What are we looking for?
The stocks that U.S. hedge funds love the most – and those that they are betting the most against. To be clear, following the latest picks that most of these funds must reveal in 13F filings every quarter isn’t always a winning strategy. Consider this humbling fact: The average fund returned just 8 per cent last year, when the S&P 500 gained 13 per cent – or 16 per cent when including dividends.
Investors also only get word of the buying and selling activity several weeks after the transactions occur, and in some cases the best time to place an order may have passed. Still, it’s interesting to see what these big minds in finance are doing with their cash, and using a follow-the-hedge-funds strategy has produced winning periods in the past.
More on our screen
The two lists come from a recent Goldman Sachs report that looked at the stocks that most frequently were among the 10 largest holdings of hedge funds – as well as the companies that represented the largest short positions. Hedge funds frequently employ shorting strategies to make money off a stock when its value goes down.
Goldman tracked 725 hedge funds that had $1.3-trillion (U.S.) of gross equity positions, and the findings were based on data available as of Dec. 31. The Goldman report notes that hedge fund net long exposure rose to 52 per cent in the fourth quarter of last year, the highest in six years. In other words, they’re a bullish bunch.
What we found
Apple lost the crown as the most favoured stock, supplanted by American International Group. That was the right call: Since Oct. 1, 2012, insurer AIG has gained about 15 per cent. Apple – now the third most widely held stock among funds – has plummeted 32 per cent.
Among these U.S. giants is a familiar Canadian name. Nexen was the fifth-biggest hedge fund long position, with 37 funds holding the stock as a top 10 holding. Prior to the fourth quarter, Nexen wasn’t anywhere close to being a top holding.
Chinese state-owned firm CNOOC Ltd. completed its $15.1-billion takeover of Nexen this week after the deal set off a storm of controversy late last year. The stock traded well below the offering price of $27.50 (U.S.) per share – sometimes by more than 15 per cent – until Ottawa approved the deal on Dec. 7. Even after the federal government gave its green light, the oil producer still traded a little shy of the offering price, as the deal wasn’t completely assured until U.S. regulators gave it the nod on Feb. 12.
While many Canadian retail investors were nervous about placing a bet on whether Nexen would fall into Chinese hands, the hedge fund community displayed remarkable confidence.
Hedge fund holdings: the long and short of it
|Largest hedge fund positions|
|Company||Ticker||Equity cap. ($ bil)||No. of funds with stock as top 10 hldg. (Dec. 31)|
|American Int'l Group||AIG-N||$58||80|
|General Motors Co.||GM-N||43||29|
Source: Goldman Sachs Global ESC Research, FactSet, IDC
|Largest hedge fund positions|
|Company||Ticker||Equity cap. ($ bil)||No. of funds with stock as top 10 hldg. (Dec. 31)||Avg. port. wght. when stock among top 10 hldgs||% of equity cap owned by hedge funds (Dec. 31)||total return YTD|
|American Int'l Group||AIG-N||$58||80||8%||21%||11%|
|General Motors Co.||GM-N||43||29||6||6||-4|
|Stocks with biggest hedge fund short positions|
|Company||Ticker||Equity cap ($ bil)||Total rtn YTD||Short interest as a % of float cap Jan. 31||Value of short interest ($ bil) Jan. 31||% of equity cap owned by hedge funds Dec. 31|
|Exxon Mobil Corp.||XOM-N||$404||3||1||2.9||1|
- American International Group Inc$63.57-0.11(-0.17%)
- Alphabet Inc$749.99-0.27(-0.04%)
- Apple Inc$119.24+1.43(+1.21%)
- Citigroup Inc$54.13-0.08(-0.15%)
- JPMorgan Chase and Co$67.12-0.05(-0.08%)
- Priceline Group Inc$1.26K+15.62(+1.25%)
- Microsoft Corp$54.34+0.41(+0.75%)
- General Motors Co$36.56+0.19(+0.52%)
- Qualcomm Inc$48.71+0.17(+0.35%)
- Intel Corp$34.57+0.11(+0.31%)
- Exxon Mobil Corp$82.15+0.92(+1.13%)
- International Business Machines Corp$139.35+0.89(+0.64%)
- AT&T Inc$33.47-0.10(-0.30%)
- Gilead Sciences Inc$106.44-1.56(-1.44%)
- Chevron Corp$91.28+0.91(+1.01%)
- Walt Disney Co$113.79-1.35(-1.17%)
- Verizon Communications Inc$45.06-0.17(-0.38%)
- Caterpillar Inc$72.13+0.91(+1.28%)
- Amgen Inc$161.60-1.92(-1.17%)
- Updated November 30 10:29 AM EST. Delayed by at least 15 minutes.