Buy Hedge Fund Stocks – 5 Best Hedge Fund Stocks To Buy Right Now in 2021

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For many years, hedge funds have outperformed the market. Although they haven’t managed to outperform the stock market in 2021, their biggest holdings and the stocks they invest in are still important for many individuals. Whether you want to follow their strategies or find out trustworthy stocks, these funds’ components may help you polish your investment strategy.

If you’d like to see which ones are the most favourite stocks for hedge funds, why they are worth your attention, and how to invest in these top-performing companies, check out the following sections below.

Table of Contents

#1 Broker to Buy Hedge Fund Stocks – eToro

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$50Exclusive promotion
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  • Invest in a wide range of cryptocurrencies
  • Ability to copy more experienced investors and their decisions
  • eToro crypto wallet included which makes it beginner-friendly
0% Commissionstart TradingOur score 10

How to Buy Hedge Fund Stocks – A Quick Guide For 2021

If you want to buy hedge fund stocks right now, all you need to do is follow the next steps:

  • Step 1: Open an Account with eToroAccess eToro’s home page and click to open a new account.
  • Step 2: Upload Your ID – Fill in the form with your personal details. Then, upload your personal documents so the broker can verify your identity and comply with the KYC policy.
  • Step 3: Deposit Funds – Next, deposit your capital via one of the many payment methods available. You can choose from debit or credit card, e-wallets like PayPal and Skrill, and many others.
  • Step 4: Search for Hedge Fund Stocks – Use the search bar at the top to look for your desired hedge fund stocks.
  • Step 5: Buy Hedge Fund Stocks – You can buy the chosen asset by clicking on “Trade” and filling in the amount, leverage used (if any), stop-loss order, and take-profit level.

67% of retail investor accounts lose money when trading CFDs with this provider.

Best Hedge Fund Stocks to Buy Now – List of the Best Hedge Fund Stocks

If you have yet to identify the best hedge fund stocks of this year, we’ve done all the research on your behalf. These are some of the most popular stocks that hedge funds invest in right now:

  1. Microsoft – Best Hedge Fund Stock to Invest in Right Now
  2. Alphabet – Best Cloud Stock to Invest in Right Now
  3. American Express – Best Credit Card Company
  4. Johnson & Johnson – Best Hedge Fund Stock for Dividends
  5. Procter & Gamble – Best Hedge Fund Stock for a Recession-Proof Portfolio

How To Buy Hedge Fund Stocks – Choose a Broker

Before buying hedge fund stocks, you need to choose a brokerage to act as a liaison between you and the financial markets. These are the top brokers right now that offer hedge fund stocks:

  • eToro – Overall Best Place to Buy Hedge Fund Stocks
  • AvaTrade – Trade Hedge Fund Stocks at 0% Commission

What Are Hedge Fund Stocks?

A hedge fund is an alternative investment vehicle that collects investors’ money and invests it into different assets. The fund has a manager that oversees the entire process and aims to achieve the fund’s objectives. The hedge fund is similar to a mutual fund, but the first is usually riskier than a mutual fund, among many other differences between the two. When choosing a hedge fund, it’s important to assess its strategy to make sure it aligns with yours. In general, hedge funds are run similar to trading strategies rather than buy-and-hold, long-term ones.

In a similar fashion, hedge fund stocks refer to the most popular stocks among hedge funds. In general, these are well-established, blue-chip stocks, so many investors use hedge funds as guidance to identify less risky options on the stock market.

Best Hedge Fund Stocks to Buy Now – Full Analysis

In the following sections, we will dive into details regarding each hedge fund stock and why they are preferred by most hedge fund managers.

1. Microsoft – Best Hedge Fund Stock to Invest in Right Now

If you already have some experience with the stock market, you will not be surprised that some of the FAANGM (Facebook, Amazon, Apple, Netflix, Alphabet, and Microsoft) stocks are on this list. Although all of them are worth checking out, Microsoft is by far the most popular among hedge fund managers. About 740 funds (more than 40%) own Microsoft shares, and more than 20% of all hedge funds have Microsoft stocks among the top ten assets in their portfolio.

