Most Important Stocks For Hedge Funds

Recently I have tried to provide readers on the weekend with the most interesting article from the past week. The article below comes from MarketFolly.com. It details the most popular stocks among hedge fund's top-ten holdings. Perhaps you may be able to find a trading idea or two as a result.

Given our focus on following hedge fund movements, we thought it would be prudent to post up Goldman Sachs' VIP list. The 'VIP' stands for 'Very Important Positions' for hedge funds that employ fundamental strategies rather than technical or trading. In essence, these are the 50 stocks that most frequently appear among the top ten holdings of hedge funds. In our hedge fund portfolio tracking series you may have noticed various stocks popping up over and over again in their top 10 holdings.

This is simply an aggregation of a larger set of data and stems from our previous coverage of the top ten hedgie holdings.

This basket of stocks returned 40% in 2009 versus 27% for the S&P 500. Goldman also notes that this list has, "outperformed the S&P 500 by 81 bp on a quarterly basis since 2001, with a Sharpe Ratio of 0.29." Quarterly turnover on this list is typically around 15 positions out of the 50. Those of you with Bloomberg Terminal access can look it up via GSTHHVIP.

Goldman has aggregated data from 487 funds based on the recent slew of 13F filings so these were the most popular stocks owned as of December 31st, 2009. Again, they focus on fundamentally focused hedge funds but have taken a much broader view of hedge fund land than we typically have. We instead focus on a select list of funds to track that are ideal due to their strategy and portfolio concentration. What's most interesting about the data Goldman has assembled is that many of the positions have actually been down year-to-date for 2010. We found that intriguing given that these are essentially 'groupthink' or consensus picks.

Below you will find Goldman Sachs' VIP List with the name of the stock followed by the number of hedge funds that own that stock in their top ten holdings.

1.Apple (AAPL): 67 hedge funds hold it as a top ten holding

2.Pfizer (PFE): 45
3.Bank of America (BAC): 37
4.Google (GOOG): 37
5.JPMorgan Chase (JPM): 36
6.Microsoft (MSFT): 36
7.Mastercard (MA): 29
8.DirecTV (DTV): 27
9.Wells Fargo (WFC): 27
10.CVS Caremark (CVS): 24

Click here to see the remaining 40 popular hedge fund stocks.