Goldman: Hedge funds hate these stocks. Buy them

The Goldman Sachs booth on the floor of the New York Stock Exchange
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The Goldman Sachs booth on the floor of the New York Stock Exchange

Goldman Sachs told hedge fund clients this week to buy stocks that are unloved by their peers if they want any chance of beating them.

The reasoning behind this head-scratching, contrarian call, the firm said in a note, is that most stocks are moving in step with each other so the only way to generate alpha—return above the market's gain—is to buy the names other hedge funds don't own.

"We believe hedge funds can boost performance relative to the market and peers by focusing their research attention on the unowned stocks most likely to trade with high idiosyncratic risk," the note said.

Here's what they say to buy.