocks which make up the Dow Jones Industrial Average are: 3M, American Express, Amgen, Apple, Boeing, Caterpillar, Chevron, Cisco Systems, Coca-Cola, Disney, Dow, Goldman Sachs, Home Depot, Honeywell, IBM, Intel, Johnson & Johnson, JP Morgan Chase, McDonald's, Merck, Microsoft, Nike, Procter & Gamble, ...
March 24, 2020 saw the largest one-day gain in the history of the Dow Jones Industrial Average (DJIA), with the index increasing 2,112.98 points.
Zacks says that the average DJIA return from 1896 is 5.42%. Investopedia says the S&P 500's return since 1957, when it became a 500 company index, is 7.96% through 2018.
U.S. stocks, as measured by the benchmark S&P 500 index, officially fell into “bear market” territory in June 2022. This represents a decline that exceeds 20% of the peak value of the index.
The average length of a bear market is 289 days, or about 9.6 months. That's significantly shorter than the average length of a bull market, which is 991 days or 2.7 years. Every 3.6 years: That's the long-term average frequency between bear markets.
Blame FAANG+M. The Federal Reserve is poised to keep tightening financial conditions, but you wouldn't know it by looking at market valuations, according to Jefferies Equity Strategy research team.
The 50-Year History Yearly Average Return of S&P 500
The historical average yearly return of the S&P 500 is 10.49% over the last 50 years, as of end of July 2022. This assumes dividends are reinvested. Adjusted for inflation, the 50-year average return (including dividends) is 6.26%.
The index has returned a historic annualized average return of around 11.88% since its 1957 inception through the end of 2021.
A hedge fund can invest in anything—land, real estate, derivatives, currencies, and other alternative assets. Mutual funds, by contrast, usually have to stick to stocks or bonds.
10 Publicly Traded Hedge Funds That Pay a Dividend.
|Hedge Fund||Dividend Growth|
|Blackstone Group L.P. (BX )||0 year|
|Invesco Ltd. (IVZ )||11 years|
|Lazard Ltd. (LAZ )||14 years|
|KKR & Co. L.P. (KKR )||0 year|
A hedge fund is a limited partnership of private investors whose money is managed by professional fund managers who use a wide range of strategies, including leveraging or trading of non-traditional assets, to earn above-average investment returns.
Key Takeaways. Hedge funds are versatile investment vehicles that can use leverage, derivatives, and take short positions in stocks. Because of this, hedge funds employ various strategies to try to generate active returns for their investors. Hedge fund strategies range from long/short equity to market neutral.
It is not uncommon for a hedge fund to require at least $100,000 or even as much as $1 million to participate. Unlike mutual funds, hedge funds avoid many of the regulations and requirements within the Securities Act of 1933.
With respect to establishing a U.S. hedge fund, average hedge fund startup costs range from $50,000 to $100,000, and first- year operational costs usually total $75,000 to $150,000.
Hedge Fund Manager Salaries in Canada
The national average salary for a Hedge Fund Manager is $90,109 in Canada.
- Biohaven Pharmaceutical Holding Company Ltd. (NYSE:BHVN) ...
- Berkshire Hathaway Inc. (NYSE:BRK-A) ...
- UnitedHealth Group Incorporated (NYSE:UNH) ...
- Tesla, Inc. ...
- Exxon Mobil Corporation (NYSE:XOM)
|2||Godrej Agrovet Ltd||29.72%|
|3||Union Bank of India||29.65%|
|4||Sun TV Network Ltd||29.52%|
Blue-chip stocks typically have solid balance sheets, steady cash flows, proven business models, and a history of increasing dividends. For that reason, investors generally consider blue-chip stocks to be among the most secure stock investments because of their track records and performance history.
Penny stocks, although they often do indeed trade for mere pennies, can still be exceedingly dangerous to short because of the risk of a short squeeze.
Put simply, a hedge fund is a pool of money that takes both short and long positions, buys and sells equities, initiates arbitrage, and trades bonds, currencies, convertible securities, commodities and derivative products to generate returns at reduced risk.
BlackRock manages US$38bn across a broad range of hedge fund strategies. With over 20 years of proven experience, the depth and breadth of our platform has evolved into a comprehensive toolkit of 30+ strategies.
The primary investors in hedge funds are institutional investors. These are professional investors who manage large amounts of money. They work for pension funds for corporations, government workers, and labor unions. They also manage sovereign wealth funds for entire countries.
- Using derivatives. Hedge funds often take advantage of financial derivative contracts such as options, forwards and futures. ...
- Long-short trading strategy. ...
- Create a portfolio of trades. ...
- Don't overleverage your trades. ...
- Perform your analysis. ...
- Manage your exit points.
High-Risk. In general, hedge funds are considered to be high-risk investments because of the huge potential for money loss. Again, these funds are primarily controlled by hedge funds managers, and with pools of money going into investments, there is likely going to be some loss.