Hedge Funds Love These 10 Blue-Chips, And So Should You

This article was originally published on Dividend Kings on Tuesday, January 10th, 2023.

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2023 is likely to be a year of extreme volatility in both directions. Initially, most blue-chip economists expect stocks to suffer as the recession takes a bite out of earnings.

According to studies from the NY, Chicago, Dallas, and San Francisco Federal Reserves, the 3m-10yr yield curve is the most accurate recession forecasting tool in history. And that’s screaming recession at the top of its lungs.

What does a 200% recession probability mean over 13 months? A near 100% probability of recession within five months, according to the “smart money” on Wall Street.

That agrees with the economic data, which indicates a recession could begin within two to four months.

Naturally, investors are worried about recessions, especially since the last two were the Pandemic and Great Recession, the two worst since the Great Depression.

S&P Potential Bear Market Bottom Scenarios

Earnings Decline In 2023	2023 S&P Earnings	X 25-Year Average PE Of 16.8	Decline From Current Level
0%	$217.89	$3,667.09	5.8%
5%	$207.00	$3,483.73	10.5%
10%	$196.10	$3,300.38 (Goldman and Morgan Stanley Base Case)	15.2%
13% (average and median recession since WWII)	$189.56	$3,190.37	18.0%
15%	$185.21	$3,117.03	19.9%
20%	$174.31	$2,933.67	24.6%

Click to enlarge

(Sources: DK S&P 500 Valuation Tool, Bloomberg Blue-Chip Consensus)

Even if we avoid a recession, which Goldman and Morgan Stanley think is the most likely outcome, both firms expect stocks to fall significantly in the year’s first quarter.

Morgan Stanley’s Mike Wilson was the most accurate forecaster of 2022, according to Bloomberg, and just put out a note saying, “20+% downside is possible in the next few weeks.”

But whether or not we get an official recession, growth will slow, thanks to the Fed’s rate hikes, which aren’t expected to stop until 5%.

The bond market still doesn’t believe the Fed won’t cut by year-end but now agrees with numerous Fed speakers from last week who are falling for at least 5% rates.

But while there is likely to be some short-term pain for investors in the next few weeks, the good news is that the next bull market is likely to start this year.

The average gain after a bear market like we’re having now is a 28% gain within a year and a nearly 4X gain over the next decade.

Fortunes are made in bear markets.” – Todd Sullivan

Long-term investors should look beyond whatever is coming in 2023 and to the much brighter outlook for 2024, 2025, and beyond.

And as hard as it is to believe after a dismal 2022, some of the best investments of the next decade are likely to be fast-growing blue-chips.

I wanted to share an interesting article I just came across to help provide some ideas for what growth and dividend growth world-beaters to buy in the coming weeks.

• 15 Best Growth Stocks to Buy According to Hedge Funds

Now, of course, articles like these are a bit hyperbolic. They measure how many hedge funds own a particular company based on 13-F filings. They don’t know the cost basis, reasoning, or time horizon of any particular fund.

So these aren’t actually “the best” growth stocks according to hedge funds, merely popular growth stocks that hedge funds owned three months ago.

Still, I wanted to look at what the supposed “smart money,” or at least the highest paid, thinks might be a great investment in 2023 and beyond.

So let’s do a countdown and summary of popular growth blue-chips that could provide life-changing returns in the coming years and might even deliver 10X returns in the next decade during the next bull market.

15th Most Popular Growth Blue-Chip With Hedge Funds – Tesla (TSLA)

Further Reading

Why Dividend Investors Should Buy Tesla

• The number Of Hedge Funds That Own It: 88
• Price: $119.77
• Fair Value: $302.44
• Historical Discount: 60%
• Quality Rating: 82% 13/13 Medium-Risk Speculative Blue-Chip
• DK Rating: Potential speculative ultra-value buy
• Yield: 0%
• Growth Consensus: 24.3%
• Long-Term Return Potential: 24.3%

2025 Consensus Total Return Potential

14th Most Popular Growth Blue-Chip With Hedge Funds – Advanced Micro Devices (AMD)

Further Reading

AMD: Focus On Progress, Not The Trough

• The number Of Hedge Funds That Own It: 89
• Price: $67.24
• Fair Value: $111.37
• Historical Discount: 40%
• Quality Rating: 93% 12/13 Low-Risk Super SWAN
• DK Rating: Potential Ultra-value buy
• Yield: 0%
• Growth Consensus: 14.7%
• Long-Term Return Potential: 14.7%

