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Shifting Tides: Hedge Funds Redirect Focus to Alternative Stocks

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Amid the turbulence in tech valuations, a subtle rotation in investment preferences is underway. Hedge funds are divesting from technology stocks at an unprecedented pace, shifting their attention to alternative investment options. While this move isn’t a cause for alarm, it does signal a prudent time to realign portfolios with the current market dynamics.

Citing a report from Reuters, investors have shown an inclination towards investment-grade bonds and cash equivalents recently, as data from EPFR tracked by Bank of America suggests. With the potential for abrupt volatility looming over the tech sector, exploring the stocks that hedge funds are embracing could offer a more stable investment outlook.

Embracing the Energy Behemoth: Exxon Mobil (XOM)

Exxon Retail Gas Location

Source: Jonathan Weiss / Shutterstock.com

An emblem of the traditional energy sector, Exxon Mobil (NYSE:XOM) continues to command a formidable position in the investment landscape. Bolstered by the inherent efficiency of hydrocarbons, Exxon Mobil remains a magnet for institutional investors. HedgeFollow data reveals substantial institutional acquisition of XOM shares in Q4 last year, with key contributors including Fisher Asset Management, State Street (NYSE:STT), and BlackRock (NYSE:BLK).

Beyond its industry stalwart status, Exxon Mobil offers an attractive forward dividend yield of 3.36% and a sustainable payout ratio of 41.39%. With institutional investors occupying a significant portion of its shareholder base, XOM imparts a sense of stability in uncertain market conditions.

Market analysts tout Exxon Mobil as a moderate buy, projecting a price target of $125.31. As one of the top picks among stocks favored by hedge funds, its appeal transcends mere market trends.

Financial Innovation Meets Stability: Visa (V)

several Visa branded credit cards

Source: Kikinunchi / Shutterstock.com

Blending technological innovation with financial services expertise, Visa (NYSE:V) marks a domain where cutting-edge solutions dovetail with stability. Although the prevailing debt landscape may introduce elements of risk, Visa stands resilient as a hedge fund favorite, evident from the substantial investments made by major players such as State Street and BlackRock.

Despite modest performance in the past fiscal year, Visa boasts a streak of positive earnings surprises, hinting at underlying strength. Analysts are optimistic about Visa’s prospects, forecasting an EPS of $9.92 against a sales backdrop of $35.85 billion for fiscal 2024. Pairing these estimates with a unanimous strong buy rating underscores Visa’s attractiveness among investors.

The Sanctuary of Healthcare: UnitedHealth Group (UNH)

The UnitedHealth (UNH) headquarters in Minnetonka, Minnesota.

Source: Ken Wolter / Shutterstock.com

Amid the market upheavals, UnitedHealth Group (NYSE:UNH) emerges as a beacon of respite from the tech sector’s tumult. With a multi-faceted approach spanning healthcare services through four distinct segments, UNH offers a sanctuary of stability for investors craving a departure from technology-oriented offerings.

HedgeFollow data reveals a robust acquisition of UNH shares by institutional investors in Q4, with notable engagements from Jennison Associates LLC, State Street, and Qube Research & Technologies. UNH’s consistent performance and diversified service offerings contribute to its appeal among hedge funds.

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