“The market’s slight gain in Q3 masked tumultuous factor rotation. In August, equity portfolios tied to momentum or the near inverse – “laggards” – outperformed, as markets inflated assets reflecting economic weakening in a low inflation/low growth world. These momentum asset biases – favoring large cap over small cap stocks, growth versus value, or “min vol” strategies – became increasingly correlated, crowded, and sometimes expensive. The equation extended itself more acutely in secular growth names and similarly punished unloved shorts. In September, and so far into October, this extreme positioning has been challenged by declining fears of an adverse trade war outcome, positive directional change in economic surprise indices, talk of fiscal stimulus outside the U.S., and an increasingly accommodative Federal Reserve. A steepening yield curve also has given life to under‐owned assets at the expense of the over‐owned, ” said Third Point’s 2019 Q3 investor letter.
Hedge funds are supposed to be nimble players who take advantage of changes and volatility in the markets. Last quarter we listed hedge funds’ top 30 stock picks for the second quarter of 2019. While the S&P 500 ETFs returned around 1.8%, hedge funds’ top 20 stock picks slightly trailed this return. However, hedge funds’ top 20 stock picks returned 24.4% during the first 9 months of the year and beat the market by 4 percentage points. Below, you can watch our video about hedge funds’ top 5 stock picks. The list of top 5 stock picks didn’t change from Q2 to Q3.
Video: 5 Most Popular Stock Among Hedge Funds
Hedge funds’ top stock picks are performing spectacularly so far in the fourth quarter. The top 20 stocks among hedge funds returned an additional 7.6% through November 14th and outperformed the market by another 3+ percentage points. Year-to-date hedge funds’ top picks returned 33.9% and beat the market’s 25.6% gain by 8+ percentage points.
Insider Monkey’s mission is to identify promising (and also terrible) hedge fund stock pitches and share them with our subscribers. Our flagship strategy identifies the best stock picks of the 100 best performing hedge funds. This strategy outperformed the S&P 500 Index by 40 percentage points during the first 5 years of its existence. This means if you had invested $100,000 into our strategy instead of an S&P 500 Index fund, you would have $40,000 more money today.
Hedge funds’ top 20 stock picks are great and we expect them to outperform the market but they aren’t going to double or triple in the next 5 years. In the last issue of our monthly newsletter we identified another large-cap growth stock that is trading at less than 3 times of its core earnings. This fact is obscured by its large cash holdings and equity stakes in other companies, as well as its large investments in future growth. We believe this stock will double in the next 3 year and triple in the next 5 years. Currently we are running a promotion. Follow this link to get a $100 discount.
Most investors believe that hedge funds lost their “magic touch” a long time ago and can’t beat the market. Don’t trust the returns reported by hedge fund indices. Hedge funds underperform because they hedge. If you want to compare apples to apples, you need to take a look at the performance of most popular hedge fund stocks vs. the returns of the S&P 500 Index. Apple, Google, Microsoft, Facebook, and Amazon have consistently been among the top 3 hedge fund picks over the last 7 years since we started publishing our quarterly newsletter. You don’t have to be a math wizard to calculate the mind numbing returns of these technology stocks some of which now trade around $1 trillion valuation.
The best thing about following hedge funds’ top picks is that you don’t need to pay them an annual 2% fee and 20% of your profits to beat the market. We do that here free of charge using the holdings data from the legally required SEC portfolio disclosures. Our approach is also superior to investing directly into hedge funds because we don’t like to invest in a hedge funds’ 35th best idea when we can invest in only the best stock picks of the best hedge funds.
