The Top 3 Places Hedge Funds Are Pouring Their Money Into

Dear Reader,

Big money, institutional flows, unusual options activity…

All leading into one another and topics we cover here every week – and for good reason.

The hundreds of millions and sometimes billions of dollars on the move in a single direction point to – but don’t give us – the best trades the market has to offer.

That’s what we call “piggybacking” – and you can read about that more right here.

But today, I want to talk about another lesson – just as lucrative – you can learn by following the big money.

It’ll set you up for not only the best trade of the day, but will help you find where longer-term opportunities will be, all within a specific corner of the market.

Not only that, but we’ll finish off with what that means into 2023 and we’ll uncover one of the ripest opportunities riding on those tailwinds.

Let’s get started…

We follow institutional money. That’s one of our mantras. They go for success rate, we go for the best trade – that’s our difference, and that’s how we make money.

And when you broaden it out, you can see that big money is always on the move and we can use this to predict where tomorrow’s profits will be made. If hedge funds and institutions think the money is in artificial intelligence (AI) – like you can see right here – then we’ll see an influx of interest and can reasonably say that there will be some pretty good trade opportunities there.

These are the three sectors that over 920 hedge funds took their biggest positions on in the third quarter…

3. Pharmaceutical Preparation

It’s probably no surprise that the global pharmaceutical market is one of the quickest moving right now. The pandemic made sure of that.

And it’s also probably no surprise that one of the most widely-owned biotechs by hedge funds is Pfizer (PFE). With a good and increasing dividend and a pipeline of products well beyond the COVID vaccine, Credit Suisse just upgraded their price target and other analysts maintain their Outperform rating.

The trend into the sector will probably continue well into 2023 as well.

From the second to third quarter of this past year, seven more hedge funds added bullish ratings on PFE, mainly because the sector itself could see big growth.

Watch this trend closely as we move into the New Year.

2. Semiconductors

Yes, semi production has come under massive pressure in the past couple of years. Disputes in Taiwan, shortages, and supply chain issues all contributed to that.

But it’s still the case that semiconductors remain one of the absolutely essential needs for a high-tech economy like ours. They go in smartphones, TVs, military equipment, medical devices, solar panels, other energy infrastructure, and much, much more. Anything you think of as electronic probably uses a semiconductor to operate.

Which is why the pressure is actually a good thing. It’s depressed prices for such an essential item in the long term, which is why many of the elite hedge funds favor one of the semi giants, NVIDIA (NVDA).

It’s positioned well for short- and long-term business cycle upside with its diversity of products and partnerships (into AI and other ventures), but I have my eye mainly on Intel (INTC).

That’s because the U.S. is dead-set on bringing manufacturing back home because of the unreliability of supply chains and conflict, so the Biden Administration passed a bill this past year to spend $52 billion on semiconductors alone. Intel has made moves to open plants in strategic locations through the U.S., so I like them for a longer-term play here.

In all, from the second to third quarter, five additional hedge funds (now at 89) adjusted their outlook on NVDA to bullish based on this trend.

1. Computer Software

Amidst the devastation of higher interest rates that’s taken out a lot of the tech sector this year, it might be weird to say that one of the most thriving sectors to watch in 2023 – according to the big money – is right in the thick of it.

But tech companies that have wider margins, produce real goods that people use, and have advanced technology are still chugging along.

And that’s exactly the case with Intuit (INTU). I’m sure you’ve used at least one of their personal finance products – Mint, QuickBooks, Credit Karma, or TurboTax. They aim to keep your necessary financial transactions safe, secure, and efficient.

The big money believes they’ve been doing a good job, too. In the second quarter, 76 hedge funds were bullish on the stock, and in the third, that number moved up to 85.

Even though the market is relatively small at $300 billion, the specialty companies that produce software that people need will be a good trend to profit from in the coming year.

I’ll be back this weekend with an area the big money is moving AWAY from. You’ll need to think twice before even touching a stock here.

I’ll talk to you then,

Mark

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