This has been a fantastic year for nimble investors whereas traditional value investors with sluggish and backward-looking investment styles fared poorly. Insider Monkey shorted the market at the end of February, and reversed most of its short trades by March 25th. First, we saw the pandemic and the market crash coming. Then, we predicted the ensuing market rally. As a result of these timely moves, our stock picks in our monthly newsletter outperformed the S&P 500 Index by more than 20 percentage points this year.
I rarely share my stock picks publicly. At the end of February I predicted a U.S. recession and told our readers to short the market in this article. Three weeks later, when the total U.S. COVID-19 death toll stood at merely 200, I predicted that the death toll would reach 20,000 by April 15th and told our readers to buy Tenet Healthcare (NYSE:THC) in this article. Tenet Healthcare was one of our monthly newsletter’s new stock picks and it closed at $12.98 on the day we published the article. Some readers were skeptical about THC, but I was proven right as the stock currently trades above $32 (we told our subscribers to sell THC at $30 and deploy the proceeds into one of our newer ideas).
In August I told our readers the following in this article:
I recently uncovered another stock that I expect to double over the next 12 months or so. Before the end of August I will be emailing this stock idea to all of our free subscribers (you can create a free account by entering your email address below):
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Our free subscribers received that idea in early September when my new free stock pick was trading at $6.30. I published that same idea in early October on our website in this article. It’s been less than 3 months and my new free stock pick is currently trading at $9.80. An increase of more than 50% in less than 3 months. It isn’t too late to buy this stock.
I don’t talk much about small-cap stock picks but we have also been sharing the list of 30 most popular stocks among hedge funds here at Insider Monkey since the end of 2018. The majority of these stocks aren’t traditional value stocks. Six months ago we shares hedge funds’ top 30 stock picks at the end of March. Three months before that we shared hedge funds’ top 30 stock picks at the end of 2019. The top 5 stocks in these list returned 39.4% so far in 2020 and outperformed the S&P 500 Index by 26.7 percentage points.
Overall, hedge funds’ top 5 stock picks returned 39.9% in 2019 and beat the market by 8.6 percentage points. Since the end of 2018, these 5 stocks returned 95% and beat the S&P 500 Index by 48 percentage points.
More than half of all investors invest in dumb index funds because they were made to believe that they can’t outperform the market by stock selection (or they are forced to invest in index funds in their companies’ retirement accounts). I am going to share with you a very simple investment strategy that outperformed the dumb S&P 500 Index ETF (SPY) by 121 percentage points since 2015.
This simple strategy’s 10 stock picks returned 74% between 2015 and 2018, vs. SPY’s 32% gain during the same period.
This simple strategy’s 10 stock picks also returned 82% since the end of 2018, vs. SPY’s 48% gain.
This simple strategy’s 10 stock picks thrived in this coronavirus crash returning 28.8% through November 23rd, vs. 12.7% gain for the S&P 500 ETF (SPY).
This is why we call index fund investing “dumb”.
The simple strategy I am talking about is hedge funds’ top 10 stock picks.
Every quarter we process more than 800 hedge funds’ 13F filing and identify the top stocks among ALL 800+ hedge funds. The list of top 10 hedge fund stocks hasn’t changed much since the third quarter of 2018. If you had invested in this low turnover simple strategy at the beginning of 2015, you would have outperformed the S&P 500 ETFs by more than 121 percentage points.
Hedge funds knew these 10 stocks are the “best” 10 stocks to buy and they were piling into these stocks.
If you subscribe to our free enewsletter below, you can get a free email alert whenever we publish an article of importance:
Insider Monkey’s mission is to identify promising (and also terrible) hedge fund stock pitches and share them with our subscribers. We launched our monthly newsletter’s activist strategy 3.5 years ago and this strategy’s picks returned 113% in 3.5 years and beat the SPY by 66 percentage points. Our short strategy was also launched 3.5 years ago and its short recommendations lost a cumulative 13% (that’s a good thing because we are shorting them) since then. You can improve your returns by subscribing to our premium newsletters. Our subscription prices start at $6.99 per month and come with a 14-day full refund guarantee.
