Insider Monkey tracks hedge funds, billionaires, and prominent value investors for a very simple reason: their consensus picks generally outperform the market. We aren’t the only research shop broadcasting this fact using a bullhorn. Here is what strategist Ben Snider said in Goldman Sachs’ periodic hedge fund report:
“Despite the strong track record of popular hedge fund stocks, investors often view high ownership as a negative trait when evaluating stock prospects. Clients often ask us to include hedge fund ownership data in stock screens, expressing a preference for buying ‘under-owned’ stocks.”
“In fact, during the past decade hedge fund popularity has been a more useful criterion for selecting stocks than valuations…. The signals from hedge fund popularity and valuation have been particularly useful in combination, especially for investors with slightly longer investment horizons. During the past decade, popular stocks have generally outperformed unpopular stocks across both 3- and 12-month investment horizons” Snider concluded.
It may sound like I am tooting my own horn, but Insider Monkey’s quarterly newsletter is actually superior to Goldman’s report. That’s because we separated the hedge fund favorites into long and short buckets. Our long bucket of hedge fund favorites returned 34.1% in the first half of 2019, whereas our short bucket of hedge fund favorites gained 21.4% during the same period. Hedge funds’ favorite top 20 stocks, on the other hand, returned 24% so far in 2019. You could have beaten the S&P 500 Index funds by 5.7 percentage points by investing in hedge funds’ top 20 picks in 2019, whereas you could have outperformed the index funds by 15.8 percentage points if you invested in our top hedge fund picks. You can try out our newsletter free of charge for 14 days to see hedge funds’ latest best stock picks.
The #19 most popular stock among the 743 hedge funds tracked by Insider Monkey was Comcast Corporation (NASDAQ:CMCSA). Comcast was also the 19th most popular stock among hedge funds at the end of December (see the 30 most popular stocks among hedge funds).
We have to warn you against indiscriminately imitating hedge funds' all stock picks. Hedge funds' top 20 stock picks outperformed the S&P 500 Index funds by 5.7 percentage points this year, but hedge funds' top 500 stock picks had the same return as the S&P 500 Index this quarter. Investing in a hedge fund's 35th best idea doesn't give you the same return as investing in a hedge fund's best idea.
[caption id="attachment_25251" align="aligncenter" width="450"] George Soros[/caption]
Let's view the fresh hedge fund action surrounding Comcast Corporation (NASDAQ:CMCSA).
Hedge fund activity in Comcast Corporation (NASDAQ:CMCSA)
Heading into the second quarter of 2019, a total of 87 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 5% from the previous quarter. By comparison, 97 hedge funds held shares or bullish call options in CMCSA a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Comcast Corporation (NASDAQ:CMCSA) was held by Eagle Capital Management, which reported holding $1321.2 million worth of stock at the end of March. It was followed by First Pacific Advisors LLC with a $497.2 million position. Other investors bullish on the company included Two Sigma Advisors, Southeastern Asset Management, and AQR Capital Management.
With a general bullishness amongst the heavyweights, specific money managers were leading the bulls' herd. Suvretta Capital Management, managed by Aaron Cowen, assembled the biggest position in Comcast Corporation (NASDAQ:CMCSA). Suvretta Capital Management had $150.4 million invested in the company at the end of the quarter. Karthik Sarma's SRS Investment Management also initiated a $46.1 million position during the quarter. The other funds with brand new CMCSA positions are George Soros's Soros Fund Management, Brandon Haley's Holocene Advisors, and Joshua Nash's Ulysses Management.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Comcast Corporation (NASDAQ:CMCSA) but similarly valued. We will take a look at PepsiCo, Inc. (NYSE:PEP), Toyota Motor Corporation (NYSE:TM), Anheuser-Busch InBev SA/NV (NYSE:BUD), and HSBC Holdings plc (NYSE:HSBC). This group of stocks' market valuations match CMCSA's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PEP,51,4490981,-2 TM,10,161453,2 BUD,22,1493242,1 HSBC,12,1080398,1 Average,23.75,1806519,0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.75 hedge funds with bullish positions and the average amount invested in these stocks was $1807 million. That figure was $6280 million in CMCSA's case. PepsiCo, Inc. (NYSE:PEP) is the most popular stock in this table. On the other hand Toyota Motor Corporation (NYSE:TM) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Comcast Corporation (NASDAQ:CMCSA) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.4% in Q2 and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Hedge funds were also right about betting on CMCSA as the stock returned 6.3% during the same period and outperformed the market as well. Comcast shares also beat the market so far this year, returning close to 25%. Hedge funds were once again right about piling into this stock instead of other stocks index funds indiscriminately buying.
Disclosure: None. This article was originally published at Insider Monkey.