GM, Apple Matter Most to Hedge Funds

BOSTON (TheStreet) -- General Motors (GM) and Apple (AAPL) were among the top stocks that mattered most to hedge funds, appearing most frequently as top holdings.

According to Goldman Sachs' fourth-quarter Hedge Fund Trend Monitor, which dissects 699 hedge funds with $808 billion of long stock-specific and ETF equity assets, Apple ranks as the top "must-have" stock. While more than 100 hedge funds trimmed or sold out of positions in Apple during the fourth quarter, the stock was among the top 10 holdings for 79 funds as of Dec. 31, heading the so-called VIP list.
GM

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%). The VIP list has a return of 6.3% so far this year, outpacing the 5.8% increase on the S&P 500.

Large-cap stocks account for 47% of hedge funds' aggregate equity assets, with Ford ( F), Qualcomm ( QCOM) and Wal-Mart ( WMT) 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."

Commodities were also important to hedge funds in the quarter. Hedge funds owned about $23 billion of long positions in gold stocks and ETFs as of Dec. 31, according to Goldman's data. If investors are looking for fresh investment ideas, though, new entrants to the VIP list included energy and materials stocks such as Halliburton ( HAL), ConocoPhillips ( COP) and Potash of Saskatchewan ( POT).

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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10. CIT Group ( CIT)

Company Profile: CIT Group provides commercial financing and leasing products and other services to small- and middle-market businesses. Due to the financial crisis, CIT Group declared bankruptcy in November 2009 before quickly emerging a month later.

Number of Funds With Stock as Top 10 Holding: 25

Major Hedge Fund Investors: Institutions own more than 90% of CIT Group's outstanding shares, with hedge funds comprising 30% of that ownership. David Einhorn's GreenLight Capital reported ownership of 7.3 million shares of CIT Group as of Dec. 31, carrying a market value of $313.3 million. Other funds, including John Paulson's Paulson & Co., Blue Ridge Capital, Avenue Capital Group and Mason Capital Management, each owned more than 3.3 million shares of CIT Group at the end of the fourth quarter.


9. Alcon ( ACL)

Company Profile: Alcon develops and sells pharmaceuticals, surgical equipment and devices and consumer eye-care products to treat diseases and disorders of the eye.

Number of Funds With Stock as Top 10 Holding: 28

Major Hedge Fund Investors: Alcon was a top holding for Steven Cohen's SAC Capital Advisors and Paulson & Co., as the funds held 3.5 million and 2.5 million shares of Alcon, respectively. Overall, Alcon has a low level of institutional ownership at 20%, while public corporations own more than 77% of the company's outstanding shares. Other big hedge fund investors include York Capital Management and Pentwater Capital Management.

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8. LyondellBasell Industries ( LYB)

Company Profile: LyondellBasell is the world's third-largest chemical company, and a producer of polypropylene and polypropylene compounds, propylene oxide, polyethylene, ethylene and propylene. The Netherlands-based company emerged from bankruptcy in April 2010 and began listing on the New York Stock Exchange in October.

Number of Funds With Stock as Top 10 Holding: 29

Major Hedge Fund Investors: James Dinan's York Capital Management is the top hedge fund owner of LyondellBasell, with reported ownership of more than 6 million shares of the chemical company. Daniel Loeb's Third Point, Barry Rosenstein's Jana Partners and Phillip Gross' Adage Capital were also among the biggest hedge fund investors in LyondellBasell as of Dec. 31.


7. General Motors ( GM)

Company Profile: GM is the world's second-largest automaker, which emerged from Chapter 11 bankruptcy and completed the world's biggest initial public offering in November.

Number of Funds With Stock as Top 10 Holding: 35

Major Hedge Fund Investors: Several hedge funds jumped quickly on GM's IPO, including Bill Ackman's Pershing Square Capital Management, which snapped up more than 7.1 million shares of the automaker. Jana Partners, Alyeska Investment Group and Kingdon Capital Management were also big investors, buying more than 3 million shares each of GM. Appaloosa Management and Glenview Capital were also investors in GM during the fourth quarter.

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6. Pfizer ( PFE)

Company Profile: Pfizer makes medicines including Advil, Robitussin, Xanax, Zoloft, Lipitor and ChapStick.

