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Were Hedge Funds Right About Goldman Sachs Group, Inc. (GS)?

With the fourth-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the first quarter. One of these stocks was Goldman Sachs Group, Inc. (NYSE:GS).

Is Goldman Sachs Group, Inc. (NYSE:GS) the right pick for your portfolio? Hedge funds are taking a bullish view. The number of bullish hedge fund positions increased by 13 in recent months. Our calculations also showed that GS isn’t among the 30 most popular stocks among hedge funds.

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’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.5% through March 12, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Richard Pzena - Pzena Investment Management

We’re going to take a look at the new hedge fund action encompassing Goldman Sachs Group, Inc. (NYSE:GS).

Hedge fund activity in Goldman Sachs Group, Inc. (NYSE:GS)

At Q4’s end, a total of 70 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 23% from the second quarter of 2018. On the other hand, there were a total of 64 hedge funds with a bullish position in GS a year ago. With hedgies’ capital changing hands, there exists a few key hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).

GS_mar2019

Of the funds tracked by Insider Monkey, Warren Buffett’s Berkshire Hathaway has the most valuable position in Goldman Sachs Group, Inc. (NYSE:GS), worth close to $3.066 billion, comprising 1.7% of its total 13F portfolio. On Berkshire Hathaway’s heels is Eagle Capital Management, managed by Boykin Curry, which holds a $953 million position; the fund has 3.9% of its 13F portfolio invested in the stock. Other peers that hold long positions contain Edgar Wachenheim’s Greenhaven Associates, Noam Gottesman’s GLG Partners and Richard S. Pzena’s Pzena Investment Management.

With a general bullishness amongst the heavyweights, some big names have jumped into Goldman Sachs Group, Inc. (NYSE:GS) headfirst. Lakewood Capital Management, managed by Anthony Bozza, assembled the most outsized position in Goldman Sachs Group, Inc. (NYSE:GS). Lakewood Capital Management had $136.5 million invested in the company at the end of the quarter. Ahmet Okumus’s Okumus Fund Management also made a $128.3 million investment in the stock during the quarter. The other funds with new positions in the stock are Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Charles Lemonides’s Valueworks LLC, and Steve Cohen’s Point72 Asset Management.

Let’s also examine hedge fund activity in other stocks similar to Goldman Sachs Group, Inc. (NYSE:GS). These stocks are Ambev SA (NYSE:ABEV), Duke Energy Corporation (NYSE:DUK), Sony Corporation (NYSE:SNE), and The Bank of Nova Scotia (NYSE:BNS). All of these stocks’ market caps match GS’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ABEV 13 233897 -1
DUK 17 867790 0
SNE 25 559479 -2
BNS 14 746136 3
Average 17.25 601826 0

View table here if you experience formatting issues.

As you can see these stocks had an average of 17.25 hedge funds with bullish positions and the average amount invested in these stocks was $602 million. That figure was $6345 million in GS’s case. Sony Corporation (NYSE:SNE) is the most popular stock in this table. On the other hand Ambev SA (NYSE:ABEV) is the least popular one with only 13 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 15 most popular stocks among hedge funds returned 19.7% through March 15th and outperformed the S&P 500 ETF (SPY) by 6.6 percentage points. Hedge funds were also right about betting on Goldman Sachs as the stock returned 19.2% and outperformed the market as well.

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

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