Goldman Sachs’ “Hedge Fund VIP List”—containing the 50 most popular stocks among hedge fund portfolios—has outperformed the broader market for the past 18 years. These are the “stocks that matter most,” says Goldman, as they are the stocks that appear most frequently among the top 10 holdings of hedge funds that have anywhere from 10 to 200 distinct equity positions.
The Hedge Fund VIP basket has beaten the market by an average 50 bps in every quarter since 2001. But after outperforming the S&P 500 by 450 bps in 2017, the basket has lagged by 325 bps since the start of 2018 and is up just 16% on the year compared to the S&P’s rise of 18%, as of August 19.
The list is a tool that investors can use to “follow the smart money,” wrote Goldman’s analysts in their most recent Hedge Fund Trend Monitor report, which analyzes a group of 835 distinct hedge funds. “By construction, the VIP list identifies the 50 stocks whose performance will largely influence the long side of many fundamentally driven hedge funds.”
Below are the top 10 stocks held by hedge funds according to Goldman’s VIP rankings:
Despite facing an antitrust investigation by regulators, Amazon continues to outperform, up more than 20% on the year. The online retail platform that has disrupted numerous industries recently opened a new campus in India after scrapping plans to build a major outpost in New York amid opposition from local leaders. Of the hedge funds on Goldman’s VIP list, 136 hold stock in Amazon and 95 funds hold it as one of their top 10 holdings.
Facebook, up nearly 39% on the year, has also become subject to antitrust scrutiny from regulators, adding to its troubles over past data leaks and fake news. Whether or not the social-media giant is merely attracting more regulatory attention or not by entering into the digital currency space with its proposed Libra currency is yet to be determined. But hedge funds like the company’s prospects with 140 funds holding its stock and 71 of those holding it as one of their top 10 holdings.
Microsoft has made a bit of a comeback in recent years and has retaken the title of most-valuable-listed company at a $1 trillion market capitalization. Much of that comeback has been the company’s commitment to building Azure, its cloud-computing division. Shares of Microsoft are up more than 35% on the year and are held by 128 of hedge funds on the VIP list, 70 of which hold it as one of their top 10 holdings.
Alibaba, the Amazon.com of China, is showing no signs of slowing down even amidst the current trade war between the U.S. and China. The company continues to beat earnings and revenue estimates despite China’s economic slowdown. The 97 hedge funds that hold Alibaba shares, and especially the 54 that hold them as one of their top 10, are receiving a nice boost as those shares have climbed more than 25% since the start of the year.
Another one of the tech giants facing antitrust investigations, Alphabet has seen its shares gain 14% this year. Google, Alphabet’s star subsidiary and the world’s leading search engine, holds approximately 38% of total U.S. digital advertising revenue, which is more than that held by Facebook and Amazon combined. The company’s shares are held by 93 of the funds on Goldman’s VIP list and 46 of those funds hold it as one of their top 10 holdings.
Biotechnology company Celgene is enjoying a streak of good news as its shares have risen nearly 50% so far this year. A number of its drugs have gained approval from the U.S. Food and Drug Administration (FDA) this year, and it hopes to win approvals on others later this year. A total of 66 hedge funds in the VIP basket hold Celgene’s stock and 44 of those hold it as one of their top 10.
Walt Disney, despite having a messy earnings report for the latest quarter, is up 24% on the year. Analysts are excited about the future prospects for Disney, especially its upcoming launch of the Disney+ streaming service as well as other upcoming milestones in its more traditional TV, movies, and theme park businesses. Shares of the entertainment company are held by 82 of the hedge funds on Goldman’s list with 41 of those funds holding those shares among the top 10 of their holdings.
Shares Netflix tanked after reporting second quarter results back in July that showed a loss of more than 100,000 subscribers in the U.S. compared to expectations of a gain of more than 300,000. In an attempt to hold onto customers, the video-streaming company recently announced that it would be launching a new feature allowing users to track recent and upcoming releases. The company’s stock, which is up about 11% on the year, are held by 86 hedge funds in the VIP basket, 39 of which hold it as one of their top 10 holdings.
Shares of Visa are up nearly 37% on the year as the payment services company doubles down on fintech. The company has announced a number of fintech acquisitions this year, including with Verifi and Payworks, and has also entered into fintech partnerships with Go-Jek, Paymate, and Setoo. A total of 80 hedge funds in Goldman’s list hold Visa’s stock and 36 hold it as one of their top 10 holdings.
Mastercard has seen its shares climb nearly 49% this year and is expected, along with rival Visa, to benefit from new European payments regulations set to come into effect next month. Mastercard has made new acquisitions, like Vocalink, that will benefit from the PSD2 regulatory change. A total of 65 hedge funds in the Hedge Fund VIP basket hold shares of the payment service company, and 33 funds hold its shares as one of their top 10holdings.