Number of Funds With Stock as Top 10 Holding: 40

Major Hedge Fund Investors: Pfizer has attracted some of the biggest investors in the hedge fund world, including Einhorn, Paulson, Shumway, Tepper, and Ainslie, all of which own more than 14 million shares of the pharmaceutical company.


5. Google ( GOOG)

Company Profile: Google is the well known Internet search engine, and also offers advertising services and cloud computing.

Number of Funds With Stock as Top 10 Holding: 40

Major Hedge Fund Investors: Google's share price, which is hovering over $600, is prohibitive to individual investors. Indeed, the public accounts for less than 15% of Google's outstanding shares, while institutions own more than 64% of the Internet giant's outstanding shares. However, hedge fund managers only account for 4.5% of institutional ownership, compared to 86% for traditional money managers. Among the biggest hedge fund owners of Google, Citadel Investment Group owns nearly 705,000 shares of Google, a position that carried a market value of $430 million as of Dec. 31. Adage Capital, Maverick Capital, and Renaissance Technologies were other major owners of Google.

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4. JPMorgan Chase ( JPM)

Company Profile: JPMorgan Chase is a global financial-services company that provides investment and retail banking in the U.S. with operations worldwide.

Number of Funds With Stock as Top 10 Holding: 47

Major Hedge Fund Investors: U.K.-based Lansdowne Partners, which bet against Northern Rock during the financial crisis, is the largest hedge fund owner of JPMorgan, as its stake of 27.6 million shares of the bank carried a market value of $1.2 billion as of Dec. 31. Other major hedge fund investors include Highfields Capital Management, Maverick Capital, Blue Ridge Capital, Eton Park Capital and Lone Pine Capital, which each own more than 8 million shares of JPMorgan as of the end of the fourth quarter.


3. Microsoft ( MSFT)

Company Profile: Microsoft is best known for its flagship Windows operating systems, as well as other software applications and consumer products, like the Xbox 360 video-game console.

Number of Funds With Stock as Top 10 Holding: 48

Major Hedge Fund Investors: Adage Capital is the largest hedge fund owner of Microsoft, with a holding of 10.6 million shares worth $283 million as of Dec. 31. Shumway, Einhorn, Tepper, and D.E. Shaw are other big hedge fund owners, each holding more than 6 million shares of Microsoft.

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2. Citigroup ( C)

Company Profile: Citigroup is the well-known financial-services company, with a broad range of financial products and services, including consumer banking and credit cards.

Number of Funds With Stock as Top 10 Holding: 49

Major Hedge Fund Investors: Citigroup found much love from hedge funds during the fourth quarter, the largest being John Paulson. Paulson & Co. owned more than 413 million shares of Citigroup at the end of the fourth quarter, worth nearly $2 billion. Andreas Halvorsen's Viking Global was the next largest hedge fund holder of Citigroup, owning more than 150 million shares. Ackman, Shumway, Tepper and Ainslie were other heavyweight hedge fund investors in Citigroup, each owning more than 78 million shares.


1. Apple ( AAPL)

Company Profile: Apple makes personal computers, mobile communication devices, and portable digital music and video players. The company is best known for its Mac line of computers, the iPod, iPhone and iPad devices, and iOS operating system.

Number of Funds With Stock as Top 10 Holding: 79

Major Hedge Fund Investors: Apple, the darling of fast-growth stocks, attracts some of the biggest names in the hedge fund world. SAC Capital, Einhorn's GreenLight Capital, Ainslie's Maverick Capital, Robert Citrone's Discovery Capital, Chris Shumway, Phillip Gross' Adage Capital, George Soros' Soros Fund Management and Chase Coleman's Tiger Global were among the top 25 hedge fund holders of Apple. However, Citadel Investment Group was the biggest of them all, owning nearly 3.3 million shares of Apple with a value of $1.1 billion as of Dec. 31.

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-- Written by Robert Holmes in Boston.

>To see these stocks in action, visit the 10 Stocks That Matter Most to Hedge Funds portfolio on Stockpickr.

>To contact the writer of this article, click here: Robert Holmes.

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Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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