Hedge funds used to be extremely good at investing 15-20 years ago. They were delivering amazing returns and charging 2 and 20 or more. There weren’t a lot of hedge fund managers, the industry was new, but they deserved to be rich. Unfortunately, their success attracted a lot of impostors to the industry. The number of hedge funds skyrocketed and the profitable hedge fund strategies were crowded out.
Nowadays, an average hedge fund fails to generate any meaningful alpha after fees. Successful hedge fund managers morphed into closet index fund managers who are hoarding assets and charging exorbitant fees to deliver returns that investors can achieve by themselves by investing in index funds.
There is still some hope though. Insider Monkey developed a proprietary methodology that identifies the best performing hedge fund managers’ best stock picks. To be fair, anyone can claim that they have a market beating strategy based on backtest results. We are different because we have been sharing the stock picks of our strategy for the last 4 years and they generated amazing returns.
Our flagship best performing hedge funds strategy returned 84.7% since its inception 4 years ago, vs. 54.2% gain for the S&P 500 ETF (SPY). Our stock picks beat passive investors by 30.5 percentage points in 4 years.
Moreover, the past 4 years haven’t been good to small-cap stocks that we invest in. S&P 500 Index’s positions are concentrated in large-cap stocks like Apple Inc. (AAPL), Microsoft Corp (MSFT), Amazon.com Inc. (AMZN), and Facebook Inc (FB). Currently these 4 stocks have a total weight of 12% in the index. These stocks significantly outperformed the rest of the market in the last 4 years and contributed disproportionately to SPY’s 54% gain in 4 years.
Our flagship strategy invests in stocks with market caps between $1 billion and $10 billion. So, we didn’t benefit from investor enthusiasm towards mega-cap technology stocks. Yet, we managed to beat the market by more than 30 percentage points by identifying underfollowed cheap stocks.
This quarter’s 13F filing deadline is today. We are going to share our new stock picks on May 16th at or before 1 pm with our premium subscribers. Our stock picks from February 15th returned an average of 5.8% vs. a loss of 0.3% for the S&P 500 ETF (SPY). That means our strategy’s picks beat the market by more than 6 percentage points in the last 3 months.
You can download the list of our February 2018 stock picks by creating a free account on our site. You can also subscribe to our quarterly newsletter and get to see our brand new stock picks tomorrow. If you subscribe before the end of May 16th, we will refund $100 of your payment.
Our flagship best performing hedge funds strategy first identifies the 100 best performing hedge funds in recent months and then determines the 30 consensus picks of these hedge funds. Then we reduce this list to 5 to 15 stocks by taking into account the sentiment of hedge funds that are shorting these stocks. You can see the list of top 40 best performing hedge funds on this page. Some of these hedge funds’ stock picks returned around 100% or more in the past year.
You will be reading a lot of articles about the stock moves of famous hedge fund managers over the next few days. Ignore them. You need to pay attention to the stock picks of best performing hedge fund managers if your goal is to beat the market.
Update: We finished processing the 13F filings of 650 hedge funds. Guess which 3 stocks most hedge funds are betting on (see the answer here).