Favorite Mutual Fund Stock Holdings Q2 2014


Goldman Sachs Portfolio Equity Research published an investment report on Friday highlighting the most- and least-owned stocks in 485 large-cap core, growth and value mutual funds. Goldman Sachs also introduced two new stock baskets: favored mutual fund positions and out-of-favor mutual fund positions . GS analysts Amanda Schneider and colleagues note that: “GSTHMFOW and GSTHMFUW spotlight stocks that mutual fund managers expect to outperform/underperform.”


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Comparing favored and out-of-favor baskets

The GS report notes that the average market cap is $69 billion for favored basket constituents and $129 billion for the average out-of-favor constituents (relative to $21 billion for the average Russell 1000 stock). Also of interest, just three of the 50 members of the favored basket are not S&P 500 constituents [Las Vegas Sands Corp. (NYSE:LVS), VMware, Inc. (NYSE:VMW) and LinkedIn Corp (NYSE:LNKD)], and all 50 constituents of the out-of-favor basket are part of the S&P 500 (INDEXSP:.INX) index.

Mutual Fund Stock Holdings

The most-owned sectors in the mutual fund favorites basket include Financials (24%), Consumer Discretionary (18%) and Info Tech (18%). The most-owned sectors in the out-of-favor basket were Financials (24%), Consumer Staples (18%) and Industrials (12%).

Mutual Fund Stock Holdings

In terms of financials, the average stock in the overweight basket trades at a small premium to the average stock in the out-of-favor basket (forward P/E of 18.3x vs. 18.0x). However, the favorite stock basket has a higher beta relative to the S&P 500 (1.1 vs. 0.8), but less than half the dividend yield (1.3% vs. 3.0%).

Mutual Fund Stock Holdings

Schneider et al also note that the price performance of the mutual fund favorite basket lagged the underweight basket year-to-date. Of particular interest, the analyst consensus expected return for the favored stocks is almost three times the expected return of the out-of-favor stocks (10.5% vs. 3.6%). The average GSTHMFOW stock is also projected to show greater 2015 EPS and sales growth than the average GSTHMFUW stock and the S&P 500.

Comparing Goldman’s hedge fund and mutual fund baskets

Mutual Fund Stock Holdings

In a comparison of Goldman Sachs hedge fund ad mutual fund baskets, the positions in both mutual fund baskets share 7 of 50 (14%) constituents with the Hedge Fund VIP list <GSTHHVIP>. Our mutual fund favorites basket also shares 8 of 50 (16%) members with our Hedge Fund Very Important Short Positions basket <GSTHVISP>. The largest overlap is between the Hedge Fund Very Important Short Positions basket and our mutual fund out-of-favor basket where 20 of 50 stocks (40%) in the two baskets overlap.