Is The Goldman Sachs Group, Inc. (GS) Going to Burn These Hedge Funds?

Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren’t timid and registered double digit market beating gains. Financials, energy and industrial stocks initially suffered the most but many of these stocks delivered strong returns since November and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment towards The Goldman Sachs Group, Inc. (NYSE:GS) changed recently.

Is The Goldman Sachs Group, Inc. (NYSE:GS) a marvelous investment right now? Hedge funds were getting less bullish. The number of bullish hedge fund positions were cut by 16 in recent months. The Goldman Sachs Group, Inc. (NYSE:GS) was in 61 hedge funds’ portfolios at the end of June. The all time high for this statistic is 78. Our calculations also showed that GS isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

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 S&P 500 ETFs by 79 percentage points since March 2017 (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.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind let’s go over the new hedge fund action encompassing The Goldman Sachs Group, Inc. (NYSE:GS).

Do Hedge Funds Think GS Is A Good Stock To Buy Now?

At second quarter’s end, a total of 61 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -21% from the first quarter of 2020. Below, you can check out the change in hedge fund sentiment towards GS over the last 24 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in The Goldman Sachs Group, Inc. (NYSE:GS) was held by Eagle Capital Management, which reported holding $1444.9 million worth of stock at the end of June. It was followed by Fisher Asset Management with a $1030 million position. Other investors bullish on the company included Greenhaven Associates, Citadel Investment Group, and Pzena Investment Management. In terms of the portfolio weights assigned to each position Greenhaven Associates allocated the biggest weight to The Goldman Sachs Group, Inc. (NYSE:GS), around 29.32% of its 13F portfolio. Truvvo Partners is also relatively very bullish on the stock, dishing out 9.88 percent of its 13F equity portfolio to GS.

Since The Goldman Sachs Group, Inc. (NYSE:GS) has faced a decline in interest from the aggregate hedge fund industry, it’s easy to see that there lies a certain “tier” of hedgies that decided to sell off their entire stakes in the second quarter. Intriguingly, Renaissance Technologies sold off the largest investment of all the hedgies monitored by Insider Monkey, worth about $74.7 million in stock. Robert Pohly’s fund, Samlyn Capital, also cut its stock, about $64.9 million worth. These moves are important to note, as aggregate hedge fund interest was cut by 16 funds in the second quarter.

Let’s now take a look at hedge fund activity in other stocks similar to The Goldman Sachs Group, Inc. (NYSE:GS). We will take a look at The Toronto-Dominion Bank (NYSE:TD), JD.Com Inc (NASDAQ:JD), American Tower Corporation (REIT) (NYSE:AMT), Sony Group Corp (NYSE:SONY), Target Corporation (NYSE:TGT), Caterpillar Inc. (NYSE:CAT), and TotalEnergies SE (NYSE:TTE). This group of stocks’ market valuations match GS’s market valuation.

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As you can see these stocks had an average of 44.4 hedge funds with bullish positions and the average amount invested in these stocks was $4056 million. That figure was $5184 million in GS’s case. JD.Com Inc (NASDAQ:JD) is the most popular stock in this table. On the other hand TotalEnergies SE (NYSE:TTE) is the least popular one with only 15 bullish hedge fund positions. The Goldman Sachs Group, Inc. (NYSE:GS) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for GS is 50.2. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 25.7% in 2021 through September 27th and still beat the market by 6.2 percentage points. Hedge funds were also right about betting on GS as the stock returned 5.9% since the end of Q2 (through 9/27) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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Disclosure: None. This article was originally published at Insider Monkey.