A bear market is a prolonged period of declining stock prices. The term originates from the fact that the stock market often drops as much as 30% in value during such a period. While most investors react to the bear market by holding back, the more aggressive ones can take advantage of those circumstances and make a lot of money. In this article, we will discuss stocks hedge funds love during a bear market.
Before moving further, it is 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. Since Alfred Winslow Jones set up the first fund in 1949, there have been hedge funds, and their popularity has grown tremendously over time. In 2021, more than $3.8 trillion in assets were under hedge fund management.
The U.S. Securities and Exchange Commission (SEC) requires hedge funds to report quarterly holdings. For many investors, going through these filings has become a habit. Still, 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 the market right now. By looking at which stocks hedge funds love, investors can make better long-term investment decisions within their own time frame.
| UBER | Uber | $29.13 |
| MA | Mastercard | $303.80 |
| NOW | ServiceNow | $419.04 |
Uber (UBER)
The Uber (NASDAQ:UBER) stock is down more than 30% in the year thus far. But it wasn’t always this way. For the first three years after its founding in 2009, Uber grew phenomenally, with a $10 billion valuation and hundreds of millions of dollars in annual revenue.
What’s most important is that Uber was able to bounce back from the challenges during the pandemic. Rides plummeted during this time, but with a strong business plan, Uber could recover quickly and use the challenges as a learning experience for how to be more prepared in the future.
Uber also deserves brownie points for growing its Uber Eats food delivery service. Revenues for the platform reached $8.3 billion in fiscal 2021, growing rapidly in the last two years. At the same time, the company is aggressively pursuing M&A activity, purchasing food delivery service Postmates and grocery delivery startup Cornershop. It is no wonder that large hedge funds are pouring capital into Uber.
In the second quarter of 2022, 129 hedge funds held positions in Uber, and the total dollar amount of their investments were worth around $5.3 billion.
Mastercard (MA)
Mastercard (NYSE:MA) is a great investment for many reasons. First, it is increasingly popular. Mastercard is accepted at nearly all retailers, both online and offline, and more and more consumers are using it as their primary form of payment. This trend will likely 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 is generating significant cash flows. This gives it the 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 doesn’t 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 make payments with cryptocurrencies.
When discussing stocks hedge funds love in a bear market, Mastercard will often make the cut. The reason is because of its constant innovation and dominant position. As per the latest quarterly 13F filings, Mastercard is part of portfolios of 137 different hedge funds. The total dollar amount of these long positions is about $15 billion.
ServiceNow (NOW)
ServiceNow (NYSE:NOW) is a cloud computing company that provides digital workflows for enterprise companies. ServiceNow’s platform helps enterprises 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, ServiceNow’s platform has a wide range of applications for enterprise companies, which makes it a valuable tool for businesses. ServiceNow is also a growing company, with its revenue increasing by 30.47% year-over-year in 2021. ServiceNow expects subscription revenue to increase to between $6.92 billion and $6.93 billion this year, up 24% from the year-ago figure. 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 forecasted growth rates are strong, and it still predicts its annual revenue to grow by at least 22% on average from 2021 to 2026, to almost $16 billion.
ServiceNow’s stock isn’t cheap yet but has strong potential for long-term investors. The company will likely see rising rates and other macro headwinds that could limit near-term gains before eventually turning around with increased business growth in its favor. In the second quarter, there were 99 hedge funds with an investment in ServiceNow. The total amount invested for these funds was $5.2 billion. It makes it one of the stocks hedge funds love in a bear market.
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.