Goldman Sachs found eye-catching trends in its latest analysis of hedge funds.
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Hedge fund managers have posted one of their strongest performances in 20 years.
Well-timed bets on cyclical stocks, mega caps, and bitcoin boosted returns.
Here are 23 stocks that are highly popular among the hedge fund crowd.
Long-short investors have poured money into stocks, even as the post-election rally has stalled.
Hedge fund managers, who are having one of their best years in two decades, have increased their net exposure to stocks to the highest mark since early 2022 in recent weeks, according to Goldman Sachs. The firm's strategists, led by Ben Snider, recently published their quarterly analysis of close to 700 hedge funds that have a combined $3 trillion in equity positions.
Another strong year for US stocks has been friendly to long-short funds, which have logged a 14% annual gain through mid-November. If that performance holds, hedge funds will double the median 7% return en route to their second-best year since the recovery from the financial crisis.
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Those robust returns didn't come from diversification. In fact, hedge funds in Goldman's analysis had about 72% of their long assets in their 10 largest holdings — right near a record high. Many of these funds were into similar stocks, as position crowding slipped a bit but stayed elevated.
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Hedge funds seem relatively content with their holdings, as fund turnover has fallen throughout the year. Managers swapped 23% of their holdings in the third quarter and 12% of the positions that were in the largest quartile of their fund.
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Return-hungry hedge fund managers made big bets ahead of the US elections by boosting their net leverage, as is typical around such monumental events. Those who went long likely rode a major post-election surge, though that momentum has waned in recent sessions.
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Where the smart money is going
The consensus on Wall Street is that President-elect Donald Trump's economic agenda will be positive for business and, by extension, economic growth. In turn, cyclical stocks have taken off.
Hedge funds got out ahead of that move by shifting exposure to economically sensitive stocks and away from defensive names throughout the third quarter, which helped them capitalize on the latest market rally. Fund managers favored financials by the most since the financial crisis, while backing away from stocks in the consumer staples, healthcare, and real estate sectors.
Other prescient moves include betting on exchange-traded products tied to bitcoin, which has exploded over 40% higher in the last month, and Chinese stocks, which took off on the back of news about government stimulus but have since cooled off.
Mega-cap growth stocks remain popular among the big-money crowd. Hedge funds shifted toward Nvidia and Tesla as they raced higher, and they pulled back from Apple and Amazon.
However, hedge fund managers are starting to downsize, as Goldman Sachs found that they've moved toward mid-sized stocks at the expense of large caps.
23 stocks that big-money managers love
Hedge funds don't lack conviction, and for good reason, judging by this year's performance.
The most commonly owned stocks by big-money managers have risen roughly 30% in 2024, which is even better than the S&P 500's 24.5% return.
Investors can attempt to replicate that success by buying hedge fund managers' favorite stocks.
Goldman Sachs put together a so-called "Hedge Fund VIP" list made up of stocks that are most commonly in the top-10 holdings of hedge funds with between 10 and 200 positions. This basket of stocks has a strong historical track record, though it isn't sector-neutral, as technology is disproportionately represented while real estate was left off.
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Below are the 23 stocks that are top-10 positions of at least 15 hedge funds in the analysis. Along with each is its ticker, market capitalization, industry, the number of funds that own it, the number of funds where it's a top-10 position, and the average weighting among those funds where it's a top-10 holding.
