According to many financial bloggers, hedge fund filings are delayed and worthless to you, the average investor. Many even spout that no hedge funds can beat the market. They say tracking hedge funds is useless. Guess what? They’re wrong, plain and simple.
At Insider Monkey, our small-cap hedge fund strategy returned 55.6% over the last 11 months and beat the S&P 500 index by 33 percentage points. We know how to interpret these filings. Don’t let their ignorance stop you from achiving superior stock returns.
Much as an NBA aficionado follows LeBron James instead of Joel Anthony (that’s right, who?), we track the best hedge funds of the industry. The titans, if you will. All in all, we monitor 525 “elite” hedge fund managers, out of a total of about 8,000 hedge funds. many members of this top tier are guys you’ve heard of, like Warren Buffett and David Einhorn. Others, like T. Boone Pickens (energy) or Patrick McCormack (tech & services), are experts in their respective niches.
As you’d probably expect, one of the best ways to understand the hedge fund industry’s current mindset is to group stocks by aggregate filing activity. Think of this as a type of “consensus hedge fund sentiment,” where only the most accomplished fund managers have a vote.
With that being said, we’re going to focus on the technology sector for now. Let’s take a look at hedge funds’ favorites in this space:
1. Google Inc (NASDAQ:GOOG) is the top dog not just in tech, but in the entire stock market universe. See the entire list of the 10 most popular stocks among hedge funds. In Google’s corner, 157 of the hedge funds we track were long at the end of the second quarter, a 9-fund increase from the first quarter. Shares of the search, social and mobile devices giant have risen more than 20% in 2013, and despite its recent swoon, it’s evident that hedgies think Google Inc (NASDAQ:GOOG) can get to the vaunted $1,000 a share-club.
2. Apple Inc. (NASDAQ:AAPL), meanwhile, took a precipitous drop in the rankings last quarter. As of the latest data, 122 top tier hedge funds held positions in the stock, a 26-fund drop from one quarter earlier. George Soros still has a position in Apple Inc. (NASDAQ:AAPL), but funds like Tiger Global and Steadfast Capital dropped their stakes entirely.
3. Microsoft Corporation (NASDAQ:MSFT) comes in a distant third, with 92 hedge funds. This was an increase of 3 from the previous quarter, and with shares up a surprising 19.5% this year, it’s clear the the smart money still supports Steve Ballmer’s restructuring efforts.
4. Visa Inc (NYSE:V) had 90 hedge funds invested at the end of the second quarter, up from 88 in Q1. Warren Buffett has a position here, as does Viking Global’s Andreas Halvorsen. Shares of the global payments company are up nearly 15% in 2013, but have seen a modest selloff in recent weeks. We’ll continue to watch hedge fund activity in Visa Inc (NYSE:V) very closely.
5. QUALCOMM, Inc. (NASDAQ:QCOM), lastly, sits in fifth with 88 of the hedge funds we track invested. This figure is down from 96 in the previous quarter, but the stock’s momentum has taken a positive turn over the past month, up more than 8% since mid-July. For the non-quant firms at least, this looks like a macro play on the marketplace’s growing adoption of 802.11ac Wi-Fi technology, which QUALCOMM, Inc. (NASDAQ:QCOM) has an integral part in.
Insider Monkey’s small-cap strategy returned 55.6% between September 2012 and July 2013 versus 22.2% for the S&P 500 index. Try it now by clicking the link above.