Apple Inc. (NASDAQ:AAPL) is the most popular stock owned by hedge funds, regardless of the size of the position during the fourth quarter of 2012, according to a report released by analysts at Bank of America Merrill Lynch (BAML).
American International Group (NYSE:AIG) and Google Inc (NASDAQ:GOOG) ranked second and third, respectively. Based on the report, 231 hedge funds held the stock of the iPhone maker, 216 hedge funds owned the shares of the insurance giant while 202 hedge funds held the insurance giant during the period.
BAML’s conclusion is slightly different from Goldman Sachs’ report on top hedge fund holdings, as well as Citigroup’s. The reason for the discrepancy is that all three firms use slightly different methodologies. The conclusion is still similar with all three research firms noting that AIG, Google Inc (NASDAQ:GOOG) and Apple Inc. (NASDAQ:AAPL) are the top three most popular hedge fund stocks.
According to BAML, hedge funds concentrated their investments on technology, discretionary, and health care sectors in the fourth quarter. In the technology sector, the investment management firms favored internet software & services, IT services and software, and aggressively sold computers and peripherals. The report cited that the major stock positions of hedge funds in terms of $US include Google Inc (NASDAQ:GOOG), Visa Inc (NYSE:V), Equinix Inc (NASDAQ:EQIX), Qualcomm Inc (NASDAQ:QCOM), and Yahoo! Inc. (NASDAQ:YHOO).
Among the stock favored by hedge funds in consumer discretionary include News Corp (NASDAQ:NWSA), Starz (NASDAQ:STRZA), Priceline.com Inc (NASDAQ:PCLN), Delphi Automotive Plc (NYSE:DLPH), and Dollar General Corp (NYSE:DG).
In the health care sectors, hedge funds sold positions in biotech and acquired shares in health care equipment. The primary stocks held include Express Scripts Holding Company (NASDAQ:ESRX), Pfizer Inc (NYSE:PFE), Humana Inc (NYSE:HUM), HCA Holdings Inc (NYSE:HCA), and Cigna Corporation (NYSE:CI).
However, looking at the top 150 hedge funds the data is slightly different according to BAML. American International Group (NYSE:AIG) is the number one stock held by the 150 largest hedge funds based on number of shares, Google Inc (NASDAG:GOOG) ranked second, Citigroup Inc. (NYSE:C) ranked third, Apple Inc. (NASDAQ:AAPL) ranked fourth, and News Corp (NASDAQ:NWSA) ranked fifth.
BAML analysts noted, “Hedge funds tend to have certain core holdings whose primary performance can have a strong impact on returns. We find that for a typical hedge fund, the top 20 stock positions make up roughly 83.7% of their long equity portfolio.”
In addition, the analysts found out that the biggest hedge funds tend to have a more diversified portfolio and their top 20 largest stock positions make up about 69.4% of its portfolio.
Furthermore, they noted that hedge funds increased its net exposures by approximately 10% to $418 billion notional during the fourth, a new high since 2005. According to them, gross exposure remained at 150% while cash holdings declined by 4.6%.
Moreover, the analysts also cited that the Hedge Fund Generals increased by 0.51% in the 4Q and up by 10.9% in 2012. Since the March 2009 lows, Hedge Fund Generals gained 183.5%.