“By the end of the First Quarter, equity markets had mostly bounced back from Q4 2018’s sharp decline. The dovish shift in Fed policy – which over the last six months went from a three to a zero-hike baseline for 2019 and accelerated the end of its balance sheet runoff – has primarily driven the rally. With this shift now arguably reflected in asset prices, further equity uplift likely will come from improving global growth or re-positioning. The balance of evidence today suggests a rise from these levels: global manufacturing PMI has fully retraced its rise from early 2016 to its peak in late 2017; US consumer fundamentals like real labor income and the consumer saving rate are strong; and renewed stimulus and a near term trade deal with the US are positive for China. Better Chinese growth should help the Euro Area and eventually, the US.” This is how Dan Loeb summarized the first quarter of 2019 in Third Point’s 2019Q1 investor letter.
This letter was published a month ago and at the time most investors were expecting a “near term trade deal” between US and China. Based on these expectations hedge funds tilted their portfolios towards companies that will likely benefit from a gradual acceleration in the US economy.
We finished processing the 13F filings of 738 hedge funds and prominent investors. Insider Monkey’s mission is to identify promising (and also terrible) hedge fund stock pitches and share them with our subscribers. We launched a long activist investing strategy in our monthly newsletter more than 2 years ago. This strategy’s stock picks returned 64% in 2 short years, vs. a gain of 27% for the S&P 500 Index ETF (SPY). Last October we shared one of our stock picks, Ascendis Pharmaceuticals (ASND), in a free sample issue of our monthly newsletter (you can still download it free of charge). The stock doubled in less than 5 months.
In the last issue of our monthly newsletter we identified another undervalued stock that is expected to increase its earnings by more than 20% annually and trades at only 19 times its forward earnings. Email us if you are interested in this stock or subscribe here.
We have also been very successful at identifying stocks that will decline even in a bull market. We launched our short strategy a little more than 2 years ago and share our short stock picks in our quarterly newsletter. This strategy’s picks lost nearly 30.9% since then, vs. a gain of 24% for the S&P 500 Index. This means our short strategy actually outperformed the market by nearly 55 percentage points. Our latest short picks lost nearly 11.9% within 2 weeks of our recommendation, vs. a loss of 3.0% for S&P 500 Index. Our premium subscribers aren’t worried about Trump’s tweets or further uncertainty in the markets because they are partially hedging their risks. Our long-short recommendations generated a net gain of 2% over the last 2 weeks and beat the market by 5 percentage points.
Most investors believe that hedge funds lost their “mojo” a long time ago and can’t beat the market. Don’t trust the returns reported by hedge fund indices. A large number of well known hedge funds don’t report to hedge fund databases. The ones that report underperform the market because their portfolios are hedged. 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. The 15 most popular stocks among hedge funds at the end of December returned 17.4% in Q1, vs. 13.5% gain for the S&P 500 Index. The 15 most popular stocks among hedge funds at the end of March returned 5.2% in Q2, vs. 1.8% gain for the S&P 500 Index. Overall, hedge funds’ top stock picks returned 23.6% and beat the market by 8 percentage points. We have read tons of articles about how hedge fund indices underperform the market year after year, yet the financial media shies away from reporting how the actual returns of hedge funds’ top stock picks beat the market quarter after quarter.
