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How Hedge Funds’ Favorite Stocks Are Performing This Year?

The US stock market has extended its bull run this year, with the S&P 500 having gained over 6% so far amid signs of stable economic growth and weak oil prices. The Fed has postponed increasing the interest rate several times due to concerns over the global macroeconomic outlook at several big events, such as the Brexit, but the odds are strong that at least one hike will be implemented by the end of 2016. According to Hedge Fund Research, its HFRI Fund Weighted Composite Index has outperformed the S&P 500 this year, having inched up by 2.96%, while across individual hedge funds the performance has been mixed, following the drops registered by stocks like Valeant Pharmaceuticals or SunEdison, or a recovery registered by gold stocks. At Insider Monkey, we follow more than 750 hedge funds and other smart money investors and compile data from their 13F filings to see how they are positioning themselves towards individual companies. Based on the data from the last round of 13F filings, let’s take a closer look at how the top five favorite stocks among the investors we track performed since the end of March.

Our backtests that covered the period between 1999 and 2012, showed that following the 15 most popular small-caps among hedge funds can help a retail investors beat the market by an average of 95 basis points per month (see more details here).

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#5 Microsoft Corporation (NASDAQ:MSFT)

 – Investors with long positions (as of March 31): 144

– Aggregate value of investors’ holdings (as of March 31): $20.83 billion

– Performance: 5%

Let’s start with Microsoft Corporation (NASDAQ:MSFT), the fifth most popular stock among hedge funds covered by us at the end of first quarter. During that period, the number of funds covered by us long the stock inched up by four, but the aggregate value of their holdings in it came down by almost $2.60 billion. Back in June, Microsoft announced the acquisition of LinkedIn Corp (NYSE:LNKD) for $26.2 billion in cash. In addition, the tech giant announced a better-than-expected fiscal fourth quarter (ended June 30), with EPS of $0.69 beating the estimates of $0.58, while revenue of $22.6 billion was $460 million ahead of expectations. The results were driven by a strong growth in the cloud segment, with Azure revenue jumping by over 100% on the year, while Office 365 commercial revenue growth registered an increase of 54%. Among the funds that reported their 13F portfolios for the end of June, Donald Yacktman’s Yacktman Asset Management disclosed ownership of 12.52 million shares of Microsoft.

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#4 Apple Inc. (NASDAQ:AAPL)

 – Investors with long positions (as of March 31): 152

– Aggregate value of investors’ holdings (as of March 31): $14.82 billion

– Performance: -0.90%

Though the number of investors covered by us long Apple Inc. (NASDAQ:AAPL) increased by 19 during the first quarter, the aggregate value of their holdings in the company fell by $2.9 billion. The performance of Apple’s stock has been affected by its financial results for the fiscal second quarter ended March 26, when the company missed both top- and bottom-line estimates, reported a decline in iPhone sales and registered the first revenue drop in 13 years. Nevertheless, Apple managed to recover in the next quarter, when its EPS of $1.42 and revenue of $42.4 billion topped the estimates, while iPhone sales extended their decline, though the company said it had strong sales of its smaller and cheaper iPhone SE launched in March. Nevertheless, amid a slump in sales of its flagship smartphone and increased competition, investors are more interested in the updated iPhone that is expected to be launched in September. Ken Fisher’s Fisher Asset Management reported holding 11.31 million shares of Apple as of the end of June.

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