50 Stocks That Matter Most To Hedge Funds
Goldman Sachs publishes a quarterly report based on 13F filings. This is a comprehensive report that takes time to prepare. The data team at Insider Monkey finished processing 13F filings and we had some time on our hands. So, we decided not to wait for Goldman Sachs to publish its report. After all, its methodology is pretty straightforward. Goldman's hedge fund VIP List "contains the 50 stocks that appear most frequently among the top 10 holdings of fundamentally-driven hedge fund portfolios." Insider Monkey is probably more selective in its hedge fund list but it is very likely that at least 90% of the hedge funds are in the same list. Identifying the top 10 holdings of a hedge fund is a no-brainer. We considered only top 10 stock holdings of each hedge fund and excluded options or convertible notes positions.
We also noticed that focusing on the top 10 positions of a hedge fund is quite arbitrary. Does a hedge fund really have 10 great ideas every quarter? Our experience shows that a good hedge fund can come up with 2-3 good ideas every year. So, we decided to compile other VIP Stock Lists that are based on each hedge fund's top 5, top 3, top 2, and top holdings. If the same names consistently come up in our list, then we can eliminate the arbitrariness of the "top 10" positions.
We didn't have time to conduct back tests on these VIP Lists. Goldman claims that its VIP list managed to outperform the market by about 3 percentage points per year between 2001 and 2010. We think this number could be improved by restricting the list to the top 2-3 positions of hedge funds.
This article has 5 tables. The first table is an approximation for Goldman's VIP List. Actavis plc (NYSE: ACT ), Apple Inc. (NASDAQ: AAPL ), and Allergan, Inc. (NYSE: AGN ) are the top three stocks. We also compiled the list of 10 most popular stocks among hedge funds, but Allergan wasn't in the top 3 in that list. Goldman's VIP List is more similar to our billionaires' top stocks list. Facebook ranks number 4 in Goldman's list whereas it wasn't among the top 10 in the billionaires' list. This indicates that we get a slightly different list every time we use a slightly different criteria. One interesting stock that showed up in Goldman's list is Covidien plc (NYSE: COV ). It isn't one of the top 30 stocks among all hedge funds (no restrictions), yet it shows up in this list. This means hedge funds are more likely to place a large bet on Covidien than a small one.
[table] Company Name , Ticker , Top 10 Holding , Value (x1000) Actavis Inc. , ACT , 57 , 9325351 Apple Inc. , AAPL , 52 , 16106272 Allergan Inc. , AGN , 52 , 15363015 Facebook Inc. , FB , 48 , 4962961 American Airlines Group Inc. , AAL , 45 , 3808322 Citigroup Inc. , C , 45 , 6338888 Covidien plc. , COV , 45 , 9396613 Valeant Pharmaceuticals International Inc. , VRX , 40 , 11092766 Baidu Inc. , BIDU , 38 , 5378019 Ally Financial Inc. , ALLY , 37 , 4710267 Liberty Global plc , LBTYK , 37 , 7204701 Microsoft Corporation , MSFT , 36 , 13387143 American International Group Inc. , AIG , 35 , 7982485 Micron Technology Inc. , MU , 35 , 4975580 Time Warner Cable Inc , TWC , 34 , 6805400 Delta Air Lines Inc. , DAL , 31 , 4189120 Alibaba Group Holding Limited , BABA , 29 , 4543248 Yahoo! Inc. , YHOO , 29 , 3859147 Air Products and Chemicals