Rising interest rates have yet to be the tonic that soothes hedge funds’ returns, as anticipated. Hedge funds on average have posted gains of just 1.9% in 2018 according to HFR, a small fraction of the 10.6% returns enjoyed by the broader market.
In the past week alone, three of the hedge funds tracked by Insider Monkey (Tourbillon Capital, Criterion Capital, and Highfields Capital Management) have closed their doors. Jason Karp‘s Tourbillon, which opened in 2013 to impressive 21% gains has struggled since 2016, losing 13.8% last year and another 3.2% this year through September 28.
The continuing lack of strong performance from hedge funds has had no effect on Insider Monkey’s market-beating “best performing hedge funds” strategy, which is only getting better with age. This strategy has rewarded subscribers with incredible 107.5% returns since its May 2014 inception, crushing the S&P 500 by over 40 percentage points. This hedge fund strategy’s small number of quarterly picks feature the most common stocks found among only the top 100 performing hedge funds each quarter. In our May 16 newsletter, customer service platform Zendesk Inc (NYSE:ZEN) and pharmaceutical company FibroGen Inc (NASDAQ:FGEN), each of which gained over 10% during the following 2.5 months, were among the seven stock picks for that quarter.
Below, we’ll look at the consensus top stock picks in several industries when using the entirety of Insider Monkey’s hedge fund database, which consisted of 645 hedge funds which filed 13Fs for the June 30 reporting period.
Hedge Funds’ #1 Automotive Stock Pick: General Motors Company (NYSE:GM)
Number of Hedge Fund Shareholders of GM (as of June 30): 59
Value of Hedge Funds’ Holdings in GM (as of June 30): $6.19 billion
General Motors Company (NYSE:GM) is the top auto stock among hedge funds, with 59 owning it on June 30, down slightly from 64 on March 31. That placed GM far ahead of rival Ford Motor Company (NYSE:F), which was the next most popular auto stock with just 32 hedge fund shareholders. Warren Buffett‘s Berkshire Hathaway is one of the biggest GM bulls, owning a position of 51.39 million GM shares worth over $2 billion.
General Motors Company (NYSE:GM)’s stock market woes in 2018 have hit another major GM bull hard, billionaire David Einhorn of Greenlight Capital. Einhorn’s fund has lost a dismal 25.7% this year, mirroring the amount lost by GM itself, which accounted for over 26% of Greenlight’s 13F portfolio at the end of Q2. GM shares currently trade at just 6x forward earnings, which looks dirt cheap when one considers the growth potential looming in the autonomous vehicle market, which Intel Corporation (NASDAQ:INTC) has predicted could be a $7 trillion industry by 2050. General Motors Company (NYSE:GM) is building a leading position in autonomous vehicles through major partnerships with companies like SoftBank and Honda, and will launch its first autonomous ride-hailing vehicle next year.
Hedge Funds’ #1 Airline Stock Pick: Delta Air Lines, Inc. (NYSE:DAL)
Number of Hedge Fund Shareholders of DAL (as of June 30): 66
Value of Hedge Funds’ Holdings in DAL (as of June 30): $6.50 billion
Delta Air Lines, Inc. (NYSE:DAL) is the most popular airline stock, being owned by 66 hedge funds on June 30, down from 73 at the end of March. United Continental Holdings Inc (NASDAQ:UAL) ranked second, being owned by 42 shareholders. Wayne Cooperman‘s Cobalt Capital Management raised its Delta Air Lines position by 136% to 502,862 shares as of June 30.
Delta Air Lines, Inc. (NYSE:DAL) recently hiked its baggage fees by 20% to $30 per bag, part of a broader industry initiative to offset rising fuel prices. Fears that Congress would implement a mandate targeting the fair usage of such fees were relieved last month, when plans to do so were dropped. That puts Delta in a position to capitalize on strong traffic and capacity trends in the industry going forward. Delta Air Lines, Inc. (NYSE:DAL)’s traffic and capacity have each risen by at least 3.5% in each of the past three months.
On the next page we’ll look at the top stock picks among hedge funds from three different industries, including retail.