Nowadays 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 and they charge an arm and a leg for their services. 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 10 hedge fund picks over the last 8 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 most of which now trade for more than $1 trillion valuation.
The best thing about following hedge funds’ top picks on our website is that you don’t need to pay hedge funds 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 at the end of this article 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. Qualcomm (NASDAQ:QCOM): $144
Number of Hedge Funds: 87 (2020Q3)
Number of Hedge Funds: 74 (2020Q2)
Total Dollar Amount of Long Hedge Fund Positions:$2.6 billion
Percent of Hedge Funds with Long Positions: 10.6%
Fourth Quarter Return (through November 23rd): 22.2%
Popularity Ranking (2020Q2): 44
Noteworthy Hedge Fund Shareholders: Matrix Capital, Quant hedge funds
Kārlis Dambrāns/Flickr
29. Fidelity National Information Services (FIS): $145
Number of Hedge Funds: 111 (2020 Q2)
Number of Hedge Funds: 88 (2020 Q3)
Total Dollar Amount of Long Hedge Fund Positions:$7.9 billion
Percent of Hedge Funds with Long Positions: 10.8%
Fourth Quarter Return (through November 23rd): -1.3%
Popularity Ranking (2020 Q2): 15
Popularity Ranking (2020Q1): 17
Noteworthy Hedge Fund Shareholders: Andreas Halvorsen, Tom Steyer
Andreas Halvorsen of Viking Global
28. Charter Communications, Inc. (NASDAQ:CHTR): $645
Number of Hedge Funds: 96 (2020 Q2)
Number of Hedge Funds: 88 (2020 Q3)
Total Dollar Amount of Long Hedge Fund Positions:$12 billion
Percent of Hedge Funds with Long Positions: 10.8%
Fourth Quarter Return (through November 23rd): 3.3%
Popularity Ranking (2020 Q2): 21
Popularity Ranking (2020 Q1): 18
Noteworthy Hedge Fund Shareholders: Warren Buffett, John Armitage
HodagMedia / Shutterstock.com
27. Bank of America Corporation (NYSE:BAC): $27.4
Number of Hedge Funds: 91 (2020 Q2)
Number of Hedge Funds: 88 (2020 Q3)
Total Dollar Amount of Long Hedge Fund Positions:$26.6 billion
Percent of Hedge Funds with Long Positions: 10.8%
Fourth Quarter Return (through November 23rd): 13.7%
Popularity Ranking (2020 Q2): 29
Popularity Ranking (2020 Q1): 23
Noteworthy Hedge Fund Shareholders: Warren Buffett, Richard S. Pzena
Warren Buffett of Berkshire Hathaway
26. UnitedHealth Group (NASDAQ:UNH): $335
Number of Hedge Funds: 96 (2020 Q2)
Number of Hedge Funds: 89 (2020 Q3)
Total Dollar Amount of Long Hedge Fund Positions:$9 billion
Percent of Hedge Funds with Long Positions: 10.9%
Fourth Quarter Return (through November 23rd): 7.5%
Popularity Ranking (2020 Q2): 22
Popularity Ranking (2020 Q1): 19
Noteworthy Hedge Fund Shareholders: Stephen Mandel, Boykin Curry
Ken Wolter/Shutterstock.com
25. Fiserv (NASDAQ:FISV): $112
Number of Hedge Funds: 85 (2020 Q2)
Number of Hedge Funds: 90 (2020 Q3)
Total Dollar Amount of Long Hedge Fund Positions:$5.4 billion
Percent of Hedge Funds with Long Positions: 11.0%
