According to Goldman Sachs' first-quarter Hedge Fund Trend Monitor, which dissects 700 hedge funds with $1.25 trillion in equity assets, Apple ranks as the No. 1 "must-have" stock. While billionaire George Soros dumped nearly 100,000 shares of Apple in the first quarter, the company was among the top 10 positions at 63 hedge funds as of March 31, heading the so-called VIP list.
Goldman, which limits the hedge fund universe to funds with 10 to 200 distinct equity positions, says the hedge fund VIP list offers an easy vehicle for investors seeking to "follow the smart money" based on 13-F filings. According to the data, this basket of 50 stocks most important to hedge funds outperformed the S&P 500 in 2009 (40% to 27%) and 2010 (19% to 15%) after falling behind the broader index by nearly 1,300 basis points in 2008. The VIP list has returned 4.8% so far this year, trailing the 5.8% increase on the S&P 500.
Large-cap stocks account for 47% of hedge funds' aggregate equity assets, with Ford (F), Intel (INTC) and Exxon Mobil (XOM) making the cut. The typical hedge fund allocates 35% of its assets to large-cap stocks, Goldman analysts write, and the difference between the average and the aggregate "suggests that hedge funds with the largest assets under management target large-cap stocks."While Goldman's previous note on fourth-quarter trends in hedge funds focused largely on commodities, analysts noted that in the first quarter, hedge fund managers used exchange traded funds, or ETFs, more for hedging purposes. Goldman analysts say hedge funds used ETFs more for hedging their bets than as directional vehicles. Analysts estimate that 18% of hedge funds' short positions are via ETFs. The $100 billion of short ETF positions accounts for 80% of the hedge fund gross ETF exposure, Goldman analysts write. Perhaps most shocking is that Goldman analysts say ETFs account for 4% of the U.S. stock market, more than the roughly 3% of the U.S. equity market owned by hedge funds. For context, U.S. households directly own 33% of the domestic equity market and indirectly own another 21% of the stock market via mutual funds, according to Goldman. The VIP list generated by Goldman Sachs based off hedge funds' filings, though, is of the most interest to retail investors. In the most recent quarter, several companies were new entries to the 50-stock VIP list, including BP (BP), Priceline.com (PCLN), Netflix (NFLX) and Mastercard (MA). The following pages detail the 10 stocks that represent the most important positions for hedge funds, according to Goldman's data, and are ranked by the number of funds that count each stock as a top 10 holding.
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