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.
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.