It is true that we don’t think it is a good idea to invest directly in a hedge fund. But that’s because we don’t like paying an arm and a leg for hedge funds’ stock picks when we can get them for free via SEC filings. We also 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. Sixty percent of these stocks outperformed the market. If you are looking for a group of stocks that historically performed even better than these mostly large-cap stocks, you can check out our quarterly newsletter for 14 days free of charge. Our small and smid cap stock picks returned 26.4% year-to-date and outperformed the market by nearly 12 percentage points. If you are only interested in large-cap stocks, check out the top 10 to 15 stocks in this list below:
32. Lyft, Inc. (NASDAQ:LYFT)
Number of Hedge Funds: 71
Total Dollar Amount of Long Hedge Fund Positions: $2.15 billion
Percent of Hedge Funds with Long Positions: 9.6%
2nd Quarter Return (through May 22): -26.1%
52-Week Return (through May 22): NA, recent IPO
Noteworthy Hedge Fund Shareholders: Ken Griffin, Steve Cohen
31. Bristol-Myers Squibb Company (NYSE:BMY)
Number of Hedge Funds: 71
Total Dollar Amount of Long Hedge Fund Positions: $4.1 billlion
Percent of Hedge Funds with Long Positions: 9.6%
2nd Quarter Return (through May 22): 0.9%
52-Week Return (through May 22): -6.0%
Noteworthy Hedge Fund Shareholders: Quant hedge funds (Renaissance, AQR, Two Sigma)
30. Fox Corporation (NASDAQ:FOXA)
Number of Hedge Funds: 71
Total Dollar Amount of Long Hedge Fund Positions: $4.26 billion
Percent of Hedge Funds with Long Positions: 9.6%
2nd Quarter Return (through May 22): 1.8%
52-Week Return (through May 22): -1.7%
Noteworthy Hedge Fund Shareholders: Seth Klarman, Dan Loeb
29. The Boeing Company (NYSE:BA)
Number of Hedge Funds: 71
Total Dollar Amount of Long Hedge Fund Positions: $4.35 billion
Percent of Hedge Funds with Long Positions: 9.6%
2nd Quarter Return (through May 22): -7.0%
52-Week Return (through May 22): 1.4%
Noteworthy Hedge Fund Shareholders: Cliff Asness, John Armitage
28. PG&E Corporation (NYSE:PCG)
Number of Hedge Funds: 72
Total Dollar Amount of Long Hedge Fund Positions: $4.79 billion
Percent of Hedge Funds with Long Positions: 9.8%
2nd Quarter Return (through May 22): 6.7%
52-Week Return (through May 22): -56.5% (hedge funds bought after the stock plunged)
Noteworthy Hedge Fund Shareholders: David Abrams, Seth Klarman, David Tepper
27. UnitedHealth Group Incorporated (NYSE:UNH)
Number of Hedge Funds: 72
Total Dollar Amount of Long Hedge Fund Positions: $6.22 billion
Percent of Hedge Funds with Long Positions: 9.8%
2nd Quarter Return (through May 22): 0.8%
52-Week Return (through May 22): 3.1%
Noteworthy Hedge Fund Shareholders: Andreas Halvorsen, Stephen Mandel
26. Anthem, Inc. (NYSE:ANTM)
Number of Hedge Funds: 73
Total Dollar Amount of Long Hedge Fund Positions: $6.15 billion
Percent of Hedge Funds with Long Positions: 9.9%
2nd Quarter Return (through May 22): -3.4%
52-Week Return (through May 22): 19.8%
Noteworthy Hedge Fund Shareholders: Andreas Halvorsen, Larry Robbins
25. Wells Fargo & Company (NYSE:WFC)
Number of Hedge Funds: 73
Total Dollar Amount of Long Hedge Fund Positions: $25.8 billion
Percent of Hedge Funds with Long Positions: 9.9%
2nd Quarter Return (through May 22): -3.7%
52-Week Return (through May 22): -13.7%
Noteworthy Hedge Fund Shareholders: Warren Buffett
24. Worldpay, Inc. (NYSE:WP)
Number of Hedge Funds: 75
Total Dollar Amount of Long Hedge Fund Positions: $5.22 billion
Percent of Hedge Funds with Long Positions: 10.2%
2nd Quarter Return (through May 22): 7.8%
52-Week Return (through May 22): 51.2%
Noteworthy Hedge Fund Shareholders: Gabriel Plotkin, Dan Loeb
23. The Goldman Sachs Group, Inc. (NYSE:GS)
