What Kind of Stocks do Hedge Funds Invest In?

Every hedge fund has an investment strategy. A designed check box that a stock has to meet before a hedge fund starts purchasing.

I will mention three.

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The old adage, "Cash Flow is King"

Many hedge funds look at the cashflow of a company to determine if they will invest in the stock.

Excellent financials are always attractive to a hedge fund.

A few ratios that hedge funds find informative when selecting a stock.

Companies that have good news

Good news can come in the form of new products, new contracts, or excellent profit reported on their financial statements.

This valuable information needs to be verified and is a good sign for hedge funds to start buying.

There’s a saying, “Buy the rumor, sell the news”

Management, Associates, and Company Fundamentals

Hedge funds look at certain individuals or companies that carry a reputation with them in the business world. Could be a reputation for success, or an individual that can turn a company around.

A good “what if” example in the tech world would be if Elon Musk purchased GO PRO. That would cause a spike in GO PRO’s shares price.

Hedge funds look for good company fundamentals when attempting to purchase. Which can be a company's Work Culture, Leadership, Strategy, Financials, etc.. There can be a whole range of fundamentals that a hedge fund finds attractive.

There are many more reasons why a stock is purchased, just always have a plan.

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