Apple Inc. (NASDAQ:AAPL), Google Inc (NASDAQ:GOOG) and Microsoft Corporation (NASDAQ:MSFT) are the most commonly held stocks among hedge fund managers according to an international survey conducted by Novus Research Chief Research Officer Stan Altshuller and research associate Yuanjie Zhang, with more managers taking positions on Apple Inc. (NASDAQ:AAPL) and Microsoft – allowing Microsoft to displace American International Group Inc (NYSE:AIG) – and Google Inc (NASDAQ:GOOG) having fewer net positions than last year. Altshuller and Zhang estimate that 30% of all hedge funds own Apple stock.
Apple, Google popular with hedge funds by almost any measure
Raising the bar slightly, counting only positions that represent 5% or more of the manager’s portfolio shakes up the rankings slightly, ranking AIG as the most popular stock followed by Apple Inc. (NASDAQ:AAPL) and Google Inc (NASDAQ:GOOG), with Microsoft Corporation (NASDAQ:MSFT) falling to seventh place.
If you’d rather look at the total size of hedge fund positions instead of just the number of positions,Google Inc (NASDAQ:GOOG) and Apple Inc. (NASDAQ:AAPL) are still at the top of the list, coming in first and third respectively, with American International Group Inc (NYSE:AIG) coming in as the second largest total position among hedge funds and Microsoft landing in fourth place.
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While Facebook Inc (NASDAQ:FB) hasn’t become quite as popular as the other three tech powerhouses, Altshuller and Zhang rated it as one of the most important securities of the last quarter because so many hedge fund managers initiated new positions on the stock (while AIG saw a “mass exodus”). Another quarter or two like this and Facebook will be one of the most held stocks.
Total exposure to IT unchanged and relatively low
But all this popularity at the top end gives the wrong impression of what hedge fund managers are really up to. Compared to the S&P 1500, hedge funds have a lower exposure to both the IT sector and to megacaps, preferring consumer discretionary as a sector and small- or mid-cap companies to large- or megacap. But hedge fund performance in the IT sector is noticeably better than the S&P 1500 as a whole (and at least slightly better in every sector except materials), so the preference for big tech does seem to be paying off.
Altshuller and Zhang expect hedge fund interest in large- and mid-caps to increase because of “the limited opportunities in mega-caps and the difficulty of investing large amounts of capital in small-cap and micro-cap names.”