Number of Hedge Funds: 76
Total Dollar Amount of Long Hedge Fund Positions: $7.45 billion
Percent of Hedge Funds with Long Positions: 10.3%
2nd Quarter Return (through May 22): 1.8%
52-Week Return (through May 22): -16.6%
Noteworthy Hedge Fund Shareholders: Warren Buffett
22. Altaba Inc. (NASDAQ:AABA)
Number of Hedge Funds: 76
Total Dollar Amount of Long Hedge Fund Positions: $15.3 billion
Percent of Hedge Funds with Long Positions: 10.3%
2nd Quarter Return (through May 22): -14.5%
52-Week Return (through May 22): -17.2%
Noteworthy Hedge Fund Shareholders: Thomas Steyer’s Farallon, Paul Singer
21. Booking Holdings Inc. (NASDAQ:BKNG)
Number of Hedge Funds: 77
Total Dollar Amount of Long Hedge Fund Positions: $5.67 billion
Percent of Hedge Funds with Long Positions: 10.4%
2nd Quarter Return (through May 22): 0%
52-Week Return (through May 22): -16%
Noteworthy Hedge Fund Shareholders: Chase Coleman
20. Adobe Inc. (NASDAQ:ADBE)
Number of Hedge Funds: 86
Total Dollar Amount of Long Hedge Fund Positions: $8.97 billion
Percent of Hedge Funds with Long Positions: 11.7%
2nd Quarter Return (through May 22): 5.8%
52-Week Return (through May 22): 18.0%
Noteworthy Hedge Fund Shareholders: Stephen Mandel, Cliff Asness
19. Comcast Corporation (NASDAQ:CMCSA)
Number of Hedge Funds: 87
Total Dollar Amount of Long Hedge Fund Positions: $6.3 million
Percent of Hedge Funds with Long Positions: 11.8%
2nd Quarter Return (through May 22): 8.9%
52-Week Return (through May 22): 36.1%
Noteworthy Hedge Fund Shareholders: Boykin Curry
18. Citigroup Inc. (NYSE:C)
Number of Hedge Funds: 87
Total Dollar Amount of Long Hedge Fund Positions: $9.2 billion
Percent of Hedge Funds with Long Positions: 11.8%
2nd Quarter Return (through May 22): 4.6%
52-Week Return (through May 22): -6.6%
Noteworthy Hedge Fund Shareholders: Jeffrey Ubben
17. Berkshire Hathaway Inc. (NYSE:BRK-B)
Number of Hedge Funds: 91
Total Dollar Amount of Long Hedge Fund Positions: $20.1 billion
Percent of Hedge Funds with Long Positions: 12.3%
2nd Quarter Return (through May 22): 0.9%
52-Week Return (through May 22): 2.3%
Noteworthy Hedge Fund Shareholders: Bill Gates, Warren Buffett, Boykin Curry
16. PayPal Holdings, Inc. (NASDAQ:PYPL)
Number of Hedge Funds: 93
Total Dollar Amount of Long Hedge Fund Positions: $3.6 billion
Percent of Hedge Funds with Long Positions: 12.6%
2nd Quarter Return (through May 22): 8.3%
52-Week Return (through May 22): 39.5%
Noteworthy Hedge Fund Shareholders: Dan Loeb, Philippe Laffont
15. salesforce.com, inc. (NYSE:CRM)
Number of Hedge Funds: 93
Total Dollar Amount of Long Hedge Fund Positions: $5.2 billion
Percent of Hedge Funds with Long Positions: 12.6%
2nd Quarter Return (through May 22): -0.5%
52-Week Return (through May 22): 25.7%
Noteworthy Hedge Fund Shareholders: Ken Fisher, Chase Coleman
14. Mastercard Incorporated (NYSE:MA)
Number of Hedge Funds: 94
Total Dollar Amount of Long Hedge Fund Positions: $11.6 billion
Percent of Hedge Funds with Long Positions: 12.7%
2nd Quarter Return (through May 22): 9.3%
52-Week Return (through May 22): 34.8%
Noteworthy Hedge Fund Shareholders: Tom Russo, Warren Buffett
13. Netflix, Inc. (NASDAQ:NFLX)
Number of Hedge Funds: 96
Total Dollar Amount of Long Hedge Fund Positions: $9.4 billion
Percent of Hedge Funds with Long Positions: 13.0%
2nd Quarter Return (through May 22): 0.9%
52-Week Return (through May 22): 8.5%
Noteworthy Hedge Fund Shareholders: Chase Coleman, Daniel Sundheim
12. Bank of America Corporation (NYSE:BAC)
Number of Hedge Funds: 96
Total Dollar Amount of Long Hedge Fund Positions: $29.1 billion
Percent of Hedge Funds with Long Positions: 13.0%
2nd Quarter Return (through May 22): 3.3%
52-Week Return (through May 22): -5.9%
Noteworthy Hedge Fund Shareholders: Warren Buffett
11. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Funds: 98
Total Dollar Amount of Long Hedge Fund Positions: $55.1 billion
Percent of Hedge Funds with Long Positions: 13.3%
2nd Quarter Return (through May 22): -3.4%
52-Week Return (through May 22): -0.9%
Noteworthy Hedge Fund Shareholders: Warren Buffett, Steve Cohen
10. JPMorgan Chase & Co. (NYSE:JPM)
Number of Hedge Funds: 100
Total Dollar Amount of Long Hedge Fund Positions: $10.3 billion
Percent of Hedge Funds with Long Positions: 13.6%
2nd Quarter Return (through May 22): 10.3%
52-Week Return (through May 22): 0.9%
Noteworthy Hedge Fund Shareholders: Warren Buffett, Cliff Asness
9. Celgene Corporation (NASDAQ:CELG)
Number of Hedge Funds: 101
Total Dollar Amount of Long Hedge Fund Positions: $11.1 billion
Percent of Hedge Funds with Long Positions: 13.7%
2nd Quarter Return (through May 22): 2.1%
52-Week Return (through May 22): 25.8%
Noteworthy Hedge Fund Shareholders: Daniel S. Och, George Soros
8. The Walt Disney Company (NYSE:DIS)
Number of Hedge Funds: 114
Total Dollar Amount of Long Hedge Fund Positions: $7.0 billion
Percent of Hedge Funds with Long Positions: 15.4%
2nd Quarter Return (through May 22): 20.6% (Disney is a new top 10 hedge fund holding)
52-Week Return (through May 22): 30.7%
Noteworthy Hedge Fund Shareholders: Daniel Sundheim, Israel Englander
7. Alibaba Group Holding Limited (NYSE:BABA)
Number of Hedge Funds: 117
Total Dollar Amount of Long Hedge Fund Positions: $13.9 billion
Percent of Hedge Funds with Long Positions: 15.9%
2nd Quarter Return (through May 22): -12.9%
52-Week Return (through May 22): -18.9%
Noteworthy Hedge Fund Shareholders: Stephen Mandel, Julian Robertson
6. Visa Inc. (NYSE:V)
Number of Hedge Funds: 124
Total Dollar Amount of Long Hedge Fund Positions: $13.2 billion
Percent of Hedge Funds with Long Positions: 16.8%
2nd Quarter Return (through May 22): 5.3%
52-Week Return (through May 22): 26.5%
Noteworthy Hedge Fund Shareholders: Dan Loeb, Warren Buffett
5. Alphabet Inc. (NASDAQ:GOOG)
Number of Hedge Funds: 133
Total Dollar Amount of Long Hedge Fund Positions: $13.6 billion
Percent of Hedge Funds with Long Positions: 18.0%
2nd Quarter Return (through May 22): -1.9%
52-Week Return (through May 22): 7.6%
Noteworthy Hedge Fund Shareholders: Leon Cooperman, Julian Robertson
4. Alphabet Inc. (NASDAQ:GOOGL)
Number of Hedge Funds: 147
Total Dollar Amount of Long Hedge Fund Positions: $11.12 billion
Percent of Hedge Funds with Long Positions: 19.9%
2nd Quarter Return (through May 22): -1.8%
52-Week Return (through May 22): 7.5%
Noteworthy Hedge Fund Shareholders: Ken Fisher, Larry Robbins
3. Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Funds: 166
Total Dollar Amount of Long Hedge Fund Positions: $19.4 billion
Percent of Hedge Funds with Long Positions: 22.5%
2nd Quarter Return (through May 22): 4.4%
52-Week Return (through May 22): 17.6%
Noteworthy Hedge Fund Shareholders: Stephen Mandel, Daniel S. Och
2. Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Funds: 170
Total Dollar Amount of Long Hedge Fund Positions:$24.8 billion
Percent of Hedge Funds with Long Positions: 23.0%
2nd Quarter Return (through May 22): 8.7%
52-Week Return (through May 22): 33.1%
Noteworthy Hedge Fund Shareholders: Stanley Druckenmiller, Boykin Curry
1. Facebook, Inc. (NASDAQ:FB)
Number of Hedge Funds: 176
Total Dollar Amount of Long Hedge Fund Positions: $18.35 billion
Percent of Hedge Funds with Long Positions: 23.8%
2nd Quarter Return (through May 22): 11.2% (New top position for hedge funds)
52-Week Return (through May 22): 0.8%
Noteworthy Hedge Fund Shareholders: Brad Gerstner, Julian Robertson
Disclosure: None.
This article is originally published at Insider Monkey.
