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

We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).

In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on December 31st. We at Insider Monkey have made an extensive database of more than 835 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded The Goldman Sachs Group, Inc. (NYSE:GS) based on those filings.

The Goldman Sachs Group, Inc. (NYSE:GS) investors should be aware of a decrease in enthusiasm from smart money lately. Our calculations also showed that GS isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 72.9% since March 2017 and outperformed the S&P 500 ETFs by more than 41 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.


Boykin Curry of Eagle Capital

We leave no stone unturned when looking for the next great investment idea. For example, this trader is claiming triple digit returns, so we check out his latest trade recommendations We are probably at the peak of the COVID-19 pandemic, so we check out this biotech investor’s coronavirus picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences (by the way watch this video if you want to hear one of the best healthcare hedge fund manager’s coronavirus analysis). Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s take a peek at the latest hedge fund action regarding The Goldman Sachs Group, Inc. (NYSE:GS).

What does smart money think about The Goldman Sachs Group, Inc. (NYSE:GS)?

At the end of the fourth quarter, a total of 75 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -4% from the third quarter of 2019. By comparison, 70 hedge funds held shares or bullish call options in GS a year ago. With the smart money’s capital changing hands, there exists a select group of notable hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).

The largest stake in The Goldman Sachs Group, Inc. (NYSE:GS) was held by Berkshire Hathaway, which reported holding $2760.3 million worth of stock at the end of September. It was followed by Eagle Capital Management with a $1576.7 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 16.88% of its 13F portfolio. Tegean Capital Management is also relatively very bullish on the stock, earmarking 15.22 percent of its 13F equity portfolio to GS.

Due to the fact that The Goldman Sachs Group, Inc. (NYSE:GS) has witnessed bearish sentiment from the aggregate hedge fund industry, logic holds that there were a few funds who were dropping their full holdings last quarter. Intriguingly, Ahmet Okumus’s Okumus Fund Management cut the largest position of the “upper crust” of funds monitored by Insider Monkey, comprising an estimated $68.1 million in stock, and Renaissance Technologies was right behind this move, as the fund sold off about $64.2 million worth. These moves are intriguing to say the least, as total hedge fund interest dropped by 3 funds last quarter.

Let’s check out hedge fund activity in other stocks similar to The Goldman Sachs Group, Inc. (NYSE:GS). We will take a look at Enbridge Inc (NYSE:ENB), Mondelez International Inc (NASDAQ:MDLZ), Fiserv, Inc. (NASDAQ:FISV), and Stryker Corporation (NYSE:SYK). This group of stocks’ market values match GS’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ENB 21 285809 1
MDLZ 50 2343152 -6
FISV 78 4174064 -2
SYK 43 833267 7
Average 48 1909073 0

View table here if you experience formatting issues.

As you can see these stocks had an average of 48 hedge funds with bullish positions and the average amount invested in these stocks was $1909 million. That figure was $7581 million in GS’s case. Fiserv, Inc. (NASDAQ:FISV) is the most popular stock in this table. On the other hand Enbridge Inc (NYSE:ENB) is the least popular one with only 21 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 1.0% in 2020 through April 20th but beat the market by 11 percentage points. Unfortunately GS wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on GS were disappointed as the stock returned -21.1% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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