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.
NEW YORK (
Insider Monkey) -- We are do-it-yourself investors.
Our favorite
hedge funds have outstanding long stock picks because we like to imitate these hedge fund managers and don't want to pay the customary flat fee of 2% of total asset value and an additional 20% of any profits earned.
Most hedge fund managers have more skill in picking long positions than shorting stocks, so we don't really miss out much by not handing over our hard-earned dollars to super-rich hedge fund managers.
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| Bruce Berkowitz |
We track 375 hedge funds and prominent investors. Based on their long stock picks in their 13F disclosures, we calculated the equal-weighted average return of each hedge fund since the beginning of the year. We limited our universe to 1,000 stocks and required that each hedge fund had at least 5 picks. Here are the best hedge funds in 2012:
1.
Eddie Lampert : Eddie Lampert's eight stock picks returned an average of 44.1%. This is amazing. Lampert's most successful stock pick was
Sears (
SHLD).
He not only bought these shares for his fund but he also bought them for his own account as an insider of the company. Lampert paid less than $30 per share for nearly 5 million shares of Sears in early January. Is this illegal insider trading? We don't think it is. This is a great example of profitable insider trading. Lampert knows his company better than all the outsiders who were writing Sears off in January. The stock closed above $75 on Friday. Lampert personally made more than 150% from his $150 million insider purchases.
Lampert's other long positions in his portfolio were also very profitable.
Seagate (
STX) returned 67%,
Genworth Financial (
GNW) gained 37%, and
Gap (
GPS) returned 32%. Seven out of eight Lampert stocks managed to beat the market.
2.
Bruce Berkowitz: Bruce Berkowitz is a contrarian investor with a lot of conviction. His bets paid off this year. Berkowitz's 16 stock picks had an equal-weighted average return of 36%. He has more than $500 million invested in Sears, too. He is also the most bullish fund manager about
Bank of America (
BAC), which returned 46% this year as of last Friday.
3.
Michael Katz of Glenrock Global Partners: Michael Katz is a relatively unknown hedge fund manager. Katz's Glenrock Global Partners returned 9.6% since 2000 and managed to beat its benchmark, MSCI World Index, by 9.4 percentage points annually.
