Was The Smart Money Right About The Goldman Sachs Group, Inc. (GS)?

Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of The Goldman Sachs Group, Inc. (NYSE:GS).

The Goldman Sachs Group, Inc. (NYSE:GS) has seen a decrease in activity from the world’s largest hedge funds recently. The Goldman Sachs Group, Inc. (NYSE:GS) was in 61 hedge funds’ portfolios at the end of June. The all time high for this statistic is 78. There were 77 hedge funds in our database with GS holdings at the end of March. Our calculations also showed that GS isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

Mark Kingdon of Kingdon Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. We check out articles like Warren Buffett’s 3 money saving tips that provide inflation and volatility hedges. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind let’s view the recent hedge fund action surrounding The Goldman Sachs Group, Inc. (NYSE:GS).

Do Hedge Funds Think GS Is A Good Stock To Buy Now?

At the end of the second quarter, a total of 61 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -21% from one quarter earlier. By comparison, 69 hedge funds held shares or bullish call options in GS a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Eagle Capital Management, managed by Boykin Curry, holds the number one position in The Goldman Sachs Group, Inc. (NYSE:GS). Eagle Capital Management has a $1.4449 billion position in the stock, comprising 4.1% of its 13F portfolio. Coming in second is Ken Fisher of Fisher Asset Management, with a $1.03 billion position; 0.6% of its 13F portfolio is allocated to the stock. Remaining professional money managers that hold long positions comprise Edgar Wachenheim’s Greenhaven Associates, and Richard S. Pzena’s Pzena Investment Management. In terms of the portfolio weights assigned to each position Greenhaven Associates allocated the biggest weight to The Goldman Sachs Group, Inc. (NYSE:GS), around 29.32% of its 13F portfolio. Truvvo Partners is also relatively very bullish on the stock, earmarking 9.88 percent of its 13F equity portfolio to GS.

Since The Goldman Sachs Group, Inc. (NYSE:GS) has faced bearish sentiment from hedge fund managers, we can see that there is a sect of fund managers that slashed their entire stakes heading into Q3. Intriguingly, Renaissance Technologies dumped the largest stake of all the hedgies tracked by Insider Monkey, comprising an estimated $74.7 million in stock. Robert Pohly’s fund, Samlyn Capital, also dropped its stock, about $64.9 million worth. These moves are interesting, as aggregate hedge fund interest fell by 16 funds heading into Q3.

Let’s check out hedge fund activity in other stocks similar to The Goldman Sachs Group, Inc. (NYSE:GS). These stocks are The Toronto-Dominion Bank (NYSE:TD), JD.Com Inc (NASDAQ:JD), American Tower Corporation (REIT) (NYSE:AMT), Sony Group Corp (NYSE:SONY), Target Corporation (NYSE:TGT), Caterpillar Inc. (NYSE:CAT), and TotalEnergies SE (NYSE:TTE). This group of stocks’ market valuations resemble GS’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 44.4 hedge funds with bullish positions and the average amount invested in these stocks was $4056 million. That figure was $5184 million in GS’s case. JD.Com Inc (NASDAQ:JD) is the most popular stock in this table. On the other hand TotalEnergies SE (NYSE:TTE) is the least popular one with only 15 bullish hedge fund positions. The Goldman Sachs Group, Inc. (NYSE:GS) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for GS is 50.2. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 26.3% in 2021 through October 29th and still beat the market by 2.3 percentage points. Hedge funds were also right about betting on GS as the stock returned 9.4% since the end of Q2 (through 10/29) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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Disclosure: None. This article was originally published at Insider Monkey.