We finally finished processing 13F filings from 821 hedge funds and prominent investors. We believe one of the best tools for ordinary investors who are on the hunt for new ideas is 13F filings. Once every quarter hedge funds with at least $100 million in total positions in publicly traded US stocks, options, and convertible debt are required to open the kimono and disclose the number of shares and the total value of its positions in each of the stocks and options in its portfolio. We now know which stocks hedge funds were piling into during the coronavirus crash.
Hedge funds hire some of the smartest Ivy League graduates as their analysts, have access to industry insiders whom they “consult” with, unconventional data sources that cost tens of thousands of dollars, years of experience and millions of dollars as incentives to come up with the next great investment idea. Every quarter we process around 800 hedge funds’ 13F filings to identify each hedge fund’s new moves, top stock picks, and more importantly overall sentiment changes towards each of the 4000 stocks that are publicly trading. We publish all of our analysis in our premium quarterly newsletter (download a free sample), and then share interesting bits and pieces on our website.
Earlier today we published the list of 30 most popular stocks among hedge funds. The top 10 stocks among hedge funds returned 185% since the end of 2014 and outperformed the S&P 500 Index ETFs by more than 109 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds’ poor performance.
It is true that hedge fund investors, i.e. those people who hand their hard earned dollars to hedge fund managers, underperform because hedge funds charge huge fees and they hedge their bets. Hedge funds also invest in a diversified portfolio of good and bad ideas. By focusing on the top stock picks among all hedge funds, we have been able to identify some of the best stocks to buy in the market for years. The top 10 most popular stocks among hedge funds beat the S&P 500 Index by more than 109 percentage points over the last 5.5 years (watch the video below to see the top 5 hedge fund stocks right now).
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we asked astrophysicist Neil deGrasse Tyson about Tesla, Elon Musk, and his top stock picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. We saw the coronavirus crash coming (see this article). Several hedge funds saw it too and they dumped stocks like Disney (DIS) and Comcast Corporation (CMCSA) and flocked into some familiar names such as Charter Communications (CHTR).
At the end of 2019 hedge funds were bullish on Disney and Comcast. Disney was the 12th most popular stock among hedge funds and Comcast Corporation ranked 25th. These two stocks were the most popular traditional media stocks among hedge funds heading into 2020.
The coronavirus pandemic changed the plans. Even though Disney’s Disney+ service was a major beneficiary of the coronavirus lockdowns, the rest of Disney’s businesses suffered. Comcast was also put on the same basket and hedge funds dumped both stocks. By the end of March, the number of hedge funds with bullish Disney positions declined by 16, whereas the decline was 4 for Comcast. Comcast isn’t among the top 30 hedge fund stocks anymore and Disney ranks 20th.
Hedge funds sold out of these two stocks but they piled into Charter Communications Inc (CHTR). The number of hedge funds with bullish CHTR positions jumped from 65 at the end of December to 104 at the end of March. We rarely see this kind of sentiment change in the hedge fund space. Currently Charter ranks 18th. So, if you are looking for a stock that is likely to outperform the market you should take a closer look at Charter. We looked into Charter recently. It is a promising stock and very likely to beat the market, but we decided to focus on the top 5 hedge fund stocks instead (see the video above).
Disclosure: None. This article is originally published at Insider Monkey.