Groupthink can be a dangerous thing but when it comes to stocks it can be market beating. Goldman Sachs keeps track of the favourite stocks of a combined 1,386 hedge funds and mutual funds, which manage a combined $5.9 trillion.
Since 2013 these “shared favourites” have outperformed the S&P 500. Here’s a list of the top nine current favourites with some commentary and facts and figures from a Goldman Sachs report.
With excerpts from a report by Brian Sozzi, Anchor, Editor-at-Large, Yahoo Finance
Top nine stock holdings of hedge funds and mutual funds:
- Adobe (ADBE)
- Fiserv (FISV)
- General Motors (GM)
- Liberty Broadband (LBRDK)
- Mastercard (MA)
- Square (SQ)
- Twilio (TWLO)
- Visa (V)
- Wells Fargo (WFC)
Goldman notes these nine stocks trade at a stiff 63% valuation premium to the S&P 500.
The robust relative premiums on these mostly growth stocks likely explains why their performance has been subpar in a market that has tilted more toward value sectors for a good portion of 2021.
These nine “shared favourites” have lagged the S&P 500 by 14 percentage points this year (6% gain vs. 20% appreciation).
Since 2013, an equal-weighted list of shared favourites has generated an annualized return of 20% (vs. 16% for S&P 500) and outpaced the S&P 500 in 62% of months, according to Goldman.
Mutual fund cash allocation as a percent of assets under management sits at a record low of 1.6%, compared to a historical average of 2.5%.
Meanwhile, leverage — or using debt to boost returns on investment — for hedge funds remains elevated to history, said Goldman.
“The dominant feature of the landscape today in investing is that it has never been more punitive to hold cash,” said David Hunt of PGIM, which manages more than $1.5 trillion in assets.