Inc. , APD , 28 , 7254865 Liberty Interactive Corporation , QVCA , 28 , 1866281 DIRECTV , DTV , 27 , 8551520 General Motors Company , GM , 27 , 1833335 Cheniere Energy Inc. , LNG , 27 , 5232694 Charter Communications Inc. , CHTR , 26 , 4183112 Wells Fargo & Company , WFC , 26 , 31227350 Berkshire Hathaway Inc. , BRK-B , 25 , 18250347 Gilead Sciences Inc. , GILD , 25 , 2025365 Google Inc. , GOOG , 24 , 1719116 Northstar Realty Finance Corp. , NRF , 23 , 870417 Bank of America Corporation , BAC , 22 , 3501114 eBay Inc. , EBAY , 22 , 8125003 Google Inc. , GOOGL , 22 , 1393933 Mastercard Incorporated , MA , 22 , 5307368 NorthStar Asset Management Group Inc. , NSAM , 22 , 1108685 SunEdison Inc. , SUNE , 22 , 2047856 Dollar General Corporation , DG , 21 , 4248491 DISH Network Corporation , DISH , 20 , 1229867 Constellation Brands Inc , STZ , 20 , 2403496 Tribune Media Company , TRCO , 20 , 2701249 Cubist Pharmaceuticals Inc. , CBST , 19 , 1818658 Twenty-First Century Fox Inc. , FOXA , 19 , 3987785 CBS Corporation , CBS , 18 , 3005426 Hertz Global Holdings Inc , HTZ , 18 , 4265268 Liberty Global plc , LBTYA , 18 , 801513 Macquarie Infrastructure Company LLC , MIC , 18 , 1265133 The Priceline Group Inc. , PCLN , 18 , 3357516 Teva Pharmaceutical Industries Limited , TEVA , 18 , 2397804 Visteon Corporation , VC , 18 , 998704 Brookdale Senior Living Inc. , BKD , 17 , 1084378 EMC Corporation , EMC , 17 , 2683759 Pfizer Inc. , PFE , 17 , 2712800 [/table]The list doesn't change much when we restrict our list to only the top 5 stock positions in each hedge fund's 13F portfolio. Here is the list:
[table] Company Name , Ticker , Top 10 Holding , Value (x1000) Allergan Inc. , AGN , 35 , 14410170 Apple Inc. , AAPL , 33 , 15053509 Actavis Inc. , ACT , 33 , 6458616 Covidien plc. , COV , 33 , 7623625 Facebook Inc. , FB , 31 , 3347516 Valeant Pharmaceuticals International Inc. , VRX , 30 , 10153485 Citigroup Inc. , C , 26 , 5033883 Ally Financial Inc. , ALLY , 25 , 4017868 Micron Technology Inc. , MU , 24 , 3163889 Microsoft Corporation , MSFT , 23 , 10970403 Baidu Inc. , BIDU , 21 , 4594884 General Motors Company , GM , 21 , 1674234 Liberty Global plc , LBTYK , 21 , 4599286 American Airlines Group Inc. , AAL , 20 , 2159987 DIRECTV , DTV , 20 , 4459773 Time Warner Cable Inc , TWC , 20 , 4769036 Yahoo! Inc. , YHOO , 19 , 3476189 Berkshire Hathaway Inc. , BRK-B , 18 , 17665116 Delta Air Lines Inc. , DAL , 18 , 3235339 Liberty Interactive Corporation , QVCA , 18 , 1429822 American International Group Inc. , AIG , 17 , 6210290 Alibaba Group Holding Limited , BABA , 17 , 3849114 Charter Communications Inc. , CHTR , 16 , 3048596 Mastercard Incorporated , MA , 16 , 4710505 Gilead Sciences Inc. , GILD , 15 , 1772192 Assured Guaranty Ltd. , AGO , 14 , 601568 Cheniere Energy Inc. , LNG , 14 , 3124579 Macquarie Infrastructure Company LLC , MIC , 14 , 1103629 Constellation Brands Inc , STZ , 14 , 2080787 Air Products and Chemicals Inc. , APD , 13 , 4797343 DISH Network Corporation , DISH , 13 , 857495 NorthStar Asset Management Group Inc. , NSAM , 13 , 821753 SunEdison Inc. , SUNE , 13 , 1136256 Cubist Pharmaceuticals Inc. , CBST , 12 , 969161 eBay Inc. , EBAY , 12 , 6027842 Google Inc. , GOOGL , 12 , 563471 Northstar Realty Finance Corp. , NRF , 12 , 511270 Pfizer Inc. , PFE , 12 , 1181525 Bank of America Corporation , BAC , 11 , 3029401 