Fourth Quarter Return (through November 23rd): 8.8%
Popularity Ranking (2020 Q2): 35
Popularity Ranking (2020 Q1): Not in top 50
Noteworthy Hedge Fund Shareholders: Gabriel Plotkin, BlueSpruce Investments
24. Wells Fargo (NYSE:WFC): $26.3
Number of Hedge Funds: 86 (2020 Q2)
Number of Hedge Funds: 90 (2020 Q3)
Total Dollar Amount of Long Hedge Fund Positions:$8.5 billion
Percent of Hedge Funds with Long Positions: 11.0%
Fourth Quarter Return (through November 23rd): 12.4%
Popularity Ranking (2020 Q2): 33
Popularity Ranking (2020 Q1): 42
Noteworthy Hedge Fund Shareholders: Warren Buffett
23. Citigroup Inc. (NASDAQ:C): $53.3
Number of Hedge Funds: 96 (2020 Q2)
Number of Hedge Funds: 91 (2020 Q3)
Total Dollar Amount of Long Hedge Fund Positions:$5.6 billion
Percent of Hedge Funds with Long Positions: 11.1%
Fourth Quarter Return (through November 23rd): 25.2%
Popularity Ranking (2020 Q2): 23
Popularity Ranking (2020 Q1): 31
Noteworthy Hedge Fund Shareholders: ValueAct, Boykin Curry
Kiev.Victor / Shutterstock.com
22. Activision Blizzard Inc. (NASDAQ:ATVI): $76
Number of Hedge Funds: 97 (2020 Q2)
Number of Hedge Funds: 93 (2020 Q3)
Total Dollar Amount of Long Hedge Fund Positions:$4.2 billion
Percent of Hedge Funds with Long Positions: 11.4%
Fourth Quarter Return (through November 23rd): –6.2%
Popularity Ranking (2020 Q2): 20
Popularity Ranking (2020Q1): 21
Noteworthy Hedge Fund Shareholders: Panayotis Takis Sparaggis, Ken Griffin
Barone Firenze / Shutterstock.com
21. T-Mobile US Inc. (NASDAQ:TMUS): $128
Number of Hedge Funds: 113 (2020 Q2)
Number of Hedge Funds: 94 (2020 Q3)
Total Dollar Amount of Long Hedge Fund Positions:$7.5 billion
Percent of Hedge Funds with Long Positions: 11.5%
Fourth Quarter Return (through November 23rd): 11.8%
Popularity Ranking (2020 Q4): 14
Popularity Ranking (2020 Q1): 68
Noteworthy Hedge Fund Shareholders: David Tepper, Crake Asset Management
20. Sea Limited (NYSE:SE): $183
Number of Hedge Funds: 82 (2020 Q2)
Number of Hedge Funds: 95 (2020 Q3)
Total Dollar Amount of Long Hedge Fund Positions:$7.8 billion
Percent of Hedge Funds with Long Positions: 11.6%
Fourth Quarter Return (through November 23rd): 18.7%
Popularity Ranking (2020 Q2): 38
Popularity Ranking (2020 Q1): 44
Noteworthy Hedge Fund Shareholders: Chase Coleman, Kora Management
Chase Coleman of Tiger Global
19. Uber Technologies (NYSE:UBER): $50
Number of Hedge Funds: 94 (2020 Q2)
Number of Hedge Funds: 100 (2020 Q3)
Total Dollar Amount of Long Hedge Fund Positions:$6 billion
Percent of Hedge Funds with Long Positions: 12.2%
Fourth Quarter Return (through November 23rd): 37.2%
Popularity Ranking (2020Q2): 25
Popularity Ranking (2020Q1): 22
Noteworthy Hedge Fund Shareholders: Brad Gerstner, Bill Miller, Chase Coleman
Brad Gerstner of Altimeter Capital
18. Netflix, Inc. (NASDAQ:NFLX): $477
Number of Hedge Funds: 113 (2020 Q2)
Number of Hedge Funds: 104 (2020 Q3)
Total Dollar Amount of Long Hedge Fund Positions:$12.9 billion
