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Net Net: Promoting innovation and managing change

Hedge funds love Apple, Actavis, hate AT&T, Intel

An Apple store in New York.
Scott Mlyn | CNBC

Hedge funds aren't changing their stock holdings much despite poor performance compared with the broader stock market.

Hedge fund position turnover averaged 27 percent in the third quarter, according to a new report of holdings as of Sept. 31 by Goldman Sachs. That's the lowest percentage ever since tracking began in 2001.

The typical hedge fund also has an average of 64 percent of its long stock bets invested in its 10 largest positions, according to the report.

"Hedge fund returns are highly dependent on the performance of a few key stocks," Goldman Sachs wrote.

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On the long side, Apple, Actavis and Facebook lead the way for stocks that most frequently appear among the largest 10 holdings as of Sept. 30, according to the report. The most common shorts are AT&T, Intel and Gilead Sciences as of Oct. 31. And the companies whose shareholders are dominated by funds, sometimes called "hedge fund hotels," include Family Dollar Stores, Dollar General and Allegion, according to data through Sept. 30.

Top hedge fund stock bets

Rank Most common top 10 longs Most shorted Most concentrated long bets
1Apple AT&TFamily Dollar Stores
2Actavis IntelDollar General
3Facebook Gilead Sciences Allegion
4AIGWalt DisneyPetSmart
5AllerganExxon MobilAutoNation
7American AirlinesExelonMohawk Industries
8CitigroupJohnson & Johnson Tesoro
9Delta Air Lines Wal-Mart StoresAir Products and Chemicals
10Time Warner Cable Amazon.comDollar Tree

Source: Source: Goldman Sachs Global Investment Research, using data as of Sept. 30, 2014 (longs) and Oct. 31 (shorts)

Despite relatively low turnover, the Goldman analysis revealed the top stocks added to hedge fund portfolios in the third quarter: United Continental Holdings, Shire, Yahoo, AbbVie and Mylan. Top equities dropped were Gilead Sciences, SunEdison, Walgreen, Visteon and Liberty Interactive.

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The 50 most popular stocks for hedge funds outperformed the S&P 500 index by 0.6 percent point this year through Nov. 19 (13.5 percent versus 12.9 percent, respectively). But an average of hedge funds across strategies returned negative 1 percent in 2014 through mid-November, according to Goldman. Stock-focused funds are up slightly, but their 1 percent gain still lags the index significantly.