5 Stocks The Best Performing Hedge Funds Are Piling Into

Hedge funds spend enormous resources and money on analyzing and uncovering data and trends about companies before funneling money. An average investor can mimic hedge funds and pick stocks that are preferred by the smart money investors to increase chances of profitable gains. Our research spanning 17 years and historical evidence indicate that bets made by hedge funds are profitable more often than not. For example, in the third quarter, the hedge funds in our database which had at least 5 long positions in companies valued at $1 billion or more returned a full 5.0 percentage points more than the S&P 500 ETFs.

Insider Monkey has also prepared a list of the 100 best performing hedge funds based on weighted average returns of each fund’s long stock positions in non-microcap companies. These hedge funds mid-cap stock picks outperformed the S&P 500 Index by double digits over the last 12 months. In this article we will discuss five of the most popular stocks that are liked by these top performing hedge funds.

Of the 100 best performing hedge funds, 21 funds had long positions in Alibaba Group Holding Ltd (NYSE:BABA) at the end of the third quarter, whereas a total of 104 hedge funds tracked by Insider Monkey were bullish on the ecommerce giant, significantly more than 69 funds a quarter earlier. This shows that the company has a pretty strong hedge fund sentiment.  Alibaba reported fiscal second quarter EPS of $0.79 on $5.14 billion revenue, better than the forecasts of $0.69 EPS and $5.03 billion revenue. Alibaba is taking on Apple with its mobile operating system, YunOS. According to a report, YunOS would surpass Apple’s iOS in the mainland China by grabbing a whopping 14% market share by the end of 2016. The stock is up over 14% so far this year.

Amazon.com, Inc. (NASDAQ:AMZN) was in the portfolios of 19 top performing hedge funds, as of the end of the third quarter. These funds collectively own $2.1 billion of the company’s stock. If all 742 hedge funds in our database are taken into account, 150 were long Amazon.com, Inc. (NASDAQ:AMZN) at the end of the September quarter. Amazon’s shares have gained some 15% in value year-to-date. Last week, some reports suggested that Amazon is set to launch its video chat service in re:Invent AWS conference this month. The company acquired a San Francisco-based startup Biba Systems last year. The startup makes video messaging apps aimed at business users.

On the next page, we will discuss some other darling stocks of the top performing hedge funds.

Sixteen of the 100 best performing hedge funds held stakes in Apple Inc. (NASDAQ:AAPL) at the end of the third quarter. These funds have $1.7 billion worth of shares of the company. Overall, 145 hedge funds in our database of 742 funds were long Apple Inc. (NASDAQ:AAPL) at the end of the third quarter. The stock has gained some 6% in value since the start of the year.  Warren Buffett‘s Berkshire Hathaway owns 15.23 million Apple shares as of the end of September.

From our list of the best performing hedge funds, 15 funds reported ownership of $1.1 billion worth of long positions in Facebook Inc (NASDAQ:FB) at the end of the third quarter, whereas a total of 149 hedge funds tracked by Insider Monkey owned Facebook Inc (NASDAQ:FB) as of the same period, versus 148 funds a quarter earlier. Facebook Inc (NASDAQ:FB) has gained 15% since the start of 2016. Billionaire Andreas Halvorsen’s Viking Global owns 18.75 million shares of the social media giant.

At the end of the third quarter, 11 of the top performing hedge funds were bullish on Alphabet Inc (NASDAQ:GOOG) with aggregate investments of $1 billion value. As a whole, in our database, a total of 200 unique hedge funds owned Alphabet’s class A or class C shares (or both), at the end of the September quarter. Alphabet Inc (NASDAQ:GOOG) earned $9.06 per share in the third quarter, versus the consensus estimate of $8.64, while revenue of $22.25 billion was in-line with estimates. The stock is up by just over 1% so far this year. Natixis Global Asset Management’s Harris Associates owns 2.36 million class C shares of Alphabet Inc (NASDAQ:GOOG) as of the end of September.

Disclosure: None