Ken Fisher Suggests More Trouble Is On The Way: Recent Stock Market Correction Similar To Asian Financial Crisis Of 1997

Ken Fisher’s top stock picks going into the third quarter have also been hit by the recent turmoil. Apple Inc. (NASDAQ:AAPL), the most largest company in terms of market cap, represented Ken Fisher’s largest holding at the end of the second quarter. Apple’s stock closed 4.47% in red on Tuesday, losing 2.41% year-to-date. Amazon.com Inc. (NASDAQ:AMZN), and Pfizer Inc. (NYSE:PFE) the other two top stock picks did not have a much more impressive stock performance yesterday, as their shares dropped by 3.19% and 2.67%, correspondingly.

Hedge funds and other big money managers like Ken Fisher tend to have the largest amounts of their capital invested in large and mega-cap stocks like Apple Inc. (NASDAQ:AAPL) because these companies allow for much greater capital allocation. That’s why if we take a look at the most popular stocks among funds, we won’t find any mid- or small-cap stocks there. However, our backtests of hedge funds’ equity portfolios between 1999 and 2012 revealed that the 50 most popular stocks among hedge funds underperformed the market by seven basis points per month, showing that their most popular picks and the ones that received the bulk of their capital were not actually their best picks. On the other hand, their top small-cap picks performed considerably better, outperforming the market by 95 basis points per month. This was confirmed through backtesting and in forward tests of our small-cap strategy since August 2012. The strategy, which involves imitating the 15 most popular small-cap picks among hedge funds has provided gains of more than 123%, beating the broader market by over 65 percentage points through the end of April (see the details).

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