Visteon Corporation , VC , 11 , 652130 Wells Fargo & Company , WFC , 11 , 27565984 Twenty-First Century Fox Inc. , FOXA , 10 , 1659737 Google Inc. , GOOG , 10 , 773669 Oracle Corporation , ORCL , 10 , 7417319 Teva Pharmaceutical Industries Limited , TEVA , 10 , 1925489 Tribune Media Company , TRCO , 10 , 2144037 TRW Automotive Holdings Corporation , TRW , 10 , 892333 American Capital Ltd. , ACAS , 9 , 757296 Brookdale Senior Living Inc. , BKD , 9 , 683018 CBS Corporation , CBS , 9 , 2346703 [/table]When we get more restrictive, things got a little bit more interesting. Covidien climbed to the fourth spot and Alibaba Group Holding Ltd (NYSE: BABA ) also got more popular. Interestingly, both Allergan and Apple are still number 1 and number 2. Here is the top 50 stocks that are among the top 3 stock positions in hedge funds' portfolio:
[table] Company Name , Ticker , Top 3 Holding , Value (x1000) Allergan Inc. , AGN , 28 , 13706403 Apple Inc. , AAPL , 24 , 14087434 Valeant Pharmaceuticals International Inc. , VRX , 24 , 8472955 Covidien plc. , COV , 24 , 5617672 Actavis Inc. , ACT , 22 , 3442602 Facebook Inc. , FB , 18 , 1238437 American Airlines Group Inc. , AAL , 17 , 2139808 Berkshire Hathaway Inc. , BRK-B , 15 , 16915924 Liberty Global plc , LBTYK , 15 , 3680170 Delta Air Lines Inc. , DAL , 15 , 2730258 DIRECTV , DTV , 14 , 3991066 Alibaba Group Holding Limited , BABA , 14 , 3808866 Micron Technology Inc. , MU , 14 , 2600864 Citigroup Inc. , C , 14 , 2296119 Baidu Inc. , BIDU , 13 , 3612598 Ally Financial Inc. , ALLY , 13 , 2817711 Yahoo! Inc. , YHOO , 13 , 2517234 Microsoft Corporation , MSFT , 12 , 6697847 General Motors Company , GM , 12 , 1245366 Macquarie Infrastructure Company LLC , MIC , 12 , 826836 Constellation Brands Inc , STZ , 11 , 1893887 SunEdison Inc. , SUNE , 11 , 1107560 NorthStar Asset Management Group Inc. , NSAM , 11 , 633204 Cheniere Energy Inc. , LNG , 9 , 2587418 Teva Pharmaceutical Industries Limited , TEVA , 9 , 1914562 Google Inc. , GOOG , 9 , 757877 Pfizer Inc. , PFE , 9 , 662963 Liberty Interactive Corporation , QVCA , 9 , 542489 Assured Guaranty Ltd. , AGO , 9 , 417966 DISH Network Corporation , DISH , 9 , 297729 Oracle Corporation , ORCL , 8 , 5628113 Time Warner Cable Inc , TWC , 8 , 4180386 Mastercard Incorporated , MA , 8 , 4166112 Bank of America Corporation , BAC , 8 , 2834672 Charter Communications Inc. , CHTR , 8 , 2243436 Spirit Aerosystems Holdings Inc. , SPR , 8 , 2071279 Cubist Pharmaceuticals Inc. , CBST , 8 , 682749 Google Inc. , GOOGL , 8 , 465419 Wells Fargo & Company , WFC , 7 , 26538770 American International Group Inc. , AIG , 7 , 4655308 Williams Companies Inc. (The) , WMB , 7 , 3518578 Comcast Corporation , CMCSA , 7 , 2421476 Signet Jewelers Limited , SIG , 7 , 1596035 Twenty-First Century Fox Inc. , FOXA , 7 , 1498706 Gilead Sciences Inc. , GILD , 7 , 1194108 FleetCor Technologies Inc. , FLT , 7 , 899484 Visteon Corporation , VC , 7 , 452207 Northstar Realty Finance Corp. , NRF , 7 , 187412 Air Products and Chemicals Inc. , APD , 6 , 4158093 Walgreens Boots Alliance Inc. , WBA , 6 , 3165917 [/table]In the following table we restricted our list to the top 2 stock ideas of hedge funds. We think this list makes more sense because these stocks are more likely to be the best ideas of hedge funds. Other than the obvious merger arbitrage related plays, three stocks attracted our attention in this list. First, Apple is the most popular stock. Twenty-two hedge funds have Apple as their #1 or #2 position. That's a huge vote of confidence. The other stock is Yahoo! Inc. (NASDAQ: YHOO ), which is now one of the top 10 stocks. Yahoo also ranks higher than Alibaba. We don't have any positions in either stock but we believe buying Yahoo is better than investing directly in BABA. Here is the list:
