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Q3 2018 Hedge Fund Holdings, Returns, Most Popular Stocks, Billionaire’s Biggest Moves, & More

Globally hedge funds manage more than $3.5 trillion based on our estimates. They employ dozens of different strategies investing in stocks, bonds, derivatives, currencies, commodities, real estate, and exotic securities like insurance claims or electricity. The most well-known hedge fund managers are equity hedge funds. This is also the most transparent corner of the hedge fund universe.

The Arab oil embargo in 1973-1974 caused the S&P 500 Index lose 14% in 1973, and 26% in 1974. In 1975 US Congress passed the section 13(f) of the Securities Exchange Act to increase investors’ confidence in the US equity markets. Section 13(f) of the Securities Exchange Act requires that institutional money managers who manage at least $100 million must file form 13F and disclose their positions in exchange traded stocks, closed-end funds, ETFs, certain convertible debt instruments, equity options, and warrants. Institutional money managers (hedge funds are part of this group) don’t have to report their cash, fixed income, private, foreign, or over-the-counter equity holdings.

Thanks to the 13F filings, we get to see which stocks world’s biggest and most successful hedge funds are buying and selling once every three months. Insider Monkey tracks more than 1000 dead, dormant, or active equity hedge funds. Through November 15th, 694 of equity these hedge funds revealed their stock holdings at the end of September 2018.

The total value of equity hedge funds’ long positions at the end of September was $2.17 trillion. This means hedge funds collectively owned about 5% of the outstanding shares of all exchange traded US stocks. This is a very important yardstick to keep in mind when evaluating whether hedge funds are really bullish about a stock. For example, Amazon.com is the third most popular stock among hedge funds. More than 1 out of 5 hedge funds have a position in Amazon shares (21.6% to be more specific). However, hedge funds collectively own only 2.2% of Amazon’s outstanding shares. This means hedge funds are really underweight Amazon shares.

The table below summarizes the aggregate statistics about hedge funds 13F holdings, the average return of these holdings compared against the S&P 500 and Russell 2000 Indices’ Returns.

Year Quarter Value of Hedge Fund Holdings Average Return of Long Positions S&P 500 ETF’s Return Russell 2000 ETF’s Return
2018 Q3 $2.17 trillion -8.2% -6.2% -10.7%
2018 Q2 $2.07 trillion 4.7% 7.7% 3.6%
2018 Q1 $2.00 trillion 4.1% 3.6% 7.9%
2017 Q4 $2.17 trillion -0.4% -1.0% -0.2%
2017 Q3 $2.08 trillion 5.9% 6.8% 3.3%
2017 Q2 $1.98 trillion 4.9% 4.4% 6.3%
2017 Q1 $1.92 trillion 3.5% 3.1% 2.5%

The first thing you will notice is that hedge funds’ aggregate 13F portfolio outperforms the S&P 500 Index whenever Russell 2000 Index outperforms the S&P 500 Index. That’s because hedge funds’ aggregate returns are roughly a 60%-40% blend of the S&P 500 and Russell 2000 Indices.

You wouldn’t it know it from the way the media constantly slams hedge funds, but they are in fact talented stock pickers which generate alpha (meaning their risk-adjusted returns beat comparable benchmarks on average).

However, that doesn’t mean that putting your money into hedge funds is the best way to profit from their stock picking expertise, assuming you have enough money for them to even consider you as a client in the first place. That’s because much of the alpha that hedge funds generate (about 80% according to research published by the Financial Times in 2016) is destroyed by their high fee structure.

Insider Monkey has uncovered a far better way to capitalize off of hedge funds’ stock picks by investing in only the top consensus picks of the 100 best performing hedge funds each quarter. Insider Monkey’s flagship “Best Performing Hedge Funds Strategy” has returned 96.9% since its 2014 inception (through November 2), beating S&P 500 ETF (SPY) by over 40 percentage points. Check out a detailed analysis of Insider Monkey’s performance and past quarterly stock picks for all the details.

In this report we are going to concentrate on the 25 most popular stocks among hedge funds, 25 most popular stocks among billionaires, 20 stocks with the biggest decline in hedge fund ownership, and 20 most concentrated hedge fund positions.

