We recently compiled a list of the 10 Most Owned Stocks by Hedge Funds Right Now. In this article, we are going to take a look at where Visa Inc. (NYSE:V) stands against the other stocks owned by hedge funds.
Wall Street stocks surged this month after the Federal Reserve released minutes of its September meeting, which resulted in the first interest rate cuts in over four years. The details disclosed a ‘substantial majority’ of central bankers backing the 0.5 percentage-point cut, raising optimism among investors for further cuts ahead.
The broader market hit record highs on October 11, driven by several financial stocks reporting stronger-than-expected results during the recently concluded quarter. Another factor encouraging investors has been the downturn in US inflation, which fell to 2.4% in September and is inching toward the Federal Reserve’s goal of a two percent annual rate. This has raised hopes of a quarter-point cut in the central bank’s next meeting in November.
However, some analysts warn against diving into stocks after interest rate cuts, citing uncertainty around the upcoming presidential elections. Liz Young Thomas, the head of investment strategy at SoFi, while talking to Business Insider in early September discussed historic patterns in US markets towards the end of the third quarter and the beginning of the fourth.
She noted how the market performs well between June and August due to thinner volumes when traders are on vacation, while volatility picks up with an uptick in activity after they return to their desks in September. However, during the election year, this volatility peaks around mid-October, instead of September, according to Young Thomas.
Fundstrat Global Advisors’ co-founder, Tom Lee, has also cautioned investors against election-related uncertainty. Here is what he stated in an interview with CNBC late last month:
This Fed cut cycle I think is setting the stage for markets to be really strong over the next one month or next three months. But, what the stocks do between now and let’s say election day, I think is still a lot of uncertainty. And that’s the reason why I’m a little hesitant for investors to dive in.
Earlier that month in the weeks leading to the interest rate cuts, Lee, who is generally bullish on the stock market, forecasted a 7-10% dip between September and October amid nervousness around the presidential elections. However, Lee urged investors to ‘buy the dip’, indicating that he sees the likely fall as an opportunity to buy stocks while they trade for a lower value.
Adam Turnquist from LPL Financial also anticipates seasonal volatility in the weeks ahead but reiterated what Lee did, that the dip presents an opportunity to buy when the share is trading low and earn high returns when the market stabilizes. Turnquist advises investors not to readjust their existing portfolios because seasonal volatility has short-term effects and is difficult to forecast.
With that said, let’s now shift focus to hedge fund sentiment on the stock market and discuss some of the most widely held stocks by hedge funds.
Methodology
We scanned Insider Monkey’s database of 912 hedge funds for the second quarter of 2024 and picked the top 10 companies with the highest number of hedge funds having stakes in them. We ranked them in ascending order of hedge fund holders in each company.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A close-up of a modern payments terminal with a pile of credit cards on the side.
Visa Inc. (NYSE:V)
Number of Hedge Fund Holders: 163
Visa Inc. (NYSE:V) is a payment technology company that facilitates electronic transactions worldwide through its VisaNet network. It is one of the most owned stocks by hedge funds right now. According to Insider Monkey, 163 hedge funds had a stake in the company, as of Q2 2024.
On July 24, the company announced its results for the third quarter of FY 2024. Net revenue surged 10% from last year to reach $8.9 billion, driven by a 7% increase in overall payment volume during the quarter. Volume grew 5% in the United States, while 10% in international markets. Visa’s EPS also expanded 12% and was recorded at $2.42, which was in line with expectations. The company has reaffirmed its full-year outlook and expects growth in the low double-digits for Q4.
During the quarter, Visa Inc. (NYSE:V) signed and renewed multiple strategic partnerships with its clients, such as Lloyds Banking Group, NatWest, Raiffeisen Bank International AG, Wells Fargo, and Tata Digital. These partnerships are not only aimed at enhancing value for the clients but will also aid in maintaining Visa’s high transaction volumes.
The company is also making strides in artificial intelligence. According to a report in Sky News last month, Visa signed a deal – believed to be valued at £700 million – to acquire software company Featurespace, which develops AI payments protection technology to prevent and mitigate financial crimes. This acquisition is likely to further bolster Visa Inc. (NYSE:V)’s reputation as a reliable financial services provider.
It is also working on enhancing its service offerings by venturing into blockchain. On October 3, Visa Inc. (NYSE:V) introduced the Visa Tokenized Asset Platform (VTAP), a new product that will help banks in issuing fiat-backed tokens on blockchain networks. Live pilots of the platform will commence in 2025. Through VTAP, Visa hopes to integrate blockchain technology into incumbent financial infrastructures, with minimal technical integration via APIs.
Considering these factors, the stock’s future trajectory looks promising. Wall Street analysts have a consensus on Visa’s Buy rating and expect an 11% appreciation in its share price.
Overall V ranks 7th on our list of the most owned stocks by hedge funds right now. While we acknowledge the potential of V as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than V but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.