After several tireless days we have finished crunching the numbers from nearly 750 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms’ equity portfolios as of March 31. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards Goldman Sachs Group, Inc. (NYSE:GS).
Goldman Sachs Group, Inc. (NYSE:GS) has seen an increase in support from the world’s most elite money managers lately. Our calculations also showed that GS ranked 23rd among the 30 most popular stocks among hedge funds. Below, we will be comparing Goldman Sachs’ popularity against 4 other stocks’ popularity to get a better idea about how hedge funds really feel about this stock.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
We’re going to view the latest hedge fund action surrounding Goldman Sachs Group, Inc. (NYSE:GS).
What does the smart money think about Goldman Sachs Group, Inc. (NYSE:GS)?
Heading into the second quarter of 2019, a total of 76 of the hedge funds tracked by Insider Monkey were long this stock, a change of 9% from the previous quarter. On the other hand, there were a total of 64 hedge funds with a bullish position in GS a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Berkshire Hathaway was the largest shareholder of Goldman Sachs Group, Inc. (NYSE:GS), with a stake worth $3523.7 million reported as of the end of March. Trailing Berkshire Hathaway was Eagle Capital Management, which amassed a stake valued at $1192.7 million. Greenhaven Associates, Citadel Investment Group, and Pzena Investment Management were also very fond of the stock, giving the stock large weights in their portfolios.
With a general bullishness amongst the heavyweights, key money managers were leading the bulls’ herd. Laurion Capital Management, managed by Benjamin A. Smith, assembled the largest call position in Goldman Sachs Group, Inc. (NYSE:GS). Laurion Capital Management had $64.6 million invested in the company at the end of the quarter. Steven Tananbaum’s GoldenTree Asset Management also initiated a $41.9 million position during the quarter. The other funds with new positions in the stock are Daniel Lascano’s Lomas Capital Management, and Thomas G. Maheras’s Tegean Capital Management.
Let’s now review hedge fund activity in other stocks similar to Goldman Sachs Group, Inc. (NYSE:GS). We will take a look at CVS Caremark Corporation (NYSE:CVS), Automatic Data Processing, Inc. (NASDAQ:ADP), QUALCOMM, Incorporated (NASDAQ:QCOM), and BlackRock, Inc. (NYSE:BLK). This group of stocks’ market valuations are closest to GS’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 47.5 hedge funds with bullish positions and the average amount invested in these stocks was $1605 million. That figure was $7453 million in GS’s case. CVS Caremark Corporation (NYSE:CVS) is the most popular stock in this table. On the other hand Automatic Data Processing, Inc. (NASDAQ:ADP) is the least popular one with only 39 bullish hedge fund positions. Compared to these stocks Goldman Sachs Group, Inc. (NYSE:GS) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately GS wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on GS were disappointed as the stock returned -2% during the same period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.