GOLDMAN SACHS: The stars have aligned for an elite group of stocks known for their super-charged returns. Here's how you can get involved before it's too late.
- It can be highly valuable to know what the most popular stocks are for both hedge funds and mutual funds. But knowing which companies are favored by both can be even more beneficial.
- Goldman Sachs has done the dirty work and figured out which 13 companies are loved by both hedge funds and their mutual fund counterparts.
- The so-called shared favorites group has handily outperformed hedge fund favorites, top mutual fund picks, and the S&P 500 on an average annualized basis since 2013.
When it comes to picking stocks, it can be valuable for an investor to know which companies are the most popular with hedge funds. The same goes for knowing where mutual funds are putting their money.
But Goldman Sachs has done it one better. The firm has looked at both universes and identified the companies that currently find themselves in the good graces of both parties.
There are 13 such stocks, which is the most since the first quarter of 2017, according to Goldman data. Looking closer, there were nine companies held over from the previous period, while four made their debuts on the so-called shared favorites list.
So what's the big deal? For starters, this cross-section of companies has generated outsized gains throughout history. Since 2013, the shared favorites consortium has seen an annualized return of 19%, easily outpacing hedge fund favorites (+15%), their mutual fund counterparts (+14%), and the S&P 500 (+14%).
There's also the matter of what greater-than-normal overlap says about the market. Since hedge funds are normally equated to "smart money," and more retail-driven mutual fund flows are referred to as "dumb money," the fact that they're both so invested in the same stocks implies a high degree of conviction.
Further, knowing what stocks are in this group can also be valuable on a contrarian basis. That's true to the degree that crowded positions end up working against investors - something that risks happening during sharp downturns.
No matter how you slice it, or end up applying the knowledge overall, there's no denying that knowing which stocks fall in the shared favorites group is valuable.
For investors looking to replicate the strategy - or even short it - there's unfortunately no handy exchange-traded fund or index ready-made for investment. But we've done the next best thing and secured the list of shared favorites, which you'll see are largely concentrated in the information tech and communication sectors.
The stocks are as follows:
