By Senad Karaahmetovic
Microsoft (NASDAQ:MSFT) is the most frequent top 10 holding among hedge funds, according to Goldman Sachs strategists. This way, Microsoft replaced Amazon (NASDAQ:AMZN) at the top of the list.
Alphabet (NASDAQ:GOOGL) comes in third while Uber (NYSE:UBER) and Netflix (NASDAQ:NFLX) entered the top five for the first time. On the other hand, Meta Platforms (NASDAQ:META) fell out of the top 5 for the first time since 2014.
Goldman’s “VIP” basket of 50 stocks that appear most often among the top 10 holdings of fundamental hedge funds has outperformed the S&P 500 in 58% of quarters since 2001.
Despite lower-than-expected returns from most popular positions, hedge funds “fared well” recently, according to Goldman strategists. They also remain “convicted” in their favorite stocks despite Goldman’s VIP basket dropping by 29% year-to-date.
“Hedge fund exposure to Growth vs. Value returned to its 20-year average. Net leverage remained at low levels, with funds using ETFs and futures to manage their exposures to a macro-driven market characterized by elevated correlations. Single stock short interest remains close to the record lows reached in 2000 and last year.”
The average hedge fund holds 71% of its long portfolio in the top 10 positions, which is a 4-year high. At a sector level, Tech and Communication Services continue to account for almost half of the VIP list and as many as 8 out of the top 10 stocks.
“While funds paused their shift away from China ADRs during 3Q, BABA is still the only representative in the VIP list,” the strategists added.
Overall, the average hedge fund has returned -5% YTD.