Below we listed the 30 most popular stocks among hedge funds at the end of September (you can also watch our video above covering the top 5 hedge fund stocks). If you are only interested in large-cap stocks, check out the top 20 stocks in this list below:
30. Fiserv Inc. (NYSE:FISV): $114
Number of Hedge Funds: 72
Total Dollar Amount of Long Hedge Fund Positions:$3.9 billion
Percent of Hedge Funds with Long Positions: 9.6%
Fourth Quarter Return (through Nov 14th): 10.1%
Popularity Ranking (Q2): 58
Noteworthy Hedge Fund Shareholders: Larry Robbins, Doug Silverman
29. Goldman Sachs (NYSE:GS): $220
Number of Hedge Funds: 72
Total Dollar Amount of Long Hedge Fund Positions:$8.2 billion
Percent of Hedge Funds with Long Positions: 9.6%
Fourth Quarter Return (through November 14th): 5.9%
Popularity Ranking (Q2): 42
Noteworthy Hedge Fund Shareholders: Warren Buffett
Roman Tiraspolsky/Shutterstock.com
28. Merck & Company, Inc. (NYSE:MRK): $85
Number of Hedge Funds: 73
Total Dollar Amount of Long Hedge Fund Positions:$4.6 billion
Percent of Hedge Funds with Long Positions: 9.8%
Fourth Quarter Return (through Aug 30th): 0.4%
Popularity Ranking (Q2): 30
Noteworthy Hedge Fund Shareholders: Cliff Asness, Peter Rathjens, Bruce Clarke and John Campbell
Cliff Asness of AQR Capital Management
27. Johnson&Johnson (NYSE:JNJ): $135
Number of Hedge Funds: 76
Total Dollar Amount of Long Hedge Fund Positions:$7.3 billion
Percent of Hedge Funds with Long Positions: 10.2%
Fourth Quarter Return (through November 14th): 1.2%
Popularity Ranking (Q2): 42
Noteworthy Hedge Fund Shareholders: Quant hedge funds AQR, DE Shaw, Renaissance, and Two Sigma
Niloo / Shutterstock.com
26. Booking Holdings Inc. (NASDAQ:BKNG): $1,849
Number of Hedge Funds: 78
Total Dollar Amount of Long Hedge Fund Positions:$5.4 billion
Percent of Hedge Funds with Long Positions: 10.4%
Fourth Quarter Return (through November 14th): -4.9%
Popularity Ranking (Q2): 27
Noteworthy Hedge Fund Shareholders: Stephen Mandel, Donald Yacktman, Sharlyn Heslam
25. UnitedHealth Group (NASDAQ:UNH): $269
Number of Hedge Funds: 78
Total Dollar Amount of Long Hedge Fund Positions:$5.6 billion
Percent of Hedge Funds with Long Positions: 10.4%
Fourth Quarter Return (through November 14th): 17.7%
Noteworthy Hedge Fund Shareholders: Stephen Mandel, Boykin Curry
Ken Wolter/Shutterstock.com
24. Boeing Company (The) (NYSE:BA): $372
Number of Hedge Funds: 79
Total Dollar Amount of Long Hedge Fund Positions:$4.0 billion
Percent of Hedge Funds with Long Positions: 10.6%
Fourth Quarter Return (through November 14th): -2.9%
Popularity Ranking (Q2): 26
Noteworthy Hedge Fund Shareholders: Andreas Halvorsen, Phil Gross
23. Comcast Corporation (NASDAQ:CMCSA): $44.50
Number of Hedge Funds: 80
Total Dollar Amount of Long Hedge Fund Positions:$6.4 billion
Percent of Hedge Funds with Long Positions: 10.7%
Fourth Quarter Return (through November 14th): 1.3%
Popularity Ranking (Q2): 18
Noteworthy Hedge Fund Shareholders: Boykin Curry, Mason Hawkins
Leonard Zhukovsky / Shutterstock.com
22. Allergan plc. (NYSE:AGN): $183.60
Number of Hedge Funds: 82
Total Dollar Amount of Long Hedge Fund Positions:$8.2 billion
Percent of Hedge Funds with Long Positions: 11.0%
Fourth Quarter Return (through November 14th): 8.9%
Popularity Ranking (Q2): 22
Noteworthy Hedge Fund Shareholders: Dan Loeb, John Paulson
21. ServiceNow, Inc. (NYSE:NOW): $260
Number of Hedge Funds: 85
Total Dollar Amount of Long Hedge Fund Positions:$5.3 billion
Percent of Hedge Funds with Long Positions: 11.4%
