For a very long-time Apple Inc. (NASDAQ:AAPL) has been dominating the hedge fund popularity rankings. Things changed a bit recently. Apple Inc. is still among the top 10, but it isn’t one of the most popular 5 stocks. Fourth quarter was marked by two major events that affected the stock market. In November, Donald Trump won the presidential election, leading to a rally as investors anticipated a more favorable business environment due to lower regulations. A month later, the Federal Reserve hiked the key interest rate by 0.25 percentage points to between 0.50% and 0.75%, which was taken as a sign of optimism about the U.S. economy. In addition, the Fed promised three more increases in 2017, as the central bank is confident in the strength of the labor market and believes that the inflation is closer to reaching the targets.
These and other developments affected the investors’ behavior and their attitude towards individual companies, as well as sectors and industries. At Insider Monkey we follow over 700 institutional investors, including some of the biggest and most famous activist hedge funds. Every quarter, we analyze their 13F filings with the Securities and Exchange Commission and determine their collective sentiment towards individual companies.
In this way, during the fourth quarter, investors were generally bullish on the stock market. Billionaires Warren Buffett and Carl Icahn both said they bought stock after the presidential election and most likely others also did the same thing. Other investors also expressed optimism that under a Trump presidency and Republicans in power, the business environment is going to improve on the back of relaxed regulations and tax cuts. Particularly, investors are bullish on the financial sector, which can also be observed by a significant jump in the number of funds from our database that held shares of big banks heading into 2017. With this in mind, let’s take a closer look at the 10 stocks that are the most popular among hedge funds.
As a side note, at Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 39.7% gains over the past 12 months and outperformed the 24.1% gain enjoyed by the S&P 500 ETFs. Our enhanced small-cap hedge fund strategy returned more than 45% over the last 12 months and outperformed SPY by more than 30 percentage points over the last 4.5 years (more details here).