S&P 500: ‘Smart Money’ Investors Are Putting $2 Billion Into Just Five Stocks

If you’re wondering which S&P 500 stocks the best mutual funds are buying, you might be surprised by how selective the list is.

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Only five shares – inclusive Nvidia (NVDA), Alphabet (GOOGL), Tesla (TSLA), Metaplatforms (META) and Eli Lilly (LLY) – has attracted more than $2 billion in combined new investments from the top mutual funds based on this month’s list of new buys.

The huge bet by top funds on this handful of stocks in the S&P 500 is not only startling in terms of dollar value. It’s also important to note that investments in these stocks make up 49% (or almost half) of all new investment dollars the funds committed this month.

That is an important belief.

Big bets on the S&P 500 Tech’s slide

Top funds appeared to benefit from some weakness in the S&P 500’s technology sector in August.

The Technology Select Sector SPDR Fund (XLK) fell 1.5% in August as the market took a breather from many of the giants that have pushed the S&P 500 higher this year.

For example, top funds poured $296 million of new money into Meta Platforms in August, even as shares fell 7.1% over the month. Major investors like the fact that the company is paying more attention to social media and focusing less on virtual reality. Analysts think the company will earn $13.34 per share this year – up more than 55% from last year.

Tesla shares also attracted new investment despite the August decline. Top funds poured $310 million into the EV maker’s shares, which fell more than 3% over the month. Investors are hoping that the expected 15% drop in profits this year is just a blip. Analysts expect the company’s profits to rise nearly 43% by 2024.

Also find opportunities at Tech Gainers

However, it’s important to note that some tech giants from the S&P 500 also posted gains. And top funds were ready to add big positions in the winners.

AI giant Nvidia raised $542 million in new investments from top funds this month. That makes it one of the best bets among funds. And leading funds bought the stock, even as shares rose 5.6% for the month. The stock has a perfect relative strength rating of 99, meaning it is outperforming almost all stocks.

Another big bet for top funds was another technology winner of the month: Alphabet. Top funds poured $673 million into the search giant’s two share classes. The stock’s primary shares gained about 3% this month. Analysts believe the company’s profits will rise by more than 23% this year.

Smaller tech games also attract money

Large technology stocks from the S&P 500 tend to raise the most money because of their size. But some smaller technology projects also attracted new investments.

Semiconductor company Broadcom (AVGO), software maker Adobe (ADBE) and networker Cisco systems (CSCO) raised $174 million, $123 million and $107 million respectively from top funds during the month.

All these technological developments saw their shares rise during the month. Cisco alone gained more than 10%. Analysts believe the computer networking equipment maker will increase its profits by 4.3% this fiscal year.

The big bets from top funds outside the S&P 500 technology

Healthcare company Eli Lilly continues to bring in new investments along with the giant tech companies.

Top funds poured $192 million of fresh money into the company’s stock. Eli Lilly is becoming a leader in the pharmaceutical industry thanks to its treatments for neurodegenerative diseases and weight loss. Eli Lilly is ranked #1 in the IBD Medical-Diversified group. Shares of Eli Lilly rose more than 20% in August. The company’s profits are up 22% this year.

TopBuild (BLD), a supplier of building materials such as insulation, is another non-tech stock getting attention from top funds. Investors poured $101 million into the stock in August. BLD shares rose nearly 6% this month. For this year, analysts expect profits to rise by more than 8%.

So while the S&P 500 tumbled in August, top funds remained busy finding stocks to capitalize on once the bull market resumed.

Top purchases from top funds in August

Source: IBD

Follow Matt Krantz on Twitter (X) @matkrantz

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