Fourth Quarter Return (through November 14th): 0%
Popularity Ranking (Q2): 25
Noteworthy Hedge Fund Shareholders: Philippe Laffont, Gabriel Plotkin
20. J P Morgan Chase & Co (NYSE:JPM): $129.50
Number of Hedge Funds: 85
Total Dollar Amount of Long Hedge Fund Positions:$11.2 billion
Percent of Hedge Funds with Long Positions: 11.4%
Fourth Quarter Return (through November 14th): 10.1%
Popularity Ranking (Q2): 16
Noteworthy Hedge Fund Shareholders: Warren Buffett, Ken Fisher
19. Fidelity National Information Services (FIS): $136
Number of Hedge Funds: 89
Total Dollar Amount of Long Hedge Fund Positions:$7.1 billion
Percent of Hedge Funds with Long Positions: 11.9%
Fourth Quarter Return (through November 14th): 2.1%
Popularity Ranking (Q2): 58
Noteworthy Hedge Fund Shareholders: Ken Griffin, Gabriel Plotkin
18. Adobe Inc. (NASDAQ:ADBE): $297.50
Number of Hedge Funds: 91
Total Dollar Amount of Long Hedge Fund Positions:$8.3 billion
Percent of Hedge Funds with Long Positions: 12.2%
Fourth Quarter Return (through November 14th): 2.1%
Popularity Ranking (Q2): 15
Noteworthy Hedge Fund Shareholders: Stephen Mandel, Ken Fisher
Copyright: photogearch / 123RF Stock Photo
17. Netflix, Inc. (NASDAQ:NFLX): $295
Number of Hedge Funds: 93
Total Dollar Amount of Long Hedge Fund Positions:$9 billion
Percent of Hedge Funds with Long Positions: 12.4%
Fourth Quarter Return (through November 14th): 8.2%
Popularity Ranking (Q2): 9
Noteworthy Hedge Fund Shareholders: Karthik Sarma, Andreas Halvorsen
Reed Hastings
16. Citigroup Inc. (NYSE:C): $74.40
Number of Hedge Funds: 93
Total Dollar Amount of Long Hedge Fund Positions:$10.3 billion
Percent of Hedge Funds with Long Positions: 12.4%
Fourth Quarter Return (through November 14th): 7.7%
Popularity Ranking (Q2): 18
Noteworthy Hedge Fund Shareholders: Jeffrey Ubben, Boykin Curry
Ken Wolter / Shutterstock.com
15. Celgene Corporation (NASDAQ:CELG): $110
Number of Hedge Funds: 93
Total Dollar Amount of Long Hedge Fund Positions:$12.5 billion
Percent of Hedge Funds with Long Positions: 12.4%
Fourth Quarter Return (through November 14th): 10.8%
Popularity Ranking (Q2): 17
Noteworthy Hedge Fund Shareholders: Phill Gross and Robert Atchinson, William B. Gray
14. PayPal Holdings, Inc. (NASDAQ:PYPL): $104
Number of Hedge Funds: 95
Total Dollar Amount of Long Hedge Fund Positions:$4.1 billion
Percent of Hedge Funds with Long Positions: 12.7%
Fourth Quarter Return (through November 14th): 0.1%
Popularity Ranking (Q2): 12
Noteworthy Hedge Fund Shareholders: Peter Rathjens, Bruce Clarke and John Campbell, Dan Loeb
www.BillionPhotos.com / Shutterstock.com
13. Bank of America Corporation (NYSE:BAC): $33
Number of Hedge Funds: 95
Total Dollar Amount of Long Hedge Fund Positions:$32.1 billion
Percent of Hedge Funds with Long Positions: 12.7%
Fourth Quarter Return (through November 14th): 12.1%
Popularity Ranking (Q2): 13
Noteworthy Hedge Fund Shareholders: Warren Buffett, Richard S. Pzena
Warren Buffett of Berkshire Hathaway
12. Berkshire Hathaway Inc. (NYSE:BRK-B): $220
Number of Hedge Funds: 99
Total Dollar Amount of Long Hedge Fund Positions:$22.3 billion
Percent of Hedge Funds with Long Positions: 13.2%
Fourth Quarter Return (through November 14th): 5.5%
Popularity Ranking (Q2): 14
Noteworthy Hedge Fund Shareholders: Michael Larson, Boykin Curry
Warren Buffett
11. Salesforce.com Inc (NYSE:CRM): $163
Number of Hedge Funds: 102
Total Dollar Amount of Long Hedge Fund Positions:$9.4 billion
Percent of Hedge Funds with Long Positions: 13.6%
