- Ben Snider, a strategist at Goldman Sachs, put together a list of outperforming stocks that have recently been heavily favored by hedge-fund managers.
- These stocks can be a leading indicator of future returns.
- Since 2001, Goldman's "VIP" stocks have trounced the S&P 500 on a quarterly basis 61% of the time, and they've outperformed by 6.37% so far in 2020.
- All of the stocks Snider selected occupy a top 10 position in a large number of hedge-fund portfolios.
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For investors, the first five months of 2020 have been about as calm as an F5 tornado.
After all, who could've anticipated the fastest bear market on record, a 35%-plus rally, 39 million jobless claims, unprecedented Federal Reserve stimulus, and a pandemic— all in a little over three months?
For investors grappling with these mercurial gyrations, a good place to look is the portfolios of hedge-fund managers. According to data compiled by Goldman Sachs, heavy interest from hedge funds has been a leading indicator of future gains throughout recent history.
Below is a chart comparing the returns of Goldman Sachs' Hedge Fund VIP Index — a fund that encompasses the top bullish positions of fundamentally focused hedge funds — with those of the S&P 500.
Since the market bottomed out on March 23, this basket of "VIP" stocks has trounced the S&P 500 by 8%. On a year-to-date basis, it's outperformed by 6.37%. If we zoom out even further, since 2001, it's outperformed 61% of the time on a quarterly basis.
"From an implementation standpoint, the Hedge Fund VIP list represents a tool for investors seeking to 'follow the smart money' based on 13-F filings," Ben Snider, a strategist at Goldman Sachs, said. "For this analysis, we limit our universe to hedge funds with 10 to 200 distinct equity positions in an attempt to isolate fundamentally-driven investors from quantitative funds or funds that mirror private equity investments."
Listed below are 25 stocks Snider and his Goldman colleagues found especially enticing to hedge-fund managers. They're listed in increasing order of how many funds hold the stock in a top 10 position.
25. RingCentral
Ticker: RNG
Number of hedge funds with stock as top 10 holding: 17
Year-to-date total return: 56%
Source: Solactive, FactSet, data compiled by Goldman Sachs Global Investment Research
24. GoDaddy
Ticker:GDDY
Number of hedge funds with stock as top 10 holding: 17
Year-to-date total return: 11%
Source: Solactive, FactSet, data compiled by Goldman Sachs Global Investment Research
23. ServiceNow
Ticker:NOW
Number of hedge funds with stock as top 10 holding: 18
Year-to-date total return: 33%
Source: Solactive, FactSet, data compiled by Goldman Sachs Global Investment Research
22. Sea Ltd. (Singapore)
Ticker:SE
Number of hedge funds with stock as top 10 holding: 18
Year-to-date total return: 73%
Source: Solactive, FactSet, data compiled by Goldman Sachs Global Investment Research
21. Adobe
Ticker:ADBE
Number of hedge funds with stock as top 10 holding: 18
Year-to-date total return: 12%
Source: Solactive, FactSet, data compiled by Goldman Sachs Global Investment Research
20. UnitedHealth Group
Ticker:UNH
Number of hedge funds with stock as top 10 holding: 19
Year-to-date total return: 0%
Source: Solactive, FactSet, data compiled by Goldman Sachs Global Investment Research
19. JD.com
Ticker:JD
Number of hedge funds with stock as top 10 holding: 19
Year-to-date total return: 58%
Source: Solactive, FactSet, data compiled by Goldman Sachs Global Investment Research
18. Centene
Ticker:CNC
Number of hedge funds with stock as top 10 holding: 19
Year-to-date total return: 8%
Source: Solactive, FactSet, data compiled by Goldman Sachs Global Investment Research
17. Activision Blizzard
Ticker:ATVI
Number of hedge funds with stock as top 10 holding: 20
Year-to-date total return: 23%
Source: Solactive, FactSet, data compiled by Goldman Sachs Global Investment Research
16. Uber Technologies
Ticker:UBER
Number of hedge funds with stock as top 10 holding: 22
Year-to-date total return: 13%
Source: Solactive, FactSet, data compiled by Goldman Sachs Global Investment Research
15. PG&E
Ticker:PCG
Number of hedge funds with stock as top 10 holding: 23
Year-to-date total return: 13%
Source: Solactive, FactSet, data compiled by Goldman Sachs Global Investment Research
14. Tiffany
Ticker:TIF
Number of hedge funds with stock as top 10 holding: 24
Year-to-date total return: -4%
Source: Solactive, FactSet, data compiled by Goldman Sachs Global Investment Research
13. Salesforce
Ticker:CRM
Number of hedge funds with stock as top 10 holding: 27
Year-to-date total return: 6%
Source: Solactive, FactSet, data compiled by Goldman Sachs Global Investment Research
12. Apple
Ticker:AAPL
Number of hedge funds with stock as top 10 holding: 30
Year-to-date total return: 8%
Source: Solactive, FactSet, data compiled by Goldman Sachs Global Investment Research
11. Mastercard
Ticker:MA
Number of hedge funds with stock as top 10 holding: 37
Year-to-date total return: -3%
Source: Solactive, FactSet, data compiled by Goldman Sachs Global Investment Research
10. Visa
Ticker:V
Number of hedge funds with stock as top 10 holding: 38
Year-to-date total return: 2%
Source: Solactive, FactSet, data compiled by Goldman Sachs Global Investment Research
9. Netflix
Ticker:NFLX
Number of hedge funds with stock as top 10 holding: 38
Year-to-date total return: 40%
Source: Solactive, FactSet, data compiled by Goldman Sachs Global Investment Research
8. Fidelity National
Ticker:FIS
Number of hedge funds with stock as top 10 holding: 38
Year-to-date total return: -2%
Source: Solactive, FactSet, data compiled by Goldman Sachs Global Investment Research
7. PayPal
Ticker:PYPL
Number of hedge funds with stock as top 10 holding: 40
Year-to-date total return: 35%
Source: Solactive, FactSet, data compiled by Goldman Sachs Global Investment Research
6. Charter Communications
Ticker:CHTR
Number of hedge funds with stock as top 10 holding: 40
Year-to-date total return: 7%
Source: Solactive, FactSet, data compiled by Goldman Sachs Global Investment Research
5. Alibaba
Ticker:BABA
Number of hedge funds with stock as top 10 holding: 57
Year-to-date total return: 1%
Source: Solactive, FactSet, data compiled by Goldman Sachs Global Investment Research
4. Alphabet
Ticker:GOOGL
Number of hedge funds with stock as top 10 holding: 58
Year-to-date total return: 3%
Source: Solactive, FactSet, data compiled by Goldman Sachs Global Investment Research
3. Facebook
Ticker:FB
Number of hedge funds with stock as top 10 holding: 98
Year-to-date total return: 4%
Source: Solactive, FactSet, data compiled by Goldman Sachs Global Investment Research
2. Microsoft
Ticker:MSFT
Number of hedge funds with stock as top 10 holding: 108
Year-to-date total return: 18%
Source: Solactive, FactSet, data compiled by Goldman Sachs Global Investment Research
1. Amazon
Ticker:AMZN
Number of hedge funds with stock as top 10 holding: 139
Year-to-date total return: 31%
Source: Solactive, FactSet, data compiled by Goldman Sachs Global Investment Research