Here Is What Hedge Funds Think About Goldman Sachs Group, Inc. (GS)

Before we spend many hours researching a company, we’d like to analyze what hedge funds and billionaire investors think of the stock first. We would like to do so because the elite investors’ consensus returns have been exceptional. The top 30 mid-cap stocks among the best performing hedge funds in our database yielded an average return of 18% during the last 12 months, outperforming the S&P 500 Index funds by double digits. Although the elite funds occasionally have their duds, such as SunEdison and Valeant, the hedge fund picks seem to work on average. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Goldman Sachs Group, Inc. (NYSE:GS).

Overall, there were 63 funds tracked by Insider Monkey holding shares of Goldman Sachs Group, Inc. (NYSE:GS) at the end of September. The company has experienced a decrease in activity from the world’s largest hedge funds of late, as there had been 68 hedge funds in our database with GS positions at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity, but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Broadcom Ltd (NASDAQ:AVGO), Mitsubishi UFJ Financial Group Inc (ADR) (NYSE:MTU), and Enterprise Products Partners L.P. (NYSE:EPD) to gather more data points.

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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.

With all of this in mind, let’s take a look at the new action surrounding Goldman Sachs Group, Inc. (NYSE:GS).

How are hedge funds trading Goldman Sachs Group, Inc. (NYSE:GS)?

As stated earlier, heading into the fourth quarter of 2016, 63 of the hedge funds tracked by Insider Monkey were long this stock, down by 7% from one quarter earlier. With hedge funds’ capital changing hands, there exists a few notable hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
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According to Insider Monkey’s hedge fund database, Berkshire Hathaway, managed by Warren Buffett, holds the most valuable position in Goldman Sachs Group, Inc. (NYSE:GS). Berkshire Hathaway has a $1.77 billion position in the stock, comprising 1.4% of its 13F portfolio. Coming in second is Greenhaven Associates, managed by Edgar Wachenheim, which holds a $604.1 million position; 11.5% of its 13F portfolio is allocated to the company. Some other professional money managers with similar optimism comprise Boykin Curry’s Eagle Capital Management, Ken Fisher’s Fisher Asset Management and Richard S. Pzena’s Pzena Investment Management.

Since Goldman Sachs Group, Inc. (NYSE:GS) has witnessed declining sentiment from the aggregate hedge fund industry, it’s safe to say that there lies a certain “tier” of hedge funds that elected to cut their entire stakes in the third quarter. It’s worth mentioning that Mike Masters’ Masters Capital Management sold off the largest investment of the 700 funds followed by Insider Monkey, totaling an estimated $222.9 million in call options., and Ken Griffin’s Citadel Investment Group was right behind this move, as the fund dropped about $85.4 million worth. These transactions are important to note, as aggregate hedge fund interest fell by 5 funds in the third quarter.

Let’s also examine hedge fund activity in other stocks similar to Goldman Sachs Group, Inc. (NYSE:GS). These stocks are Broadcom Ltd (NASDAQ:AVGO), Mitsubishi UFJ Financial Group Inc (ADR) (NYSE:MTU), Enterprise Products Partners L.P. (NYSE:EPD), and China Life Insurance Company Ltd. (ADR) (NYSE:LFC). This group of stocks’ market caps match GS’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AVGO 76 8267068 2
MTU 16 87370 4
EPD 30 522615 2
LFC 12 47740 1

As you can see these stocks had an average of 34  funds with bullish positions at the end of September and the average amount invested in these stocks was $2.23 billion. That figure was $4.77 billion in Goldman Sachs’ case. Broadcom Ltd (NASDAQ:AVGO) is the most popular stock in this table, while China Life Insurance Company Ltd. (ADR) (NYSE:LFC) is the least popular one with only 12 bullish hedge fund positions. Goldman Sachs Group, Inc. (NYSE:GS) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard, Broadcom Ltd (NASDAQ:AVGO) might be a better candidate to consider a long position.