Looking for high-potential stocks? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 7.6% in the 12 months ending November 21, with more than 51% of the stocks in the index failing to beat the benchmark. Therefore, the odds that one will pin down a winner by randomly picking a stock are less than the odds in a fair coin-tossing game. Conversely, best performing hedge funds’ 30 preferred mid-cap stocks generated a return of 18% during the same 12-month period. Coincidence? It might happen to be so, but it is unlikely. Our research covering a 17-year period indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like Broadcom Ltd (NASDAQ:AVGO).
Broadcom Ltd (NASDAQ:AVGO) was in 76 hedge funds’ portfolios at the end of September. AVGO shareholders have witnessed an increase in hedge fund sentiment recently. There were 74 hedge funds in our database with AVGO holdings at the end of the previous quarter. At the end of this article we will also compare AVGO to other stocks including Mitsubishi UFJ Financial Group Inc (ADR) (NYSE:MTU), Enterprise Products Partners L.P. (NYSE:EPD), and China Life Insurance Company Ltd. (ADR) (NYSE:LFC) to get a better sense of its popularity.
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 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
Hedge fund activity in Avago Technologies Ltd (NASDAQ:AVGO)
At the end of the third quarter, a total of 76 of the hedge funds tracked by Insider Monkey held long positions in this stock, a 3% uptick from the second quarter of 2016, and the third consecutive quarter in which hedge fund ownership has risen. With the smart money’s sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Jim Davidson, Dave Roux and Glenn Hutchins’ Silver Lake Partners has the biggest position in Broadcom Ltd (NASDAQ:AVGO), worth close to $1.84 billion, comprising 38% of its total 13F portfolio. The second most bullish fund manager is Andreas Halvorsen of Viking Global, with a $786 million position; the fund has 3.4% of its 13F portfolio invested in the stock. Some other professional money managers that hold long positions include Ken Griffin’s Citadel Investment Group, Stephen Mandel’s Lone Pine Capital and Doug Silverman and Alexander Klabin’s Senator Investment Group.