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Best Hedge Funds: First Quarter 2012

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

By Meena Krishnamsetty

NEW YORK ( Insider Monkey) -- Insider Monkey looks out for long/short equity hedge funds with the best stock-picking ability.

The reason is simple. We believe that we can imitate these hedge funds' performance without surrendering 2% of our savings and 20% of our returns the way these funds' investors do.

Imitating hedge funds does have some disadvantages. We get to see hedge funds' long positions once a quarter, and that's with a 45-day delay.

It is also true that they may not even be holding those shares by the time we are buying them.

However, we don't think that makes a huge difference in terms of performance. We follow hedge fund managers who hold on to stocks for long periods of time, so in some cases we even pay a lower price than what they initially paid.

We also don't have to invest in a hedge fund manager's 50th best idea. We can just pick the top stock picks of best hedge fund managers and maybe even beat these managers at their own game.

Here are the best hedge fund managers of the first quarter.

Each of these fund manager's long stock picks in the largest 1000 stocks had a value-weighted return of at least 30%. During the same period, the S&P 500 ETF (SPY) returned 12.7%.

  1. King Street Capital -- Brian Higgins: King Street is the best hedge fund in our database. Its six stock picks returned 41.7%. You can see King Street's (and other hedge funds') top picks by clicking on the funds' names.
  2. Fairholme -- Bruce Berkowitz: Bruce Berkowitz is showing investors (and John Paulson) that investing is a marathon. After last year's terrible performance, his 16 stock picks returned 38.2% during the first quarter.
  3. Cavalry Asset Management -- John Hurley: Cavalry Asset Management's 16 technology stock picks gained an average of 37.1% during the first quarter.
  4. ESL Investments -- Eddie Lampert: Lampert's top picks pulled back a little bit since we last compiled the list of best hedge funds. However, his eight large-cap stock picks returned 36.9% during the first quarter.
  5. Anchorage Advisors -- Kevin Michael Ulrich: Anchorage Advisors' eight large-cap picks returned 34.9%.
  6. Toscafund Asset Management -- Martin Hughes: Hughes' five large-cap picks gained 33.1%.
  7. Glenrock Global Partners -- Michael Katz: Katz's 13 large-cap picks returned 32.1%.
  8. Chou Associates Management -- Francis Chou: Chou managed to find 17 large-cap stocks that delivered a 31.9% return in the first three months of 2012.
  9. Algebris Investments: Eric Halet and Davide Serra's 14 large-cap stock picks gained 31.1% during the first quarter.
  10. Centerbridge Partners: Mark Gallogly's five large-cap stock picks returned 31.12%.
  11. Litespeed Management: Jamie Zimmerman's seven stock picks gained 31.06%.
  12. Round Table Investment Management: Ian Banwell's six stock picks returned 30%. Guess what Ian Banwell's top stock pick was (it wasn't Apple (AAPL)!).

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

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