Goldman Sachs recently published its analysis of hedge fund and mutual fund positions, noting that equity exposure is still low but has rebounded.
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Goldman looked at 758 hedge funds with $2.3T of gross equity positions and 543 mutual funds with $2.4T in assets under management at the start of 2023.
“Hedge funds and mutual funds generally agree on sectors and factors, with Financials (XLF) and Energy (XLE) two notable exceptions; hedge funds are underweight while mutual funds are overweight,” strategist David Kostin wrote in a note.
Looking at favored stocks, ten names overlap with longs in Goldman’s Hedge Fund Very Important Positions basket and its Mutual Fund Overweight basket.
“Five of the 10 shared favorites are Info Tech (XLK) stocks and the median favorite trades at a 20% NTM P/E premium to the S&P 500 (NYSEARCA:SPY) (VOO) (IVV) median (19x vs. 16x),” Kostin said. “Shared favorites have outperformed the S&P 500 (SP500) by 1 pp YTD (6% vs. 5%) following record underperformance in 2021 and 2022.”
“The group typically struggles during periods of market stress but has a strong track record of outperformance at the expense of higher volatility.”
The stocks are:
- Fiserv (FISV), 18 hedge funds have it as a top 10 holding, mutual funds are overweight by 14 basis points
- Schwab (SCHW), 13 funds, 17 bps
- Workday (WDAY), 15 funds, 10 bps
- Humana (HUM), 11 funds, 11 bps
- Uber (UBER), 35 funds, 14 bps
- Wells Fargo (WFC), 11 funds, 22 bps
- Mastercard (MA), 28 funds, 32 bps
- UnitedHealth (UNH), 12 funds, 13 bps
- ServiceNow (NOW), 12 funds, 9 bps
- Visa (V), 36 funds, 27 bps
Among the out of favor, there are 28 stocks that hit both the Hedge Funds Very Important Short Positions basket and the Mutual Fund Underweight basket.
- AbbVie (ABBV), short interest as percentage of float cap 1%, mutual funds are underweight 28 bps
- Caterpillar (CAT), 2%, 18 bps
- Ford (F), 3%, 9 bps
- Illinois Tool Works (ITW), 2%, 11 bps
- 3M (MMM), 2%, 9 bps
- PepsiCo (PEP), 1%, 26 bps
- Tesla (TSLA), 3%, 66 bps
- Amgen (AMGN), 1%, 9 bps
- Costco (COST), 1%, 16 bps
- Home Depot (HD), 1%, 28 bps
- Coca-Cola (KO), 1%, 34 bps
- Merck (MRK), 1%, 10 bps
- Pfizer (PFE), 1%, 31 bps
- Verizon (VZ), 1%, 11 bps
- Broadcom (AVGO), 1%, 23 bps
- Chevron (CVX), 1%, 37 bps
- IBM (IBM), 3%, 15 bps
- Linde (LIN), 1%, 19 bps
- Moderna (MRNA), 4%, 12 bps
- Procter & Gamble (PG), 1%, 57 bps
- Walmart (WMT), 1%, 24 bps
- Boeing (BA), 2%, 9 bps
- Disney (DIS), 1%, 14 bps
- Intel (INTC), 2%, 16 bps
- Eli Lilly (LLY), 1%, 18 bps
- NextEra Energy (NEE), 1%, 15 bps
- AT&T (T), 1%, 18 bps
- Exxon Mobil (XOM), 1%, 34 bps
Looking at crossover stocks, there are two that are shorted by hedge funds but where mutual funds are overweight: Bank of America (BAC) and Comcast (CMCSA).
Megacaps dominate the seven stocks are favored by hedge funds, but mutual funds are underweight: Apple (AAPL), Amazon (AMZN), Meta (META), Microsoft (MSFT), Alphabet (GOOGL), Nvidia (NVDA) and Berkshire Hathaway (BRK.B).
Hedge funds are off to a strong start to the year, according to UBS.
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