Hedge Funds Get Bullish: 10 Stocks They Love

Hedge funds are the most bullish they've been on stocks in six years.

Net long exposure hit 52 percent in the fourth quarter, the highest since the first quarter of 2007, according to a report by Goldman Sachs.

"My expectation is that the market will reach a new high by the end of the year, with the S&P 500 at 1575," said David Kostin, Chief U.S. Equity Strategist at Goldman Sachs who co-authored the report. "Picking up the net exposure is consistent with the idea of gaining exposure to a rising equity market."

"The strategy of following the (hedge fund) community has been a very successful one," he told CNBC's "Squawk on the Street." "These positions matter."

AIG and Google leap-frogged Apple as the top long position by hedge funds, according to the report, which analyzed 725 hedge funds with $1.3 trillion in gross assets.

The single position that mattered the most to hedge funds was AIG: 80 funds had AIG as a top 10 holding, with an average portfolio weight of 8 percent, the report showed.

The most widely-held short positions have been in large stocks with high liquidity and large borrowing capacity, Kostin said.

Although many hedge funds have underperformed the market -- the typical fund had a return of just 8 percent in 2012, compared to more than 13 percent for the S&P 500 -- Kostin said they were hurt by their short positions.

Many funds also seem to be betting on the consumer, Kostin noted. About 22 percent of hedge funds had net positions in consumer discretionary stocks.

From "an analytic perspective this makes a lot of sense because that's where the highest amount of stock-picking opportunities are," he said, adding that financials and technology also offer opportunities in this trade.

The report also found that turnover remained at decade lows.

Kostin said he sees that as an overall strategy change for hedge funds because "managers tend to buy positions they already own."

Biggest Hedge Fund Long Positions

Company	Ticker	Equity Cap ($ bil)	No. of Funds w/ Stock as Top 10 Holding	Total Return YTD
American Intl Group	AIG	$58	80	11%
Google Inc.	GOOG	259	73	11
Apple Inc.	AAPL	439	67	-12
Citigroup Inc.	C	130	40	12
Nexen Inc.	NXY	15	37	2
JPMorgan Chase	JPM	187	34	13
priceline.com	PCLN	35	31	14
Microsoft Corp.	MSFT	236	30	5
General Motors Co.	GM	43	29	-4
QUALCOMM Inc.	QCOM	112	28	6

Source: Goldman Sachs

Biggest Hedge Fund Short Positions

Company	Ticker	Equity Cap ($ bil)	No. of Funds w/ Stock as Top 10 Holding	Total Return YTD
Intel Corp.	INTC	$106	11	4%
Exxon Mobil Corp.	XOM	404	13	3
International Bus. Machines	IBM	226	3	5
AT&T Inc.	T	200	7	6
Gilead Sciences	GILD	63	9	13
Chevron Corp.	CVX	226	3	8
Walt Disney	DIS	97	5	10
Verizon Communications	VZ	127	7	4
Caterpillar	CAT	63	8	7
Amgen Inc.	AMGN	65	3	(1)

Source: Goldman Sachs

— By CNBC's Paul Toscano. Follow him on Twitter and get the latest stories from "Squawk on the Street" @ToscanoPaul

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