How Hedge Funds’ Favorite Stocks Are Performing This Year?

The US stock market has extended its bull run this year, with the S&P 500 having gained over 6% so far amid signs of stable economic growth and weak oil prices. The Fed has postponed increasing the interest rate several times due to concerns over the global macroeconomic outlook at several big events, such as the Brexit, but the odds are strong that at least one hike will be implemented by the end of 2016. According to Hedge Fund Research, its HFRI Fund Weighted Composite Index has outperformed the S&P 500 this year, having inched up by 2.96%, while across individual hedge funds the performance has been mixed, following the drops registered by stocks like Valeant Pharmaceuticals or SunEdison, or a recovery registered by gold stocks. At Insider Monkey, we follow more than 750 hedge funds and other smart money investors and compile data from their 13F filings to see how they are positioning themselves towards individual companies. Based on the data from the last round of 13F filings, let’s take a closer look at how the top five favorite stocks among the investors we track performed since the end of March.

Our backtests that covered the period between 1999 and 2012, showed that following the 15 most popular small-caps among hedge funds can help a retail investors beat the market by an average of 95 basis points per month (see more details here).

#5 Microsoft Corporation (NASDAQ:MSFT)

 – Investors with long positions (as of March 31): 144

– Aggregate value of investors’ holdings (as of March 31): $20.83 billion

– Performance: 5%

Let’s start with Microsoft Corporation (NASDAQ:MSFT), the fifth most popular stock among hedge funds covered by us at the end of first quarter. During that period, the number of funds covered by us long the stock inched up by four, but the aggregate value of their holdings in it came down by almost $2.60 billion. Back in June, Microsoft announced the acquisition of LinkedIn Corp (NYSE:LNKD) for $26.2 billion in cash. In addition, the tech giant announced a better-than-expected fiscal fourth quarter (ended June 30), with EPS of $0.69 beating the estimates of $0.58, while revenue of $22.6 billion was $460 million ahead of expectations. The results were driven by a strong growth in the cloud segment, with Azure revenue jumping by over 100% on the year, while Office 365 commercial revenue growth registered an increase of 54%. Among the funds that reported their 13F portfolios for the end of June, Donald Yacktman’s Yacktman Asset Management disclosed ownership of 12.52 million shares of Microsoft.

#4 Apple Inc. (NASDAQ:AAPL)

 – Investors with long positions (as of March 31): 152

– Aggregate value of investors’ holdings (as of March 31): $14.82 billion

– Performance: -0.90%

Though the number of investors covered by us long Apple Inc. (NASDAQ:AAPL) increased by 19 during the first quarter, the aggregate value of their holdings in the company fell by $2.9 billion. The performance of Apple’s stock has been affected by its financial results for the fiscal second quarter ended March 26, when the company missed both top- and bottom-line estimates, reported a decline in iPhone sales and registered the first revenue drop in 13 years. Nevertheless, Apple managed to recover in the next quarter, when its EPS of $1.42 and revenue of $42.4 billion topped the estimates, while iPhone sales extended their decline, though the company said it had strong sales of its smaller and cheaper iPhone SE launched in March. Nevertheless, amid a slump in sales of its flagship smartphone and increased competition, investors are more interested in the updated iPhone that is expected to be launched in September. Ken Fisher’s Fisher Asset Management reported holding 11.31 million shares of Apple as of the end of June.

#3 Alphabet Inc (NASDAQ:GOOG)

– Investors with long positions (as of March 31): 142

– Aggregate value of investors’ holdings (as of March 31): $14.90 billion

Alphabet Inc (NASDAQ:GOOGL)

 – Investors with long positions (as of March 31): 155

– Aggregate value of investors’ holdings (as of March 31): $14.98 billion

– Performance: 6%

During the first quarter, the number of funds covered by us long Alphabet Inc (NASDAQ:GOOGL)’s class A stock inched up by one, but the aggregate value of their holdings in it fell by $120 million, while the number of investors holding class C shares remained unchanged, but the total value of their positions went up by $700 million. For the second quarter, Alphabet reported EPS of $8.42 and revenue of $21.5 billion (up by 21% on the year), while analysts had expected EPS of $8.04 on revenue of $20.76 billion. After a disappointing first quarter, better-than-expected results for the second quarter helped the stock to rebound and assured investors that Alphabet is seeing growth across most segments. Fisher Asset Management reported ownership of 995,300 class A shares of Alphabet and 455,300 class C shares in its 13F filing for the end of the second quarter.

#2 Facebook Inc (NASDAQ:FB)

 – Investors with long positions (as of March 31): 164

– Aggregate value of investors’ holdings (as of March 31): $14.53 billion

– Performance: 9.5%

During the first quarter, Facebook Inc (NASDAQ:FB) saw a marked increase in its popularity and the number of funds bullish on the stock went up by 18 during the first quarter, while the aggregate value of their holdings jumped by $3.74 billion. Facebook is the best-performing stock among those covered in this article, which is not surprising, since the company showed solid results and managed to beat the estimates every quarter reported so far this year. For the second quarter, the company posted EPS of $0.97 on revenue of $6.44 billion, beating analysts’ expectations by $0.15 and $420 million, respectively. Facebook also registered strong growth in monthly active users (MAU) and mobile MAU and an increase in the share of mobile revenue to 84% of the total from 76% a year earlier. Principal Global Investors’ Columbus Circle Investors holds 2.04 million shares of Facebook as of the end of June.

#1 Allergan plc Ordinary Shares (NYSE:AGN)

 – Investors with long positions (as of March 31): 170

– Aggregate value of investors’ holdings (as of March 31): $20.11 billion

– Performance: -5.9%

The most popular stock at the end of first quarter among the funds covered by us, Allergan plc Ordinary Shares (NYSE: AGN), is the worst-performing in this list. The stock is down mainly due to the termination of the merger between Allergan plc Ordinary Shares (NYSE:AGN) and Pfizer Inc. (NYSE:PFE) that was announced in early April. Investors were betting on the merger to go through and the number of funds from our database long the stock jumped by 11 during the January-March period. The company has recently reported its second-quarter results, with EPS of $3.35, better than the expected $3.32, but revenue of $3.72 billion inched up by just 1.1% on the year and missed analysts’ estimates by $270 million. At the beginning of August, Allergan completed the $40.5 billion sale of its generic unit to Teva Pharmaceuticals and there have been reports that it might be interested in acquiring Biogen, although it might have to compete with Merck & Co. John Brennan’s Sirios Capital Management has disclosed ownership of 836,600 shares of Allergan in its latest 13F filing.

Disclosure: None