Apart from its excellent share price growth of 58% this year, there are several other reasons you may want to consider this stock. For instance, Microsoft developed several cloud services (i.e., Office 365) and keeps expanding on this market. Specialists have estimated that the cloud services market is worth $1 trillion (TAM or total addressable market), which justifies Microsoft’s popularity among hedge fund managers.

67% of retail investor accounts lose money when trading CFDs with this provider.

2. Alphabet – Best Cloud Stock to Invest in Right Now

Alphabet, Google’s parent company, has always attracted many investors. About 37% of hedge funds invested in the company, and about 14% count the stock as one of their top ten holdings.

It is not difficult to understand why Alphabet is a favourite, especially when we consider its leading position in web search. Apart from this, digital advertising is yet another sector in which Google excels. Although many were quite skeptical due to Google’s overreliance on digital advertising services, this market has yet to show any weakness.

67% of retail investor accounts lose money when trading CFDs with this provider.

3. American Express – Best Credit Card Company

Credit card companies play in a riskier environment, but American Express is one of the few stocks with a healthy financial position. Its market cap hovers above $130 billion and has a 1% dividend yield as of this writing, which is extremely promising for a credit card company.

Over the past year, the company’s stock price went up by nearly 40%, generating healthy returns for its stockholders. With a stock price of more than $163 right now, the credit card company share price was only $95 in 2018. This stock may also be a good pick for conservative investors because it has low debt and quite some liquidity available.

67% of retail investor accounts lose money when trading CFDs with this provider.

4. Johnson & Johnson – Best Hedge Fund Stock for Dividends

Johnson & Johnson is perhaps one of the most closely watched companies of 2020 and 2021 amid the pandemic. Although the company had a steadier year, with only about a 13% share price increase, no portfolio is truly diversified without a healthcare giant.

One of the main benefits of this stock is that it’s a great choice for dividend lovers. More specifically, Johnson and Johnson has been increasing its dividend each year for 59 consecutive years. Right now, the dividend yield is 2.52%. Analysts expect the share price to reach $215 in the next 12 months at most, with a median estimate of $180 (an increase of 6.9%) and a low estimate of $169 (or 0.3%).

67% of retail investor accounts lose money when trading CFDs with this provider.

5. Procter & Gamble – Best Hedge Fund Stock for a Recession-Proof Portfolio

The consumer staples sector contains necessities like cleaning and laundry products, personal care and hygiene products, family and baby care, among others. Some of the most popular brands owned by this retail giant include Fairy (washing liquid), Ariel and Tide (laundry detergent), Head & Shoulders and Pantene (shampoo), Oral-B (toothbrushes and other oral hygiene products), and Pampers.

Procter & Gamble is an excellent pick because consumer staples is a sector that remains fairly stable. In other words, regardless of whether it is a recession or a period of booming economic growth, consumers still spend their money on beauty products, cleaning detergents, oral hygiene, and other similar products.

The dividend yield is about 2.21%, while the double-digit share price growth reached 16% in the past year. This turns Procter & Gamble into a favorite for many investors, given its low volatility, excellent annual payout, and its 65-year history of annual dividend growth.

67% of retail investor accounts lose money when trading CFDs with this provider.

Investing vs Trading Hedge Fund Stocks

If are new to the investing world, you should know that there are major differences between trading and investing strategies. Below, we will introduce you to their basics, so you can find out which one suits you best.

Invest in Hedge Fund Stocks

An investing strategy means that you select financial assets to buy and hold for a long period, typically several years. Long-term investors use fundamental analysis to identify which stocks suit their strategy. For instance, the quick ratio tells you if the company is in a good financial position by showing how easily the business can cover its short-term debt (using liquidity like cash). If the business does not have enough cash to cover its debt, its viability is threatened. Long-term investors may also want to earn dividends, case in which they check the dividend yield.

Trade Hedge Fund Stocks

If you don’t want to buy stocks and hold for the long term, then trading is for you. This means you buy and sell assets in a much shorter time period, depending on your strategy. There are day traders that buy and sell assets during the same day, scalpers that make profits from buying and selling within seconds.

