HES - 3 Institutional Investor Favorites Ready to Rally Further

2024-07-15 06:00:00 ET

InvestorPlace - Stock Market News, Stock Advice & Trading Tips

While there are many ways to gain an advantage on Wall Street, betting alongside the biggest investors can potentially be quite lucrative. Naturally, the wealthiest institutions didn’t earn that status by losing money all the time. So, it makes sense that to get the best results, you partner with the best. That’s the mainline thesis behind institutional investor favorites.

Another factor to consider is that the behemoths enjoy access to the best resources and tools available. Typically, retail investors lack the wherewithal for such privileges. In addition, the major institutions hire the brightest candidates. Therefore, you have a greater breadth of confidence when acquiring shares of institutional investor favorites.

At the same time, no guarantees exist. While the big boys may target the best ideas, they’re not foolproof. Also, they can afford to be audacious with their wagers. However, you might not have the same luxury. Still, more often than not, the pros know what they’re doing. On that note, below are intriguing institutional investor favorites to consider.

Amazon (AMZN)

Easily one of the most popular ideas on Wall Street, it’s no surprise that Amazon (NASDAQ: AMZN ) ranks among the institutional investor favorites. Per data provided by HedgeFollow , AMZN stock represents the second-biggest institutional acquisition, behind only semiconductor juggernaut Nvidia (NASDAQ: NVDA ). As of filings in the first quarter of this year, institutional investors acquired $14.41 billion worth of shares.

Fundamentally, Amazon offers a multi-pronged weapon. Primarily, it dominates the e-commerce sector, an ecosystem that’s been marching higher since the second quarter of 2022. In addition, Amazon dominates in technology services, particularly its AWS cloud network. Thanks to so many relevant businesses, the company posted an average earnings per share of 87 cents in the past four quarters. In contrast, analysts were anticipating only 63 cents.

One drawback with AMZN stock is that it trades at 3.58X trailing-year sales. Between the first quarter of 2023 to Q1 2024, the average metric sat at 2.63X. Still, what’s intriguing here is that sales are projected to steadily expand. In fiscal 2024, the top line could move up 2.6% to $589.61 billion. By 2025, this figure could rise to $654.94 billion, up 11.1%.

UnitedHealth Group (UNH)

When it comes to the topic of institutional investor favorites, we could discuss tech-related ideas to the end of time. However, it’s important to note that the big dogs are also focused on other market segments. Interestingly, insurance and healthcare services provider UnitedHealth Group (NYSE: UNH ) ranks highly in terms of major market participants. Overall, Wall Street’s best have acquired $6.14 billion worth of shares.

From a fundamental perspective, institutional buyers may be thinking long term. Yes, UNH stock presents relevancies regarding medical insurance and other coverage-related concerns. Further, the company could see significant demand in the coming years for its over-age 65 plans. Thanks to the population spike of the post-war baby boom, millions of people will be retiring. Naturally, people of advanced age often require greater care needs.

Temptingly, UNH stock is trading at a relative discount, with the market pricing it at 1.23X trailing-year sales. In the past year, this metric averaged 1.35X. What’s more, covering experts believe that by year’s end, revenue could rise to $398.43 billion. If so, that would imply a growth rate of 16.3%.

In the following year, sales could tick up again (by 7.5%) to $428.42 billion. It’s one of the institutional investor favorites to consider.

Hess (HES)

For those who wish to try their luck among the ideas endorsed by giants, energy player Hess (NYSE: HES ) could be an interesting opportunity. Falling under the oil and gas exploration and production industry, Hess is also known as an upstream specialist. It also offers midstream (transportation) capabilities, covering crude oil, natural gas liquids (NGLs) and natural gas. Thanks to geopolitical dynamics, HES stock may jump higher.

Even better, the alpha dogs appear to be sniffing something special over the horizon. All told, the top investors have acquired $3.89 billion worth of HES stock. Cynically, should global oil supply chains be disrupted due to ongoing “current events,” Hess could see a boost to the bottom line. Notably, it’s already strong, with the company posting an average EPS of $1.77 in the past four quarters.

Analysts, it should be noted, expected only $1.18 during that time. Another compelling signal is that HES stock trades for only 3.98X trailing-year sales. In the past year, this metric reached 4.08X. So, even with the institutional interest, HES hasn’t been priced at a premium.

That could change soon. Analysts are looking for fiscal 2024 revenue to hit $12.29 billion, up 15.5%. Therefore, it’s one of the top institutional investor favorites to consider.

On the date of publication, Josh Enomoto 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 .

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