 

The 25 Most Popular Stocks Among Hedge Funds

Rank Company Ticker Number of Hedge Funds %Owned by HFs
1 Microsoft Corporation MSFT 170 3.6
2 Facebook Inc. FB 164 3.5
3 Amazon.com Inc. AMZN 150 2.2
4 Alphabet Inc. GOOGL 137 1.7
5 Alphabet Inc. GOOG 130 1.7
6 Alibaba Group Holding Limited BABA 127 3.6
7 Apple Inc. AAPL 112 6.2
8 Visa Inc. V 112 4.2
9 Bank of America Corporation BAC 102 10.9
10 J P Morgan Chase & Co JPM 99 3
11 Citigroup Inc. C 97 6.3
12 PayPal Holdings Inc. PYPL 97 4.7
13 Mastercard Incorporated MA 95 4.1
14 Comcast Corporation CMCSA 92 4
15 Altaba Inc. AABA 87 39.6
16 Salesforce.com Inc CRM 86 4.7
17 Berkshire Hathaway Inc. BRK-B 84 4.6
18 Netflix Inc. NFLX 84 5.4
19 T-Mobile US Inc. TMUS 80 7.3
20 Wells Fargo & Company WFC 79 11.8
21 Aetna Inc. AET 79 17.8
22 Adobe Systems Incorporated ADBE 79 6
23 Electronic Arts Inc. EA 79 12.2
24 NXP Semiconductors N.V. NXPI 78 24.6
25 Activision Blizzard Inc ATVI 74 9.1

 

 

Billionaire’s Top Holdings, Biggest Q3 Moves

Among the hedge funds tracked by Insider Monkey are about 60 which are managed or were founded by billionaires. These gifted investors have built immense personal wealth for themselves over the years thanks to their long and storied histories of delivering market-beating returns for their investors.

We pay special attention to this group of legendary investors, which includes the likes of Warren Buffett, Carl Icahn, George Soros, and Ray Dalio, publishing quarterly articles that share only their consensus top picks across various industries. Below, we’ve gathered a collection of 10 of our favorite billionaire investors, sharing their top stock picks and biggest Q3 moves. We also provided the list of 25 most popular stocks among billionaires in this section.

This year Insider Monkey’s Billionaire Stock Index delivered a cumulative gain of 1.4% through November 21st, vs. 0.6% return for the S&P 500 ETF (SPY).

Hedge Fund Report 2018 Q3 - Insider Monkey

Image Location: https://d2gr5kl7dt2z3t.cloudfront.net/blog/wp-content/uploads/2018/11/23113320/Hedge-Fund-Infographics-Insider-Monkey.jpg

The 25 Most Popular Stocks Among Billionaires

Rank Company Ticker Number of Billionaires No. of Billionaires in Q2
1 Microsoft Corporation MSFT 31 29
2 Alibaba Group Holding Limited BABA 24 18
3 Facebook Inc. FB 22 29
4 Alphabet Inc. GOOGL 22 21
5 Apple Inc. AAPL 19 15
6 Amazon.com Inc. AMZN 19 20
7 Altaba Inc. AABA 19 17
8 Aetna Inc. AET 18 18
9 Adobe Systems Incorporated ADBE 18 17
10 Alphabet Inc. GOOG 17 17
11 Visa Inc. V 16 16
12 J P Morgan Chase & Co JPM 16 14
13 Twenty-First Century Fox Inc. FOXA 16 13
14 Intel Corporation INTC 16 11
15 Shire plc SHPG 16 11
16 Mastercard Incorporated MA 16 15
17 DISH Network Corporation DISH 16 11
18 PayPal Holdings Inc. PYPL 15 15
19 AT&T Inc. T 15 17
20 Bank of America Corporation BAC 14 16
21 Allergan plc. AGN 14 12
22 NXP Semiconductors N.V. NXPI 14 19
23 Marathon Petroleum Corporation MPC 14 13
24 Walt Disney Company (The) DIS 14 11
25 Salesforce.com Inc CRM 14 11

 

The 20 Stocks With The Biggest Decline in Hedge Fund Ownership

The table below displays the stocks that experienced the biggest decline in the number of hedge funds with bullish positions during the third quarter. These stocks underperformed the market since the end of the third quarter as well. The 10 stocks at the top of our rankings lost a whopping 19.3% through November 21st, vs. a decline of 8.9% for the S&P 500 ETF (SPY). So, it is very likely that negative expectations about these stocks are triggering hedge fund sales, and hedge fund sales are fueling the downward trend in these stocks.