Fundamental traders use fundamental analysis to make profits in a short period of time. For instance, you can keep an eye on the news (like economic reports and company-specific news, such as earnings announcements) to make trading decisions. News traders and swing traders often hold their positions for multiple days or even weeks until corporate changes take place.

How to Choose the Best Hedge Fund Stocks for My Portfolio?

There are different ways to choose the best hedge fund stocks for your portfolio. It depends on your strategy, typically using fundamental or technical indicators or other well-defined techniques that may combine several aspects. However, to ensure returns, beginners should experiment with different strategies but ultimately focus only on one technique that suits them best. Next, we will explore a few aspects you may want to consider when filtering your hedge fund stocks.

Market Capitalization

If you are looking for hedge fund stocks, it’s important to understand that most of these companies are large, well-established ones. Also known as blue-chip stocks, you can find the right ones by filtering their market capitalization. This is the total value of its outstanding shares and indicates how big the company is.

Investors that use market cap in their strategy usually look for large-cap, medium-cap, or small-cap companies. For instance, adding large-cap companies like Microsoft to your portfolio makes you more likely to weather economic downturns. Also, market leaders like Procter & Gamble are typically blue-chip stocks with a long, reliable track record of growth and stability.

Industry & Diversification

Hedge fund stocks can be extremely varied, although most of these are part of the S&P 500. You need to consider what industry you want to invest in. In general, buying multiple stocks from different industries lowers your overall risk. This is because some industries like tech perform better during booming economic conditions, while others like healthcare and utility companies stabilize your portfolio during downturns or recessions.

Growth Potential vs Dividends

When choosing stocks, you will most likely sacrifice either growth potential or dividends. For instance, Procter & Gamble may not have much room to grow given its industry and position but comes with a high dividend yield. A tech giant like Alphabet has unlimited growth potential with no dividend payments. This depends on your strategy and return expectations. For instance, would you like to rapidly grow your portfolio value or would you prefer earning yearly income via dividends and less capital appreciation?

Benefits of Hedge Fund Stocks

The benefits of hedge fund stocks should not be ignored if you want to drive returns. The most important ones are discussed below.

Dividends

As briefly mentioned, hedge fund stocks are often part of the S&P 500, mature companies that usually pay dividends. Unlike tech companies, for instance, mature stocks like Johnson & Johnson pay hefty dividends. This means that your investment earns you guaranteed returns.

Less Risk

As most hedge fund stocks are large and mature, their financial performance is also stable. These are incumbents with decades of experience in the market, so the risks associated with small companies are inexistent. Yet, you can further decrease your risk by investing in multiple stocks from different industries and adding a wide range of other financial assets, including indices and bonds.

Portfolio Diversification

With a zero-commission broker like eToro, which allows you to invest as little as $10 in any stock, you can easily create a highly diversified portfolio. This means that your portfolio will be safer during economic stagnation or recessions while still earning you great returns during economic booms.

Drawbacks of Hedge Fund Stocks

Hedge fund stocks come with great benefits for some investors. However, they are not a one-size-fits-all approach. Let’s see what drawbacks you should consider before investing in them.

Low Returns

Just like any investment, lower risk means lower return. Hedge fund stocks may be safer than other types of stocks, but the steady and predictable financial performance means that there is a much lower (or no) chance to see your investment doubling overnight. If you are a risk-taker, hedge fund stocks may not be for you.

Little Volatility

If you want to trade often, large hedge fund stocks may not grant you the opportunities you seek. Lower risk also means little volatility, so you won’t be able to buy and sell these stocks over a short period with great returns. Thus, the lack of price volatility makes hedge fund stocks unsuitable for technical traders seeking quick profits.

Where to Buy Hedge Fund Stocks – Full Broker Reviews

In the following sections, we will introduce you to the best online brokers for hedge fund stocks. They are both regulated by several authorities around the world, come with a great variety of assets, and you can invest with zero commissions.