[table] Company Name , Ticker , Top 2 Holding , Value (x1000) Apple Inc. , AAPL , 22 , 12658141 Allergan Inc. , AGN , 20 , 12236195 Covidien plc. , COV , 18 , 4546456 Actavis Inc. , ACT , 16 , 3078718 Valeant Pharmaceuticals International Inc. , VRX , 14 , 5848431 Liberty Global plc , LBTYK , 13 , 2572827 Berkshire Hathaway Inc. , BRK-B , 12 , 15277954 American Airlines Group Inc. , AAL , 12 , 2013716 Ally Financial Inc. , ALLY , 11 , 2685155 Yahoo! Inc. , YHOO , 11 , 2089587 Delta Air Lines Inc. , DAL , 11 , 1311821 Macquarie Infrastructure Company LLC , MIC , 10 , 777544 Facebook Inc. , FB , 10 , 382359 Microsoft Corporation , MSFT , 9 , 5987292 Alibaba Group Holding Limited , BABA , 9 , 3017700 Baidu Inc. , BIDU , 9 , 2722915 Micron Technology Inc. , MU , 9 , 1719056 Citigroup Inc. , C , 9 , 1625949 Constellation Brands Inc , STZ , 9 , 1344996 DIRECTV , DTV , 8 , 2900968 Teva Pharmaceutical Industries Limited , TEVA , 8 , 1635065 General Motors Company , GM , 8 , 844649 Google Inc. , GOOG , 8 , 749718 Assured Guaranty Ltd. , AGO , 8 , 327585 SunEdison Inc. , SUNE , 7 , 358781 Williams Companies Inc. (The) , WMB , 6 , 3507315 Spirit Aerosystems Holdings Inc. , SPR , 6 , 1980898 Cheniere Energy Inc. , LNG , 6 , 1779608 Sealed Air Corporation , SEE , 6 , 965128 FleetCor Technologies Inc. , FLT , 6 , 780516 Liberty Interactive Corporation , QVCA , 6 , 464620 Visteon Corporation , VC , 6 , 401537 Wells Fargo & Company , WFC , 5 , 26266208 Tribune Media Company , TRCO , 5 , 1872661 Loral Space and Communications Inc. , LORL , 5 , 1018619 United Therapeutics Corporation , UTHR , 5 , 805727 SanDisk Corporation , SNDK , 5 , 772054 Gilead Sciences Inc. , GILD , 5 , 726917 Pfizer Inc. , PFE , 5 , 453656 Google Inc. , GOOGL , 5 , 341874 DISH Network Corporation , DISH , 5 , 237136 Northstar Realty Finance Corp. , NRF , 5 , 159799 NorthStar Asset Management Group Inc. , NSAM , 5 , 113272 Oracle Corporation , ORCL , 4 , 4437517 Mastercard Incorporated , MA , 4 , 3263741 Walgreens Boots Alliance Inc. , WBA , 4 , 2792708 Time Warner Cable Inc , TWC , 4 , 2589684 Bank of America Corporation , BAC , 4 , 2531060 Comcast Corporation , CMCSA , 4 , 2164327 Charter Communications Inc. , CHTR , 4 , 1816423 [/table]Here is the final table. These are the most popular #1 stock picks of nearly 750 equity hedge funds. You probably guessed it right, Apple is the most popular #1 stock pick among hedge funds. Another interesting stock among the top 5 is Warren Buffett's Berkshire Hathaway Inc. (NYSE: BRK.B ). Let's take this opportunity and tell you why it isn't a great idea to buy BRK-B if your goal is to tap into Buffett's investing wisdom. We usually don't recommend investing in hedge funds because of their high fees. Our research has shown that investors were able to beat the market by an average of 18 percentage points per year by investing in their top 15 small-cap ideas ( read the details ).
