Regarding stocks, hedge fund managers are some of the savviest investors around. While most of us might not have access to their advanced strategies and resources, we can still learn from their picks. Fund managers focus on well-established companies with promising business models, quality management teams, and sound balance sheets. Stocks hedge funds are buying can provide a clue as to which companies are seen as having significant upside potential.
Stocks hedge funds are buying reflect those they find attractive in terms of growth opportunities and industry trends; if a large percentage of them invest in a particular stock, it could be worth taking a closer look at its fundamentals and overall prospects. With careful research, investors can pick up on industry trends while getting exposure to great stocks through the lens of the pros.
These three companies possess excellent financial performance metrics and strong fundamentals, giving them the potential to yield high profits in both the short and long term. It makes them an attractive option for those looking to diversify their investments.
|DAL||Delta Air Lines||$34.59|
Hedge funds are giving much love to AT&T (NYSE:T). And why not? There is so much to like about the company right now.
First, this year marked the end of the company’s ill-fated media strategy. With the spin-off of its media assets complete in the shape of Warner Media, the company can now focus on what it does best, the telecom business. Its recent financial results prove that the strategy is working. The company delivered on both the top and bottom lines. The fact that it also pays a healthy dividend makes it an attractive investment.
The markets are also waking up to the potential of the telecom giant. For several months, AT&T shares suffered massive blows. However, things are looking up now as investors look forward to a new year of possibilities.
In addition, the stock is one of the best options for income investors. At $1.11 per AT&T share, the telecom giant will pay out an astounding $8 billion aggregate to stockholders. That will still leave about $6 billion from its free cash flow haul to pare down debt. Not a bad deal by any stretch.
Delta Air Lines (DAL)
Delta Air Lines (NYSE:DAL) is seeing a sizable increase in business in 2022, marking a stark change from the previous two years. But the stock is still down by double digits this year, as investors worry about soaring inflation and a slowing global economy. But the carrier’s business model puts it slightly ahead of the competition. It is one of the primary reasons you will find DAL among stocks hedge funds are buying.
Delta has established itself as a luxury brand within the U.S. airline sector by providing great service and meeting travelers’ needs. Over the past decade, this premium positioning has given Delta an advantage: most of its revenue comes from business travel and higher-income leisure travelers who are more immune to economic downtimes than budget customers. At a time when skyrocketing prices are hurting other businesses in the industry, their proven track record of excellence makes them stand out exponentially above their competition.
Despite some operating challenges, Delta scored record revenue in the third quarter, despite operating with 17% less capacity than in Q3’19. While the main cabin revenue experienced a slight drop, the premium cabin saw a significant increase.
With customers increasingly shifting their preferences towards more premium products, management has noted a shift in Delta’s revenue sources. By 2024, the company believes that main cabin tickets will account for only 40% of its total sales.
Managers have set a target of $7 adjusted earnings by 2024 while maintaining more than $4 billion of free cash flow. Considering its recent performance, it does not look like these goals are tough. That’s why when looking at stocks hedge funds are buying, DAL sticks out.
When it comes to stock investments, many investors look for tried-and-true companies that have been around for years and have a reputation for success. After all, they’ve made money and are unlikely to be influenced by downturns or other market changes. However, taking risks can sometimes be just as lucrative as playing it safe. One example is Cazoo Group (NYSE:CZOO), an online car retailer gaining serious traction with investors due to strong price momentum.
Despite not having the illustrious history of some other retail firms, hedge funds are starting to take note of Cazoo as a potentially savvy investment choice. Cazoo’s meteoric rise proves that having faith in untested business models can be very rewarding financially.
Interestingly, Cazoo first came to investors’ notice when it debuted via a SPAC deal. Like several other stocks during the SPAC boom, investors initially poured heavily into this. And when the markets cooled off, they quickly retreated.
Cazoo is not standing idly by, though. It is making significant changes to its operating model to turn things around. The most prominent step is exiting the European Union. The move will help save $115 million. It will also free up the company to concentrate on the U.K. market, where it will find considerable success.
Cazoo is not the first company this year to have to make some tough decisions. But considering the size of its operations, its moves are major. And hedge funds are noticing.
On the publication date, Faizan Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.