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Some investors strictly invest in mega-cap blue chip stocks. Most hedge funds have at least one or more Dow stocks in their portfolios as well. Insider Monkey follows hedge fund managers because they're the smartest investors around. They leave less to chance than most investors. They go great lengths to get an “edge” over ordinary investors. Hedge fund managers also have the resources to do extensive research on public companies and they have access to experts who can guide them. We believe we are more likely to beat the market by imitating insiders and hedge funds than trading against them.

We compiled the list of Dow components that hedge funds love the most and the least. We track more than 300 hedge funds and nearly one third of them had Microsoft (NASDAQ:MSFT) in their portfolios at the end of March. Here are the rankings for the rest of Dow components:

Rank

Stock

Ticker

No of Funds

Value (x1000)

1

MICROSOFT CORP

MSFT

93

5,378,793

2

JPMORGAN CHASE

JPM

83

7,027,379

3

PFIZER INC

PFE

72

5,235,709

4

BANK OF AMERICA

BAC

67

5,578,935

5

JOHNSON & JOHNSON

JNJ

55

4,653,428

6

CISCO SYSTEMS INC

CSCO

51

2,993,223

7

EXXON MOBIL

XOM

48

2,525,555

8

HEWLETT PACKARD CO

HPQ

46

2,718,513

9

MCDONALDS CORP

MCD

43

1,396,653

10

INTEL CORP

INTC

42

2,725,519

11

PROCTER & GAMBLE CO

PG

40

6,221,812

12

GENERAL ELECTRIC CO

GE

39

1,792,901

13

COCA COLA CO

KO

38

16,374,005

14

WAL MART STORES INC

WMT

37

4,094,657

15

IBM

IBM

37

2,473,693

16

MERCK & CO INC NEW

MRK

37

1,068,699

17

CHEVRON CORP NEW

CVX

35

980,127

18

AMERICAN EXPRESS CO

AXP

34

8,049,217

19

KRAFT FOODS INC

KFT

32

4,765,053

20

DISNEY WALT CO

DIS

29

2,188,945

21

UNITED TECHNOLOGIES

UTX

29

1,297,283

22

DU PONT

DD

29

283,072

23

HOME DEPOT INC

HD

28

1,333,820

24

VERIZON

VZ

28

534,758

25

3M CO

MMM

26

1,167,563

26

BOEING CO

BA

25

1,272,070

27

A T & T INC

T

24

671,223

28

CATERPILLAR INC

CAT

23

1,514,640

29

ALCOA INC

AA

23

858,537

30

TRAVELERS COMPANIES

TRV

21

1,456,754

Microsoft is the most popular Dow component among hedge funds that utilize fundamental analysis. Jim Simons’ Renaissance, David Tepper’s Appaloosa, Leon Cooperman’s Omega Advisors, and Tom Steyer’s Farallon are some of the hedge funds that are bullish about Microsoft. Whitney Tilson is extremely bulish about Microsoft too. He predicted that Microsoft will reach $35 by the end of 2011.

JP Morgan is the second most popular Dow component with 83 different hedge funds holding the stock in their portfolios. Steve Heinz’s Lansdowne, Jonathan Jacobson’s Highfields Capital, and Andreas Halvorsen’s Viking Global are among the hedge funds with huge JPM positions.

Pfizer is the third most popular stock. It also performed much better than MSFT and JPM so far in 2011, returning 25%. David Einhorn’s Greenlight and Lee Ainslie’s Maverick had large positions in PFE at the end of March.

Hedge funds like TRV the least. There were only 21 hedge funds holding TRV at the end of March. Nevertheless this is still a very large number. Mason Hawkins’ Southeastern Asset Management had the largest stake in TRV. David Einhorn’s Greenlight and Ric Dillon’s Diamond Hill Capital also had large positions in TRV.

Hedge funds are clearly sending the message that large, out-of-favor companies like MSFT, JPM, PFE, and BAC are very attractive long-term investments. Investors with a long-term focus should consider investing in these blue chip companies.

Source: Hedge Funds' Most and Least Favorite Dow Stocks: Long-Term Investors, Take Note