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The fourth quarter (Q4) shined bright for hedge funds, marking it a standout period in the investment realm. According to a recent report released by a U.K.-based data investment business, global hedge fund returns surged 7.1% in Q4, pushing returns to 13.3% for 2023, after a slight drop of 0.1% in the third quarter (Q3). That performance underscores the massive potential of hedge fund stocks to contribute to a well-rounded investment portfolio, especially in times of volatility.
Hedge fund stocks continue to capture the attention of savvy investors looking to diversify and effectively add a little dynamism to their portfolios. Moreover, hedge funds stand out for their ability to deliver robust returns, regardless of market conditions, by pursuing unique opportunities across various assets.
Hedge Fund Stocks to Buy: Pfizer (PFE)
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Pharma giant Pfizer’s (NYSE:PFE) stock witnessed a steep decline in value last year, shedding more than 40% of its value. The drop was mainly attributable to decreased sales from its coronavirus vaccine. Despite this, Pfizer’s outlook remains positive, bolstered by its powerful pipeline, which goes beyond its vaccine. With the FDA’s recent approval of nine new molecular entities, Pfizer is poised for a promising future, expecting sales growth of 3% to 5% in 2024. Additionally, the acquisition of Seagen marks a key moment for Pfizer’s oncology division, potentially adding $25 billion in sales by 2030 from its expansionary initiatives.
In Q4, the hedge fund activity in PFE stock increased dramatically, with a purchase of 6.4 million shares, elevating the total to 28.5 million from 22.1 million in the third quarter (Q3). That represents a growth of 29% quarter-over-quarter (QOQ). Additionally, on a year-over-year (YOY) basis, the increase is 19.1%, up from 23.9 million shares.
AT&T (T)
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AT&T (NYSE:T) has adeptly managed its liquidity challenges, focusing on reducing its debt load. Moreover, with its interest rates expected to stabilize, AT&T’s financial outlook looks promising. Additionally, it boasts a solid 5.3% free cash flow margin and a 14.1% return on common equity, making its stock an attractive buy. Despite a dividend cut a few years back, AT&T remains appealing to investors, offering a generous 6.6% yield.
In Q4, the company saw a significant uptick in hedge fund interest, with a 78.3% increase in shares held compared to Q3 and an astounding 110% rise from December last year. Furthermore, considering Wall Street’s encouraging financial forecast suggesting a Moderate Buy rating and a 20% upside, the momentum around T stock hints at a robust upside potential.
Bank of America (BAC)
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Bank of America (NYSE:BAC) remains a robust player in the U.S. retail deposit space, showcasing resilience despite the headwinds in the financial sector. Posting a 10% drop in sales, the bank remains cautiously optimistic, dubbing this period “The Year of the Landing.” Nevertheless, it reported a substantial profit exceeding $3 billion in the fourth quarter, highlighting its healthy growth in loans and deposits amidst challenging conditions. With a strategic focus on debt reduction, including a dividend trim, Bank of America is well-positioned to ride 2024 on a high.
In Q4, Bank of America (BAC) stock saw hedge fund activity climb by 6.8 million shares, resulting in a modest 0.6% QOQ rise. YOY, the increase is more pronounced at 6.3%, up from 1.1 trillion shares. That uptick in hedge fund interest, coupled with a Wall Street forecast of a Moderate Buy and a potential 9% upside from current prices bode well for BAC.
On the date of publication, Muslim Farooque did not hold (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.