Percent of Hedge Funds with Long Positions: 12.7%
Fourth Quarter Return (through November 23rd): –4.7%
Popularity Ranking (2020 Q2): 13
Popularity Ranking (2020Q1): 16
Noteworthy Hedge Fund Shareholders: Karthik Sarma, Gil Simon
Reed Hastings
17. Adobe Inc. (NASDAQ:ADBE): $461
Number of Hedge Funds: 104 (2020 Q2)
Number of Hedge Funds: 106 (2020 Q3)
Total Dollar Amount of Long Hedge Fund Positions:$10.5 billion
Percent of Hedge Funds with Long Positions: 13.0%
Fourth Quarter Return (through November 23rd): –6.1%
Popularity Ranking (2020 Q2): 19
Popularity Ranking (2020Q1): 14
Noteworthy Hedge Fund Shareholders: Stephen Mandel, Ken Fisher
Copyright: photogearch / 123RF Stock Photo
16. Salesforce.com Inc (NYSE:CRM): $258
Number of Hedge Funds: 107 (2020 Q2)
Number of Hedge Funds: 106 (2020 Q3)
Total Dollar Amount of Long Hedge Fund Positions:$11.1 billion
Percent of Hedge Funds with Long Positions: 13%
Fourth Quarter Return (through November 23rd): 2.5%
Popularity Ranking (2020 Q2): 17
Popularity Ranking (2020Q1): 12
Noteworthy Hedge Fund Shareholders: Ken Fisher, Al Gore
Copyright: drserg / 123RF Stock Photo
15. Berkshire Hathaway Inc. (NYSE:BRK-B): $230
Number of Hedge Funds: 107 (2020 Q2)
Number of Hedge Funds: 109 (2020 Q3)
Total Dollar Amount of Long Hedge Fund Positions:$19.6 billion
Percent of Hedge Funds with Long Positions: 13.3%
Fourth Quarter Return (through November 23rd): 7.8%
Popularity Ranking (2020 Q2): 16
Popularity Ranking (2020 Q1): 13
Noteworthy Hedge Fund Shareholders: Michael Larson, Boykin Curry
Warren Buffett
14. Walt Disney Company (The) (NYSE:DIS): $146
Number of Hedge Funds: 105 (2020 Q2)
Number of Hedge Funds: 112 (2020 Q3)
Total Dollar Amount of Long Hedge Fund Positions:$9 billion
Percent of Hedge Funds with Long Positions: 13.7%
Fourth Quarter Return (through November 23rd): 17.6%
Popularity Ranking (2020 Q2): 18
Popularity Ranking (2020 Q1): 20
Noteworthy Hedge Fund Shareholders: Donald Yacktman, Daniel Sundheim
Copyright: blanscape / 123RF Stock Photo
13. Booking Holdings Inc (NASDAQ:BKNG): $2020
Number of Hedge Funds: 96 (2020 Q2)
Number of Hedge Funds: 113 (2020 Q3)
Total Dollar Amount of Long Hedge Fund Positions:$6.7 billion
Percent of Hedge Funds with Long Positions: 13.8%
Fourth Quarter Return (through November 23rd): 18.1%
Popularity Ranking (2020 Q2): 24
Popularity Ranking (2020 Q1): 28
Noteworthy Hedge Fund Shareholders: Paul Reeder and Gabriel Plotkin
Rawpixel.com/Shutterstock.com
12. JP Morgan Chase & Co (NYSE:JPM): $118
Number of Hedge Funds: 123 (2020 Q2)
Number of Hedge Funds: 118 (2020 Q3)
Total Dollar Amount of Long Hedge Fund Positions:$6.1 billion
Percent of Hedge Funds with Long Positions: 14.4%
Fourth Quarter Return (through November 23rd): 23.6%
Popularity Ranking (2020 Q2): 12
Popularity Ranking (2020 Q1): 15
Noteworthy Hedge Fund Shareholders: Daniel Sundheim, Andreas Halvorsen
11. Bristol-Myers Squibb (NYSE:BMY): $62