Warren Buffett doesn't charge his investors huge fees. His salary is actually microscopic in comparison to what he has done for his investors. The problem with investing in Berkshire is that it hoards a ton of cash and this affects its returns. Last year, the New York Times ran an article bashing Buffett. We explain in this article why the New York Times was wrong about Buffett. In a nutshell, Buffett's top stock picks actually perform much better than index funds even when you buy them two weeks after the 13F filings. By buying Buffett's entire 13F portfolio investors could have outperformed the market by 6 percentage points per year between 1999 and 2009.
We haven't done any back tests based on the following list. Theoretically it should yield much better returns than Goldman's original 50 VIP Stocks list. For the time being you can use it as a source of ideas for further research. Here is our list:
[table] Company Name , Ticker , Top 1 Holding , Value (x1000) Apple Inc. , AAPL , 14 , 3726450 Covidien plc. , COV , 11 , 3363034 Allergan Inc. , AGN , 9 , 8782545 Macquarie Infrastructure Company LLC , MIC , 9 , 739183 Berkshire Hathaway Inc. , BRK-B , 7 , 14320318 Alibaba Group Holding Limited , BABA , 7 , 1965307 American Airlines Group Inc. , AAL , 7 , 1679369 Yahoo! Inc. , YHOO , 7 , 1123661 Actavis Inc. , ACT , 7 , 1047841 Delta Air Lines Inc. , DAL , 7 , 960903 Ally Financial Inc. , ALLY , 6 , 1568308 Citigroup Inc. , C , 6 , 1002658 Baidu Inc. , BIDU , 6 , 996735 Liberty Global plc , LBTYK , 6 , 594587 Valeant Pharmaceuticals International Inc. , VRX , 5 , 1752074 Micron Technology Inc. , MU , 5 , 1408459 Constellation Brands Inc , STZ , 5 , 1123499 Teva Pharmaceutical Industries Limited , TEVA , 5 , 1072717 Visteon Corporation , VC , 5 , 397882 Assured Guaranty Ltd. , AGO , 5 , 225626 Facebook Inc. , FB , 5 , 197173 Microsoft Corporation , MSFT , 4 , 5303508 Spirit Aerosystems Holdings Inc. , SPR , 4 , 1609052 DIRECTV , DTV , 4 , 1487312 Cheniere Energy Inc. , LNG , 4 , 1353960 Biogen Idec Inc. , BIIB , 4 , 792116 Twenty-First Century Fox Inc. , FOXA , 4 , 762739 CF Industries Holdings Inc. , CF , 4 , 442888 Oracle Corporation , ORCL , 3 , 2908142 Time Warner Cable Inc , TWC , 3 , 2578736 Williams Companies Inc. (The) , WMB , 3 , 2522323 Walgreens Boots Alliance Inc. , WBA , 3 , 1349959 Harbinger Group Inc , HRG , 3 , 1172573 Calpine Corporation , CPN , 3 , 853024 Transdigm Group Incorporated , TDG , 3 , 665307 NextEra Energy Inc. , NEE , 3 , 597150 United Technologies Corporation , UTX , 3 , 486096 Pfizer Inc. , PFE , 3 , 350414 United Therapeutics Corporation , UTHR , 3 , 337275 HD Supply Holdings Inc. , HDS , 3 , 242951 American Realty Capital Properties Inc. , ARCP , 3 , 240620 Amicus Therapeutics Inc. , FOLD , 3 , 200835 DISH Network Corporation , DISH , 3 , 196674 Visa Inc. , V , 3 , 179018 Shutterfly Inc. , SFLY , 3 , 154334 SunEdison Inc. , SUNE , 3 , 148303 InterXion Holding N.V. , INXN , 3 , 145723 NorthStar Asset Management Group Inc. , NSAM , 3 , 72198 HCA Holdings Inc. , HCA , 3 , 65991 Wells Fargo & Company , WFC , 2 , 25860212 [/table]RSS Import: Original Source