1. eToro – Overall Best Place to Buy Hedge Fund Stocks

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eToro is one of the most popular brokers in the world with more than 23 million users. Customers can trade or invest in hundreds of stocks, trade CFDs (contracts-for-difference), or engage in social trading. The platform has a special section where you can comment on your stocks or follow master traders’ opinions and even trades. Thus, eToro is a great platform for beginners seeking to learn the basics of trading or investing in equities and provides an equal opportunity for advanced investors to become highly successful.

The fee structure is extremely beneficial to its users. For instance, deposits are completely free of charge, while withdrawals cost only $5 regardless of the amount. Also, buying real stocks come with zero commissions. For advanced users, eToro provides extra features, such as buying and selling CFDs, leveraged positions, short-selling, and different risk management tools like stop-loss orders.

Pros

  • eToro provides a broad array of stocks
  • Has a mobile phone app
  • No download required to access the platform
  • You can copy successful traders’ portfolios
  • Access to charts and fundamental indicators

Cons

  • Although the minimum investment is $10 per stock, you need a higher investment to copy other traders (typically $200 or more)

 67% of retail investor accounts lose money when trading CFDs with this provider.

2. AvaTrade – Trade Hedge Fund Stocks at 0% Commission

Just like eToro, AvaTrade charges no commissions. It is a CFD-only broker, so you cannot invest in real stocks. This feature, along with the large array of trading platforms available, recommends it to traders and advanced users rather than beginners or long-term investors.

The broker is fully regulated, just like eToro, but it does not accept US clients. The minimum deposit is 100 units of currency (depending on the base currency of the account) and has thorough research and educational sections to help you deepen your trading knowledge.

Pros

  • Broad asset offerings, including CFDs on stocks, indices, cryptocurrency, and others
  • Numerous trading platforms available for all types of traders and investors
  • Fully regulated broker
  • Allows social trading
  • Budget-friendly cost structure with 0% commissions

Cons

  • No real stocks available (only derivatives)

71% of retail investor accounts lose money when trading CFDs with this provider.

How to Buy Hedge Fund Stocks – Detailed & Explained in Full

Next, we will help you register with our top broker for hedge fund stocks, eToro. This is how you can get started within minutes!

Step 1: Open a Broker Account

Access eToro and click to open a new account. You need to fill in this form that asks for basic details, including a username and a password that you will use to log into the platform. Follow the prompts to validate your account by uploading a government-issued ID and proof of address.

how to join etoro

67% of retail investor accounts lose money when trading CFDs with this provider.

Step 2: Deposit Funds

Next, deposit your capital into the trading account. Click on “deposit” and choose your favorite payment method. To transfer the money immediately, you can choose an e-wallet like PayPal or a debit/credit card.

Deposit Funds

Step 3: Search for Hedge Fund Stocks

The next step is to look for our recommended stocks or conduct your own analysis. To see what offerings are available, click on the “Discover” section to find a list of all stocks available for purchase.

Step 4: Buy Hedge Fund Stocks

Once you make your decision, simply click on “Trade” to send your order. Fill in the amount and use a stop-loss order and/or take-profit level as per your strategy. You need to invest at least $10 per stock.

How to Buy Hedge Fund Stocks – Conclusion

All in all, hedge fund stocks are those companies favored by numerous hedge fund managers. They are usually well-established, blue-chip companies with a track record of performance. Some of these may pay you dividends, others have a steady stock price growth.

In this article, we have introduced you to the best hedge fund stocks of this year, why they are the top performers in their specific fields, and how you can register with an online broker right now and start investing. For more information about stock investing, the best dividend stocks right now, and other investment and trading guides, check out our other articles.

1
$50Exclusive promotion
Our score10
  • Invest in a wide range of cryptocurrencies
  • Ability to copy more experienced investors and their decisions
  • eToro crypto wallet included which makes it beginner-friendly
0% Commissionstart TradingOur score 10

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About Ana Frincu PRO INVESTOR

Ana Frincu is a freelance content writer specialised in finance and economics. She has a BA in International Business Management and a MA in International Taxation and Finance. With a keen interest in fintech and personal experience as an investor, she covers a broad range of topics, including trading, alternative data, cryptocurrency, and macroeconomics.