Goldman says these rare 6 stocks are favorites of both hedge fund and mutual fund managers
The market has been a fertile stock-picking environment for mutual funds and hedge funds this year, and Goldman Sachs said it found a handful of stocks loved by both cohorts. The Wall Street bank analyzed the holdings of 744 hedge funds with $2.4 trillion of gross equity positions as well as the holdings of 528 mutual funds with $2.8 trillion of assets under management at the start of the third quarter, based on regulatory filings. It then compiled the Hedge Fund VIP basket, consisting of 50 stocks that most frequently appear among the 10 largest holdings of hedge funds, and the Mutual Fund Overweight basket, consisting of 50 stocks in which mutual funds are the most overweight. Goldman found there are six "shared favorites" among hedge funds and mutual funds last quarter, including Cigna , Fiserv , Uber , Workday , Visa and Mastercard . These shared favorites have risen 14% this year, lagging the S & P 500 by 1 percentage point. However, they tend to have a strong, longer-term track record of outperformance. An equal-weighted list of shared favorites has generated an annualized return of 14%, compared with 13% for the S & P 500. It also has a 59% monthly hit rate of outperformance, Goldman said. Stocks have been driven by company-specific news this year, as opposed to the macroeconomic environment, Goldman said. Its research showed that the typical S & P 500 stock has been more micro-driven in the past six months than at any time since 2017, driven by weaker stock correlation. "A more micro-driven market has typically been associated with more opportunity for stock pickers to capture alpha," David Kostin, head of U.S. equity strategy, said in a note. That said, both hedge funds and mutual funds benefited from the broader cyclical rally, given their increased exposure to cyclical sectors such as energy stocks, Goldman said. — CNBC's Michael Bloom contributed reporting.