The stocks that hedge funds “love most” is a mix of boring traditional automotive picks, such as General Motors Company (NYSE:GM) and Hertz Global Holdings, Inc. (NYSE:HTZ), to sizzling tech stocks such as Apple Inc. (NASDAQ:AAPL) and Google Inc (NASDAQ:GOOGL) (NASDAQ:GOOG), in competition to dominate “the Internet of things.”
Hedge funds performance
While hedge funds are often considered smart money, the largest US hedge funds poorly lagged general stock market indices. The hedge funds delivered at 1% year to date versus S&P 500’s 7% due to their heavy emphasis on consumer discretionary stocks, a MarketWatch report noted. The hedge funds also appear to like stocks with a US government risk backstop, as American International Group Inc (NYSE:AIG), which notoriously received a government bailout following the 2008 derivatives collapse, was the top holding. Citigroup, whose executives magically escape individual prosecution for their role in the 2008 derivatives collapse, was number 4 on the CNBC list. Having Jack Lew, a former Citigroup employee who had a major role in the derivatives implosion at the bank, now US Treasury Secretary, might not hurt the firm’s influence.
“Hedge funds consistently allocate the largest share of their assets to the [consumer discretionary] sector, where large stock return dispersion typically provides alpha opportunity for stock-pickers,” a Goldman Sachs report noted. “This year, however, return dispersion has been exceptionally low, with the last six months ranking in the bottom percentile since 1980.”
Allergan, Valeant, Apple among top 20 popular hedge funds holding
Among the 20 stocks with the biggest change in popularity among hedge funds found high profile activist target Allergan, Inc. (NYSE:AGN) at the top of the list. Meanwhile, while Valeant Pharmaceuticals Intl Inc (NYSE:VRX) (TSE:VRX), which teamed up with activist hedge fund Pershing Square and its high profile founder Bill Ackman, to take over Allergan, found it was the 13th stock with the most change in popularity. Micron Technololgy, who insiders say is benefiting from a market consolidation and has the ability to increase market prices, is 19th on the list of stocks that gained hedge fund popularity.
Who has recently fallen out of favor?
Amazon, Herbalife, General Motors among top 20 unpopular hedge funds holding
While it is on CNBC’s list of most loved hedge funds, it is second on the list of stocks with the largest change in negative popularity. Also on the list on unpopular hedge fund stock holdings is Amazon.com, Inc. (NASDAQ:AMZN), a company that is accused of not caring about investors and has had difficulty generating significant profits.
Herbalife Ltd. (NYSE:HLF), a target of Bill Ackman’s short interest and Carl Icahn’s love, is 16th on the list of negative popularity changes, while eBay, which Icahn apparently successfully persuaded to spin off PayPal, is 19th on the list of negative popularity.