The market's pullback has erased the 2018 gains for a breathtakingly large number of stocks. But investors at mutual funds and hedge funds, nonetheless, have held onto huge positions in stocks including Adobe Inc. (ADBE), Brooking Holdings Inc. (BKNG), Comcast Corp. (CMCSA), Salesforce.com Inc. (CRM), Delta Air Lines Inc. (DAL), Alphabet Inc. (GOOGL), MasterCard Inc. (MA), ServiceNow Inc. (NOW), and Visa Inc. (V), as outlined Goldman Sachs' latest US Weekly Kickstart Report.
9 Favorite Picks Lead The Pack
While almost all of these 9 stocks have outperformed the market year-to-date, and some dramatically, the broader S&P 500 has fallen about 1% over the same period.
Out of the group of stocks still favored by big institutional investors, five of them are software and services providers.
Cloud Software a Bright Spot Amid Big Tech Turmoil
While this winter has been unkind to tech stocks, even in light of positive earnings results, investors still favor Salesforce as a solid bet in the late-stage economic cycle. The cloud software provider is benefiting from a steady rise in IT budgets for software initiatives, maintaining its position as the leading provider of customer relationship management systems.
In the most recent quarter, the company beat the consensus estimates, posting 26% revenue growth, 28% billings growth and a 34% backlog gain. In 2019, Salesforce forecasts $16 billion in revenue, and the initial fiscal 2020 revenue outlook implies at least 20% growth.
In a note to clients on Tuesday, Nomura Instinet included Salesforce in its top five technology picks for 2019. Analyst Chris Eberle expects Salesforce stock to jump nearly 30% over 12 months, as outlined by Barron’s.
The analyst cited Salesforce’s “continued market share gains across multiple end markets and breadth and depth of products, combined with its keen customer focus, recurring revenue model, and strategic value to its customers," naming the stock "a core long-term holding in the software space.”
Card Payments Bet Pays Off
Payments providers MasterCard and Visa have both sharply outperformed this year on a variety of positive tailwinds including double-digit revenue and earnings expansion, a strong U.S. consumer, favorable gas prices, bank partnerships and a widespread shift in the payments space to cashless and convenient transactions.
One Airline Stock Soars Above the Rest
While the airline industry has suffered through a period of heightened volatility thanks to headwinds such as higher costs and pricing wars, Delta has proved to be an outlier among its peers.
Earlier this week, shares of U.S. carriers fell on broader concerns about the industry’s ability to manage a recent reduction in oil prices after Delta indicated that unit revenues, a key metric, would fall short of prior expectations in Q4.
Nonetheless, Delta shares remain up roughly 3% this year, driven by optimism surrounding a healthy economic backdrop and strong demand, particularly for business-class flights and on routes to Europe. The airline also indicated that its cost control was better-than-expected in the latest quarter, lifting profit guidance to the high end of its $1.10 to $1.30 range in the current quarter.
Mutual Funds and Hedge Funds Differ on FANG
Most of the FANGs are nowhere near as popular as these 9 stocks, Goldman indicates. Google is now the only FANG member held at overweight by both mutual funds and hedge funds. Meanwhile, hedge funds that have taken the divergent path on and held large positions in big tech stocks such as (AAPL) Amazon.com Inc. (AMZN) and Netflix Inc. (NFLX), which have fallen sharply.