Fourth Quarter Return (through November 14th): 9.8%
Popularity Ranking (Q2): 15
Noteworthy Hedge Fund Shareholders: Ken Fisher, Stephen Mandel
Copyright: drserg / 123RF Stock Photo
10. Walt Disney Company (The) (NYSE:DIS): $145
Number of Hedge Funds: 105
Total Dollar Amount of Long Hedge Fund Positions:$4.2 billion
Percent of Hedge Funds with Long Positions: 14.0%
Fourth Quarter Return (through November 14th): 12.9%
Popularity Ranking (Q2): 8
Noteworthy Hedge Fund Shareholders: Donald Yacktman, Daniel Sundheim
Copyright: blanscape / 123RF Stock Photo
9. Apple Inc. (NASDAQ:AAPL): $266
Number of Hedge Funds: 108
Total Dollar Amount of Long Hedge Fund Positions:$64.8 billion
Percent of Hedge Funds with Long Positions: 14.4%
Fourth Quarter Return (through November 14th): 17.6%
Popularity Ranking (Q2): 11
Noteworthy Hedge Fund Shareholders: Warren Buffett, Ken Fisher
8. Mastercard Incorporated (NYSE:MA): $281
Number of Hedge Funds: 115
Total Dollar Amount of Long Hedge Fund Positions:$13.2 billion
Percent of Hedge Funds with Long Positions: 15.4%
Fourth Quarter Return (through November 14th): 3.1%
Popularity Ranking (Q2): 10
Noteworthy Hedge Fund Shareholders: Tom Russo, Charles Akre
Pixabay/Public Domain
7. Visa Inc. (NYSE:V): $180
Number of Hedge Funds: 132
Total Dollar Amount of Long Hedge Fund Positions:$15.7 billion
Percent of Hedge Funds with Long Positions: 17.6%
Fourth Quarter Return (through November 14th): 4.7%
Popularity Ranking (Q2): 7
Noteworthy Hedge Fund Shareholders: Ken Fisher, Warren Buffett
JMiks / Shutterstock.com
6. Alphabet Inc. (NASDAQ:GOOG): $1,335
Number of Hedge Funds: 136
Total Dollar Amount of Long Hedge Fund Positions:$15.6 billion
Percent of Hedge Funds with Long Positions: 18.2%
Fourth Quarter Return (through November 14th): 7.6%
Popularity Ranking (Q2): 6
Noteworthy Hedge Fund Shareholders: Boykin Curry, David Blood and Al Gore
Boykin Curry of Eagle Capital
5. Alphabet Inc. (NASDAQ:GOOGL): $1,334
Number of Hedge Funds: 147
Total Dollar Amount of Long Hedge Fund Positions:$12.3 billion
Percent of Hedge Funds with Long Positions: 19.7%
Fourth Quarter Return (through November 14th): 7.2%
Popularity Ranking (Q2): 4
Noteworthy Hedge Fund Shareholders: Ken Fisher, Cliff Asness
4. Alibaba Group Holding Limited (NYSE:BABA): $186
Number of Hedge Funds: 149
Total Dollar Amount of Long Hedge Fund Positions:$19.2 billion
Percent of Hedge Funds with Long Positions: 19.9%
Fourth Quarter Return (through November 14th): 9.3%
Popularity Ranking (Q2): 5
Noteworthy Hedge Fund Shareholders: Ken Fisher, D. E. Shaw
3. Amazon.com, Inc. (NASDAQ:AMZN): $1,739
Number of Hedge Funds: 169
Total Dollar Amount of Long Hedge Fund Positions:$23 billion
Percent of Hedge Funds with Long Positions: 22.6%
Fourth Quarter Return (through November 14th): 1.1%
Popularity Ranking (Q2): 3
Noteworthy Hedge Fund Shareholders: Ken Fisher, Boykin Curry
2. Microsoft Corporation (NASDAQ:MSFT): $150
Number of Hedge Funds: 173
Total Dollar Amount of Long Hedge Fund Positions:$26.9 billion
Percent of Hedge Funds with Long Positions: 23.1%
Fourth Quarter Return (through November 14th): 6.5%
Popularity Ranking (Q2): 2
Noteworthy Hedge Fund Shareholders: Ken Fisher, Boykin Curry
1. Facebook, Inc. (NASDAQ:FB): $194
Number of Hedge Funds: 178
Total Dollar Amount of Long Hedge Fund Positions:$20.8 billion
Percent of Hedge Funds with Long Positions: 23.8%
Fourth Quarter Return (through November 14th): 8.5%
Popularity Ranking (Q2): 1
Noteworthy Hedge Fund Shareholders: Chase Coleman, Andreas Halvorsen