Number of Hedge Funds: 136 (2020 Q2)
Number of Hedge Funds: 124 (2020 Q3)
Total Dollar Amount of Long Hedge Fund Positions:$7.6 billion
Percent of Hedge Funds with Long Positions: 15.2%
Fourth Quarter Return (through November 23rd): 3.5%
Popularity Ranking (2020 Q2): 10
Popularity Ranking (2020 Q1): 9
Noteworthy Hedge Fund Shareholders: Jim Simons, Warren Buffett
Copyright: mikkolem / 123RF Stock Photo
10. Mastercard Incorporated (NYSE:MA): $332
Number of Hedge Funds: 147 (2020 Q2)
Number of Hedge Funds: 133 (2020 Q3)
Total Dollar Amount of Long Hedge Fund Positions:$15.6 billion
Percent of Hedge Funds with Long Positions: 16.3%
Fourth Quarter Return (through November 23rd): –1.7%
Popularity Ranking (2020 Q2): 7
Popularity Ranking (2020 Q1): 8
Noteworthy Hedge Fund Shareholders: Tom Russo, Charles Akre
Pixabay/Public Domain
9. Apple Inc. (NASDAQ:AAPL): $114
Number of Hedge Funds: 128 (2020 Q2)
Number of Hedge Funds: 134 (2020 Q3)
Total Dollar Amount of Long Hedge Fund Positions:$127 billion
Percent of Hedge Funds with Long Positions: 16.4%
Fourth Quarter Return (through November 23rd): -1.5%
Popularity Ranking (2020 Q2): 11
Popularity Ranking (2020 Q1): 10
Noteworthy Hedge Fund Shareholders: Warren Buffett, Ken Fisher
8. PayPal Holdings, Inc. (NASDAQ:PYPL): $201
Number of Hedge Funds: 144 (2020 Q2)
Number of Hedge Funds: 150 (2020 Q3)
Total Dollar Amount of Long Hedge Fund Positions:$11.5 billion
Percent of Hedge Funds with Long Positions: 18.4%
Fourth Quarter Return (through November 23rd): 1.9%
Popularity Ranking (2020 Q2): 9
Popularity Ranking (2020Q1): 11
Noteworthy Hedge Fund Shareholders: Philippe Laffont, Christopher Lyle
www.BillionPhotos.com / Shutterstock.com
7. Alphabet Inc. (NASDAQ:GOOG): $1735
Number of Hedge Funds: 144 (2020 Q2)
Number of Hedge Funds: 150 (2020 Q3)
Total Dollar Amount of Long Hedge Fund Positions:$15.3 billion
Percent of Hedge Funds with Long Positions: 18.4%
Fourth Quarter Return (through November 23rd): 18%
Popularity Ranking (2020 Q2): 8
Popularity Ranking (2020Q1): 7
Noteworthy Hedge Fund Shareholders: Boykin Curry, David Blood and Al Gore
Boykin Curry of Eagle Capital
6. Visa Inc. (NYSE:V): $208
Number of Hedge Funds: 154 (2020 Q2)
Number of Hedge Funds: 160 (2020 Q3)
Total Dollar Amount of Long Hedge Fund Positions:$18.7 billion
Percent of Hedge Funds with Long Positions: 19.6%
Fourth Quarter Return (through November 23rd): 4.3%
Popularity Ranking (2020 Q2): 6
Popularity Ranking (2020Q1): 6
Noteworthy Hedge Fund Shareholders: Ken Fisher, Warren Buffett
JMiks / Shutterstock.com
Top 5 Stocks Among Hedge Funds:
We recently launched a YouTube channel and created a video listing the top 5 stocks among hedge funds. The list of top 5 hedge fund stocks didn’t change since Q4 of 2019. Until we produce the new video for this quarter you can watch our video of Q1’s top 5 hedge fund stocks below. Don’t forget to subscribe to our YouTube channel if you like our video below:
