Hedge Funds Get Bullish: 10 Stocks They Love
By: 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 | $58 | 80 | 11% |
| Google Inc. | GOOG | 259 | 73 | 11 |
| Apple Inc. | AAPL | 439 | 67 | -12 |
| Citigroup Inc. | C | 130 | 40 | 12 |
| Nexen Inc. | NXY | 15 | 37 | 2 |
| JPMorgan Chase | JPM | 187 | 34 | 13 |
| priceline.com | PCLN | 35 | 31 | 14 |
| Microsoft Corp. | MSFT | 236 | 30 | 5 |
| General Motors Co. | GM | 43 | 29 | -4 |
| QUALCOMM Inc. | QCOM | 112 | 28 | 6 |
Biggest Hedge Fund Short Positions
| Company | Ticker | Equity Cap ($ 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) |
— By CNBC's Paul Toscano. Follow him on Twitter and get the latest stories from "Squawk on the Street" @ToscanoPaul
