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A recent analysis highlighted a selection of 10 Cheap Blue Chip Stocks to Buy According to Hedge Funds. This piece aims to examine the standing of Alphabet Inc. (NASDAQ:GOOGL) in comparison to other affordable blue-chip stocks favored by hedge funds.
Market tension has surged amid growing uncertainty around U.S. policy, as noted by Fidelity. Factors such as tariff increases, deregulation, and stringent immigration policies have placed a burden on financial markets. The global business cycle is currently showing signs of reduced synchronization, particularly in the early months of 2025. The firm emphasizes the importance of diversifying investments across fixed income and non-U.S. assets due to prevailing growth risks. Notably, while gold and commodities experienced gains, a decline in the U.S. dollar bolstered non-U.S. equities, according to Fidelity.
Fidelity reports that the uncertainty surrounding U.S. policy choices during the first quarter impacted financial markets significantly. Investors were navigating news related to new executive actions, including increases in tariffs and announcements on deregulation and staff reductions. Concerns regarding the broader economic impact of these tariff increases on global markets also escalated in the weeks following the quarter’s close. Despite high growth risks, the global economy remained stable at the end of Q1. The firm advises that diversifying into fixed income and international assets is crucial at this juncture.
In terms of performance, the S&P 500 Index recorded a return of -4.3% for Q1 2025, partly influenced by a downturn in growth stocks, which fell by 10%. Conversely, commodities and gold saw robust increases of 8.9% and 19%, respectively, amidst heightened market volatility.
READ ALSO: 7 Best Stocks to Buy For Long-Term and 8 Cheap Jim Cramer Stocks to Invest In.
Regarding inflation, Fidelity notes that consumer prices remained largely stable at around 3% during Q1, which is significantly above the Federal Reserve’s 2% target. The firm anticipates that inflation will likely remain sticky at this level for the upcoming year, with upward pressure from tariff hikes. Moreover, expectations surrounding consumer inflation have surged to multi-decade highs, facilitating easier cost transfers for businesses. The labor market remains tight, even amidst increasing policy unpredictability and government job cuts, as per Fidelity’s assessment. On the supply side, labor force participation continues to lag behind pre-pandemic levels, hindered by slowing immigration and demographic challenges.
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Marci McGregor, who leads Portfolio Strategy at Merrill and Bank of America Private Bank, suggests that the coming months may present a favorable opportunity for defensive investment strategies. She advises investors to focus on stocks that are defensive, provide dividends, and exhibit value. Looking toward the long term, there may be opportunities once trade climate uncertainties diminish, and current market volatility could allow for attractive pricing on assets that support long-term strategies, says McGregor.
To curate the list of 10 Cheap Blue Chip Stocks favored by hedge funds, holdings from the iShares Core S&P 500 ETF were examined, selecting companies with a forward P/E of less than approximately 20.0x and considering hedge fund sentiments from Q4 2024. The stocks were then ranked based on ascending order of hedge fund endorsements.
So why should investors pay attention to stocks heavily favored by hedge funds? Research indicates that mirroring the top stock picks of renowned hedge funds can lead to market outperformance. A quarterly newsletter strategy that selects 14 small-cap and large-cap stocks has achieved a remarkable 373.4% return since May 2014, significantly outpacing its benchmark by 218 percentage points (see more details here).
Is Alphabet Inc. (GOOGL) a Top Choice Among Cheap Blue Chip Stocks?
Number of Hedge Fund Holders: 234
Forward P/E as of April 18: ~17.04x
BofA Securities maintains a “Buy” rating on Alphabet Inc. (NASDAQ:GOOGL). Analysts express optimism regarding Google’s recent AI developments and overall valuation. They project that new features will enhance monetization and boost advertising clicks from informational queries. Despite concerns surrounding potential AI disruptions, the core search business for Alphabet remains resilient and continues to grow. The company’s AI initiatives extend beyond cloud services, demonstrating its commitment to remaining competitive in this technology sphere.
Looking ahead, Alphabet Inc.’s growth is closely linked to its AI projects and integrations. Significant investments in AI infrastructure and research position the firm well to capitalize on the increasing demand for AI-driven services and cloud computing. AI advancements are set to enhance Alphabet’s search algorithms, sustaining its market dominance and potentially increasing advertisement revenue through refined targeting and improved user experiences. Additionally, the emphasis on AI and machine learning capabilities within Google Cloud Platform (GCP) could attract enterprises aiming to adopt advanced AI solutions, fostering potential market share growth in the broader cloud computing domain.
Overall, GOOGL ranks 1st in our analysis of affordable blue-chip stocks recommended by hedge funds. While its investment potential is recognized, some analysts believe that certain undervalued AI stocks may offer even greater opportunities for returns within a shorter timeframe. One such AI stock has shown gains since the start of 2025, even as other popular AI stocks experienced losses of approximately 25%. For those in search of undervalued AI investment opportunities trading at below 5 times earnings, further information can be found in our report on the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires.
Disclosure: None. This article was originally published at Insider Monkey.
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finance.yahoo.com