Goldman's rising star stocks are seeing the biggest increase in popularity among hedge funds
Rising popularity from hedge funds can be a strong signal of outperformance in the near future for stocks, and Goldman Sachs highlighted which names the smart money is loving right now. The Wall Street bank analyzed the holdings of 735 hedge funds with $2.4 trillion of both long and short equity positions at the start of the fourth quarter, based on regulatory filings. Goldman then identified a slew of Russell 1000 stocks with the largest increase in number of hedge fund owners during the quarter. These rising stars have typically gone on to outperform sector peers in the quarters following their popularity surge during the past two decades, according to Goldman. The names from last quarter have outpaced the Russell 1000 in recent months, the bank noted. Kenvue , the consumer health business that Johnson & Johnson spun out as an independent company earlier this year, saw 48 hedge funds in total adding it as a holding last quarter, Goldman said. Enthusiasm surrounding new anti-obesity medications lifted Eli Lilly to the top of the rising star list. Earlier this month, the Food and Drug Administration approved Eli Lilly's tirzepatide drug for weight loss, paving the way for even wider use of the blockbuster medication. Home Depot also enjoyed notable hedge fund buying last quarter. The home improvement retailer recently posted fiscal third-quarter earnings and revenue that beat expectations. Hedge funds also piled into two merger arbitrage plays — Splunk and Capri Holdings — last quarter. Shares of Splunk rocketed in September following the announcement that Cisco will acquire it for $157 per share in an all-cash deal worth about $28 billion. In August, Coach owner Tapestry agreed to a $8.5 billion deal to acquire Michael Kors and Jimmy Choo parent Capri Holdings