A bear market is a long period of declining stock prices. The term comes from the fact that the stock market often drops as much as 30% in value during such a period. While most investors react to bear markets by holding back, the more aggressive ones can take advantage of those situations and make a lot of money. In this article, we will discuss the stocks hedge funds love during bear markets.
Before continuing, it’s important to note why this article focuses on hedge funds.
Hedge funds are investment funds that use a variety of strategies, from short-selling and arbitrage to proprietary trading. Ever since Alfred Winslow Jones set up the first fund in 1949, hedge funds have existed, and their popularity has grown exponentially over time. By 2021, more than $3.8 trillion in assets will be under hedge fund management.
The US Securities and Exchange Commission (SEC) requires hedge funds to report quarterly holdings. For many investors, going through these filings has become a habit. However, this information should be taken with a grain of salt. What most people find interesting is what the reports reveal about what hedge funds are doing in today’s market. By looking at which stock hedge funds like, investors can make better long-term investment decisions within their own time frame.
| UBER | Uber | $29.13 |
| M.A | MasterCard | $303.80 |
| NOW | Service Today | $419.04 |
Uber (UBER)
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The Uber (NASDAQ:UBER) stock is down more than 30% year to date. But this is not always the case. In the first three years after it was founded in 2009, Uber grew phenomenally, with a $10 billion valuation and hundreds of millions of dollars in annual revenue.
The most important thing is that Uber has recovered from the challenges during the pandemic. Rides fell during this period, but with a solid business plan, Uber can quickly recover and use the challenges as a learning experience on how to be better prepared in the future.
Uber also deserves brownie points for growing its food delivery service Uber Eats. Revenues for the platform reached $8.3 billion in fiscal 2021, growing rapidly over the past two years. At the same time, the company is aggressively pursuing M&A activity, buying food delivery service Postmates and starting grocery delivery Cornershop. It’s no wonder that big hedge funds are pouring capital into Uber.
In the second quarter of 2022, 129 hedge funds held positions in Uber, and the total dollar value of their investments was worth approximately $5.3 billion.
Mastercard (MA)
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MasterCard (NYSE:M.A) is a good investment for many reasons. First, it is increasingly popular. Mastercard is accepted at almost all retailers, online and offline, and more and more people are using it as their primary form of payment. This trend is likely to continue, meaning Mastercard’s revenues will continue to grow.
Second, hedge funds love this stock. Mastercard is a high-growth company that offers investors a relatively safe way to participate in the growth of the global economy. As a result, Mastercard is one of the most popular stocks among hedge fund managers.
Finally, Mastercard is a great long-term investment. The company has a strong competitive position and generates significant cash flows. This provides resources to invest in new products and services, which will drive further growth in the future.
It is also worth noting that Mastercard is a company that does not shy away from change and is always innovating to stay on top. Mastercard recently agreed to provide a crypto-based prepaid card in Argentina to allow Binance (BNB-USD) users in the country to pay with cryptocurrencies.
When discussing stocks hedge funds love in a bear market, Mastercard often makes the cut. The reason is due to its constant change and dominant position. According to the latest quarterly 13F filing, Mastercard is part of the portfolios of 137 different hedge funds. The total dollar value of these long positions is approximately $15 billion.
ServiceNow (NOW)
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Service Today (NYSE:NOW) is a cloud computing company that provides digital workflows for enterprise companies. The ServiceNow platform helps businesses automate IT operations, improve customer service, and manage employee workflows.
ServiceNow is considered a good investment because it is a leader in the growing cloud computing market. Additionally, the ServiceNow platform has a wide range of applications for enterprise companies, making it an important tool for businesses. ServiceNow is also a growing company, with its revenue rising 30.47% year-over-year in 2021. ServiceNow expects subscription revenue to grow between $6.92 billion and $6.93 billion this year, up 24% from last year. Overall, ServiceNow is a good investment because it is a leader in the cloud computing market and has a wide range of business applications.
ServiceNow’s estimated growth rates are strong, and it still predicts its annual revenue to grow at least 22% on average from 2021 to 2026, to nearly $16 billion.
ServiceNow stock isn’t cheap yet but has strong potential for long-term investors. The company is likely to see rising rates and other macro headwinds that could limit near-term gains before higher business growth eventually turns in its favor. In the second quarter, there were 99 hedge funds with investments in ServiceNow. The total amount invested for these funds is $5.2 billion. This makes it one of the stocks hedge funds love in a bear market.
As of the date of publication, Faizan Farooque does not hold (directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writers, subject to InvestorPlace.com’s Publishing Guidelines.