Is your favorite stock on the VIP list? The Goldman Sachs Global Investment Research Hedge Fund VIP List, that is.
The VIP list, which contains the 50 stocks that appear most often among the top 10 holdings of fundamentally-driven hedge funds, returned 26% for all of 2017, topping the S&P' 500's 22% return during the same period, Goldman analysts said in a note detailing fourth quarter and year-end performance.
Rising Treasury bond yields and tax reform impacts in the fourth quarter weighed on the technology sector, usually a favorite of hedge funds. Funds trimmed their overweight tech positions, but the sector remains the largest net portfolio weight at 24% and the bulk of Goldman's VIP list at 38%, analysts said.
Financials remain the largest net underweight for hedge funds, down 445 basis points. Portfolio turnover in the sector hovered near record lows in the end of 2017, Goldman said.
Though hedge funds lifted the net sector tilt in healthcare to the largest overweight position since 2010, technology and consumer discretionary sectors represent the largest weights in the VIP list at 38% and 28%, respectively.
But Goldman noted that the top five constituents in its VIP list are all technology, media or telecommunications firms - Amazon.com Inc. (AMZN - Get Report) , Facebook Inc. (FB - Get Report) , Time Warner Inc. (TWX) , Alphabet Inc. (GOOGL - Get Report) and Microsoft Corp. (MSFT - Get Report) . Rounding out the top ten were Bank of America Corp. (BAC - Get Report) , NXP Semiconductors (NXPI - Get Report) , Alibaba Group Holdings (BABA - Get Report) , Visa Inc. (V - Get Report) and Comcast Corp. (CMCSA - Get Report) .
There were 13 new constituents in the VIP list for the fourth quarter, Goldman said. New additions were Aetna, Allergan, Activision Blizzard Inc. (ATVI - Get Report) , Boeing Co. (BA - Get Report) , Rockwell Collins Inc. (COL) , Caesars Entertainment Corp. (CZR - Get Report) , JD.com Inc. (JD - Get Report) , Liberty Sirius XM Group (LSXMK - Get Report) , Mastercard Inc. (MA - Get Report) , ServiceNow Inc. (NOW - Get Report) , Priceline Group Inc. (PCLN) , Qualcomm Inc. (QCOM - Get Report) and Zayo Group Holdings Inc. (ZAYO - Get Report) .
Hedge fund crowding around the most popular positions remains elevated, Goldman said, but below the extremes that occurred in 2016. The average fund holds 68% of its long portfolio in its top 10 positions, just below the record density of 69% in 2016.
And it seems the momentum from the end of 2017 has lasted to at least some degree moving into 2018: "Our Hedge Fund VIP list of the most popular long positions atypically outperformed during the drawdown," Goldman said, leading the S&P 500 by 170 basis points up 3.5% year-to-date compared to the index's 1.9% gains.
"The steady-handed approach - maintained during the correction - has fared well in early 2018, with our long/short momentum (+6%) and growth (+2%) factors and the tech sector (+6%) all outperforming YTD," Goldman wrote.
Amazon, Facebook, Alphabet, Microsoft, Comcast, Allergan and Activision Blizzard are holdings in Jim Cramer's Action Alerts PLUS Charitable Trust Portfolio . Want to be alerted before Jim Cramer buys or sells the stocks? Learn more now.