Rank Company Ticker No of HFs (Q3) No of HFs (Q2) Decline in No of HFs
1 Facebook Inc. FB 164 193 29
2 AT&T Inc. T 70 94 24
3 NXP Semiconductors N.V. NXPI 78 93 15
4 Baidu Inc. BIDU 53 67 14
5 Deere & Company DE 37 51 14
6 Zillow Group Inc. Z 22 36 14
7 Marriott International MAR 29 42 13
8 Ctrip.com International Ltd. CTRP 19 31 12
9 Axon Enterprise Inc. AAXN 16 28 12
10 Pinnacle Foods Inc. PF 35 46 11
11 Teleflex Incorporated TFX 17 28 11
12 Hilton Worldwide Holdings Inc. HLT 45 55 10
13 Western Digital Corporation WDC 33 43 10
14 Regions Financial Corporation RF 31 41 10
15 TD Ameritrade Holding Corporation AMTD 18 28 10
16 Service Corporation International SCI 15 25 10
17 Azul S.A. AZUL 11 21 10
18 PagSeguro Digital Ltd. PAGS 39 48 9
19 Forest City Realty Trust Inc. FCE-A 34 43 9
20 Lam Research Corporation LRCX 34 43 9

 

The 20 Most Concentrated Hedge Fund Positions

Concentrated hedge fund positions are double edged swords. If hedge funds are dealing with a hostile management that is blind to the interests of shareholders, concentrated hedge fund holdings will force the management’s hand to make changes that will benefit the stock price. On the other hand, if management is already doing what should be done and in the event of an unforeseen market-wide decline these stocks might decline more because several of these hedge funds may try to sell large portions of their holdings all at the same time.

The 20 most concentrated hedge fund positions we listed below lost 13% so far in Q4 (through November 21) vs. a loss of 8.9% for the S&P 500 ETF (SPY) and a loss of 12.2% for the Russell 2000 ETF (IWM). The 10 stocks at the top of this list where hedge funds own 40% or more lost 14.5% during the same period.

The list of stocks below has at least 30 separate hedge funds collectively owning more than 30% of the outstanding shares of each company.

Rank Company Ticker No of HFs (out of 694) Total Value (x1000)  Concentration
1 Caesars Entertainment Corporation CZR 62 4321459 63.0%
2 Zogenix Inc. ZGNX 37 1091823 61.3%
3 Peabody Energy Corporation BTU 34 2098132 48.3%
4 Nexeo Solutions Inc. NXEO 30 531459 48.3%
5 Altra Industrial Motion Corp. AIMC 35 568492 47.0%
6 VICI Properties Inc. VICI 39 3561661 44.5%
7 Herbalife Nutrition Ltd. HLF 38 3764011 43.9%
8 Clovis Oncology Inc. CLVS 32 673672 43.5%
9 Tempur Sealy International Inc. TPX 30 1182122 41.0%
10 Altaba Inc. AABA 87 16329027 39.6%
11 Tribune Media Company TRCO 39 1292684 38.4%
12 WMIH Corp. WMIH 31 568490 37.6%
13 Warrior Met Coal Inc. HCC 35 495642 34.7%
14 W.R. Grace & Co. GRA 37 1635397 34.1%
15 Axalta Coating Systems Ltd. AXTA 43 2358252 33.6%
16 DaVita Inc. DVA 42 4001510 33.5%
17 Cheniere Energy Inc. LNG 42 5973125 33.4%
18 Amicus Therapeutics Inc. FOLD 30 761559 33.4%
19 Dell Technologies Inc. DVMT 61 6285474 32.5%
20 Heron Therapeutics Inc.  HRTX 31 785278 31.9%

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