American International Group, Inc. (AIG) is Hedge Funds’ New No. 1

At Insider Monkey, we track more than 450 hedge funds, from Warren Buffett to David Einhorn. We’ve found that retail investors can be rewarded by following the smart money, and our Billionaire Hedge Fund Index—the result of a collaboration with MarketWatch— returned 24.3% last year, beating the S&P 500 ETF by 8 percentage points (see the details of our market-beating strategy).

Four times a year, we rank hedge funds’ top consensus picks, and Apple Inc. (NASDAQ:AAPL) has been the most popular stock among hedge funds for a very long time. Times changed and the balance of power has shifted. Latest filings show that hedge funds are dumping their top tech picks in favor of financials, particularly those trading at steep discounts to book.

Still, it’s a mild surprise to see who’s the new No. 1.

AIGWith 142 hedge funds holding long positions in the latest round of 13F filings from the SEC, American International Group, Inc. (NYSE:AIG) takes this crown, and the back half of 2012 was truly a comeback story. Hedgies’ interest in the insurer spiked by 80% in Q3 and after 21 of the funds we track bought shares in Q4, 142 are now bullish on AIG.

Apple, meanwhile, has lost its proverbial “reign” to the leaner, meaner, post-bailout AIG, and a selloff of more than 20% last quarter explains why this may be the case. Despite Cupertino’s mountain of cash and bargain-bin valuation, top-tier hedge fund managers like Dan Loeb and Stephen Mandel were cutting Apple entirely in Q4. As of the latest data, 132 of the funds we track are still long Apple, but 26 dumped the stock last quarter.

Google Inc (NASDAQ:GOOG) sits at No. 3 on this list, despite the fact that 17 hedge funds sold off the tech giant in Q4. A total of 126 of the funds we track now hold Google in their portfolios, and shares have rewarded these bulls in 2013 thus far, returning 11.6%.

Citigroup (NYSE:C) is a great microcosm of hedge funds’ penchant for financials this past quarter, as George Soros, for example, has made the bank his new top stock pick. Aggregately speaking, five of the money managers we track bought Citigroup in Q4, and like Google, it’s already popped by double-digits year-to-date.

General Motors Company (NYSE:GM) is now held by 98 of the hedge funds we track, and the automaker rounds out our top five. This bullish activity is an extension of what we observed in Q3, when aggregate interest increased by 13%.

Three funds bought GM last quarter, and it appears that this interest came at the expense of Microsoft Corporation (NASDAQ:MSFT). A whopping 13 of our hedgies dropped the tech company last quarter, and the stock now sits one spot outside of the smart money’s “fab five.”

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