2025 Consensus Total Return Potential

13th Most Popular Growth Blue-Chip With Hedge Funds – Home Depot (HD)

Further Reading

The Home Depot: Threatened But Not Yet Shaken

• The number Of Hedge Funds That Own It: 89
• Price: $317.81
• Fair Value: $383.81
• Historical Discount: 17%
• Quality Rating: 91% 13/13 Low-Risk Ultra SWAN
• DK Rating: Potential strong buy
• Yield: 2.4%
• Growth Consensus: 10.5%
• Long-Term Return Potential: 12.9%

2025 Consensus Total Return Potential

12th Most Popular Growth Blue-Chip With Hedge Funds – Thermo Fischer Scientific (TMO)

Further Reading

Thermo Fisher Scientific: Back To Normal

• The number Of Hedge Funds That Own It: 92
• Price: $546.09
• Fair Value: $482.94
• Historical Discount: -13%
• Quality Rating: 96% 12/13 Low-Risk Super SWAN
• DK Rating: Hold
• Yield: 0.2%
• Growth Consensus: 6.7%
• Long-Term Return Potential: 6.9%

2025 Consensus Total Return Potential

11th Most Popular Growth Blue-Chip With Hedge Funds – Adobe (ADBE)

Further Reading

Adobe And Meta: Both Are Screaming Buys, But Only One Could Change Your Life

• The number Of Hedge Funds That Own It: 93
• Price: $341.98
• Fair Value: $571.68
• Historical Discount: 40%
• Quality Rating: 99% 13/13 Very Low-Risk Ultra SWAN
• DK Rating: Potential ultra-value buy
• Yield: 0%
• Growth Consensus: 15.2%
• Long-Term Return Potential: 15.2%

2025 Consensus Total Return Potential

10th Most Popular Growth Blue-Chip With Hedge Funds – Activision Blizzard (ATVI)

Further Reading

Activision: High-Yield Investment Amid 2023 Downturn And Recession

• The number Of Hedge Funds That Own It: 96

Note that MSFT is buying ATVI for $95 per share. Many hedge funds bought it to earn a small arbitrage premium when the deal closes.

• Price: $77.22
• Fair Value: $75.81
• Historical Discount: -2%
• Quality Rating: 81% 12/13 Medium-Risk Super SWAN
• DK Rating: Hold (unless you’re doing M&A arbitrage)
• Yield: 0.6%
• Growth Consensus: 10.7%
• Long-Term Return Potential: 11.3%

2025 Consensus Total Return Potential (Assuming The Acquisition Fails)

9th Most Popular Growth Blue-Chip With Hedge Funds – T-Mobile (TMUS)

Further Reading

T-Mobile: A Leader In The 5G Revolution

• The number Of Hedge Funds That Own It: 100
• Price: $148.77
• Fair Value: $266.78
• Historical Discount: 44%
• Quality Rating: 71% 9/13 Above-Average High-Risk Speculative
• DK Rating: Potential speculative good buy
• Yield: 0%
• Growth Consensus: 30.3%
• Long-Term Return Potential: 30.3%

2025 Consensus Total Return Potential

8th Most Popular Growth Blue-Chip With Hedge Funds – ServiceNow (NOW)

Further Reading

ServiceNow: Super Growth, High Retention, And Undervalued

• The number Of Hedge Funds That Own It: 103
• Price: $378.56
• Fair Value: $640 (Morningstar)
• Discount: 41%
• Quality Rating: Not Rated
• DK Rating: Not Rated
• Yield: 0%
• Growth Consensus: 31.4%
• Long-Term Return Potential: 31.4%

2025 Consensus Total Return Potential

7th Most Popular Growth Blue-Chip With Hedge Funds – UnitedHealth (UNH)

Further Reading

UnitedHealth Group: Customer-Centered Initiatives To Help Hedge Against Adversity

• The number Of Hedge Funds That Own It: 110
• Price: $490.06
• Fair Value: $462.27
• Historical Discount: -6%
• Quality Rating: 92% 13/13 Very Low-Risk Ultra SWAN
• DK Rating: hold
• Yield: 1.3%
• Growth Consensus: 13.6%
• Long-Term Return Potential: 14.9%

2025 Consensus Total Return Potential

6th Most Popular Growth Blue-Chip With Hedge Funds – Apple (AAPL)

