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The Goldman Sachs Group, Inc. (GS): Are Hedge Funds Right About This Stock?

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Asma UL Husna
·5 min read
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Is The Goldman Sachs Group, Inc. (NYSE:GS) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.

The Goldman Sachs Group, Inc. (NYSE:GS) has seen an increase in activity from the world's largest hedge funds lately. The Goldman Sachs Group, Inc. (NYSE:GS) was in 76 hedge funds' portfolios at the end of December. The all time high for this statistic is 78. Our calculations also showed that GS isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings).

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' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 124 percentage points since March 2017 (see the details here).

Robert Pohly of Samlyn Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, auto parts business is a recession resistant business, so we are taking a closer look at this discount auto parts stock that is growing at a 196% annualized rate. We go through lists like the 15 best micro-cap stocks to buy now to identify the next stock with 10x upside potential. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. With all of this in mind let's take a look at the new hedge fund action surrounding The Goldman Sachs Group, Inc. (NYSE:GS).

Do Hedge Funds Think GS Is A Good Stock To Buy Now?

Heading into the first quarter of 2021, a total of 76 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 9% from one quarter earlier. On the other hand, there were a total of 75 hedge funds with a bullish position in GS a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Eagle Capital Management was the largest shareholder of The Goldman Sachs Group, Inc. (NYSE:GS), with a stake worth $1375.8 million reported as of the end of December. Trailing Eagle Capital Management was Greenhaven Associates, which amassed a stake valued at $808.1 million. Fisher Asset Management, Pzena Investment Management, and Azora Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. 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 15.22% of its 13F portfolio. Azora Capital is also relatively very bullish on the stock, earmarking 12.87 percent of its 13F equity portfolio to GS.

Consequently, key hedge funds have been driving this bullishness. GMT Capital, managed by Thomas E. Claugus, initiated the largest position in The Goldman Sachs Group, Inc. (NYSE:GS). GMT Capital had $57.6 million invested in the company at the end of the quarter. Robert Pohly's Samlyn Capital also made a $51.4 million investment in the stock during the quarter. The other funds with brand new GS positions are Ray Dalio's Bridgewater Associates, Doug Gordon, Jon Hilsabeck and Don Jabro's Shellback Capital, and Joe DiMenna's ZWEIG DIMENNA PARTNERS.

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as The Goldman Sachs Group, Inc. (NYSE:GS) but similarly valued. These stocks are Uber Technologies, Inc. (NYSE:UBER), CVS Health Corporation (NYSE:CVS), Target Corporation (NYSE:TGT), Fidelity National Information Services Inc. (NYSE:FIS), Airbnb, Inc. (NASDAQ:ABNB), British American Tobacco plc (NYSE:BTI), and Vale SA (NYSE:VALE). This group of stocks' market caps match GS's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position UBER,135,10094450,35 CVS,56,961205,-5 TGT,78,4065099,21 FIS,88,9181248,0 ABNB,68,1610985,68 BTI,10,832550,3 VALE,35,2909481,0 Average,67.1,4236431,17.4 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 67.1 hedge funds with bullish positions and the average amount invested in these stocks was $4236 million. That figure was $4608 million in GS's case. Uber Technologies, Inc. (NYSE:UBER) is the most popular stock in this table. On the other hand British American Tobacco plc (NYSE:BTI) is the least popular one with only 10 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. Our overall hedge fund sentiment score for GS is 65.6. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.3% in 2021 through April 19th and still beat the market by 0.9 percentage points. Hedge funds were also right about betting on GS as the stock returned 30.6% since the end of Q4 (through 4/19) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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

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