Further Reading

When To Back Up The Truck On Apple Stock In 2023

• The number Of Hedge Funds That Own It: 140
• Price: $130.15
• Fair Value: $122.76
• Historical Discount: -6%
• Quality Rating: 92% 13/13 Medium-Risk Ultra SWAN
• DK Rating: hold
• Yield: 0.7%
• Growth Consensus: 10.7%
• Long-Term Return Potential: 11.4%

2025 Consensus Total Return Potential

5th Most Popular Growth Blue-Chip With Hedge Funds – Mastercard (MA)

Further Reading

How Amazon, Lowe’s, And Mastercard Can Potentially 6X Your Retirement Income

• The number Of Hedge Funds That Own It: 146
• Price: $370.97
• Fair Value: $407.73
• Historical Discount: 9%
• Quality Rating: 100% 13/13 Very Low-Risk Ultra SWAN
• DK Rating: potential good buy
• Yield: 0.6%
• Growth Consensus: 22.5%
• Long-Term Return Potential: 23.1%

2025 Consensus Total Return Potential

4th Most Popular Growth Blue-Chip With Hedge Funds – Visa (V)

Further Reading

Google And Visa Are Potentially Set To Soar In 2023

• The number Of Hedge Funds That Own It: 165
• Price: $218.60
• Fair Value: $272.98
• Historical Discount: 20%
• Quality Rating: 99% 13/13 Very Low-Risk Ultra SWAN
• DK Rating: potential strong buy
• Yield: 0.8%
• Growth Consensus: 15.9%
• Long-Term Return Potential: 16.7%

2025 Consensus Total Return Potential

3rd Most Popular Growth Blue-Chip With Hedge Funds – Alphabet (GOOG)(GOOGL)

Further Reading

Google And Visa Are Potentially Set To Soar In 2023

• The number Of Hedge Funds That Own It: 196
• Price: $88.80
• Fair Value: $135.01
• Historical Discount: 35%
• Quality Rating: 97% 13/13 Very Low-Risk Ultra SWAN
• DK Rating: Potential ultra-value buy
• Yield: 0%
• Growth Consensus: 12.5%
• Long-Term Return Potential: 12.5%

2025 Consensus Total Return Potential

2nd Most Popular Growth Blue-Chip With Hedge Funds – Amazon (AMZN)

Further Reading

How Amazon, Lowe’s, And Mastercard Can Potentially 6X Your Retirement Income

• The number Of Hedge Funds That Own It: 269
• Price: $87.36
• Fair Value: $207.28
• Discount: 58%
• Quality Rating: 99% 13/13 Low-Risk Ultra SWAN
• DK Rating: potential ultra-value buy
• Yield: 0%
• Growth Consensus: 19.2%
• Long-Term Return Potential: 19.2%

2025 Consensus Total Return Potential

#1 Most Popular Growth Blue-Chip With Hedge Funds – Microsoft (MSFT)

Further Reading

Get Ready To Back Up The Truck On Microsoft

• The number Of Hedge Funds That Own It: 269
• Price: $227.12
• Fair Value: $268.95
• Discount: 16%
• Quality Rating: 100% 13/13 Very Low-Risk Ultra SWAN
• DK Rating: potential strong buy
• Yield: 1.2%
• Growth Consensus: 12.2%
• Long-Term Return Potential: 13.4%

2025 Consensus Total Return Potential

Bottom Line: Hedge Funds Love These 10 Blue-Chips, And So Should You

Let me be clear: I’m NOT calling the bottom in any of these companies (I’m not a market-timer).

Blue-chip quality and even Ultra SWAN quality does NOT mean “can’t fall hard and fast in a bear market.”

Fundamentals are all that determine safety and quality, and my recommendations.

• over 30+ years, 97% of stock returns are a function of pure fundamentals, not luck
• in the short term; luck is 25X as powerful as fundamentals
• in the long term, fundamentals are 33X as powerful as luck

While I can’t predict the market in the short term, here’s what I can tell you about these 15 companies.

With rare exceptions (like TMO), they represent some of the world’s best growth and dividend growth blue-chips.

Except for Apple, UnitedHealth, Activision, and Thermo Fisher, all are reasonably priced.

This means that anyone looking for world-beater blue-chips to potentially profit from the start of the new bull market likely starting in 2023 should consider TSLA, AMD, TMUS, HD, ADBE, MA, V, GOOG, AMZN, and MSFT.

Some of these companies are speculative (like Tesla), so you’ll want to size your position according to your personal risk profile.

But if you remember to focus on safety and quality first, prudent valuation, and sound risk management always, then these ten growth blue-chips could be just what you need to enjoy a new bull market in 2023 and beyond.