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Pro Analysis

Hedge funds love these 20 stocks and they are crushing the market, Goldman says

Carl Bass, president and chief executive officer of Autodesk Inc., center, takes part in ringing the Nasdaq opening bell remotely with Adena Friedman, chief financial officer of NASDAQ OMX Group, second from right, at the Autodesk office in San Francisco, California, U.S., on Thursday, June 24, 2010.
David Paul Morris | Bloomberg | Getty Images
Carl Bass, president and chief executive officer of Autodesk Inc., center, takes part in ringing the Nasdaq opening bell remotely with Adena Friedman, chief financial officer of NASDAQ OMX Group, second from right, at the Autodesk office in San Francisco, California, U.S., on Thursday, June 24, 2010.

Hedge funds overall are underperforming this year, but the stocks most owned by the smart money are still beating the market significantly, according to Goldman Sachs' latest "Hedge Fund Trend Monitor" report.

"The strategy of buying the 20 most concentrated stocks has a strong track record over 15 years," Goldman Sachs' Ben Snider wrote in the note to clients Monday.

"Our basket of the 20 'Most Concentrated' stocks has outperformed the S&P 500 by nearly 1000 bp [basis points] YTD, putting it on pace for a fifth consecutive year of outperforming the S&P 500."

Goldman defines "concentration" as the percentage of a stock's market capitalization owned "in aggregate" by hedge funds. The firm found the strategy of buying the top 20 stocks with the highest concentration of hedge fund ownership beat the S&P 500 by 10 percentage points a year on average since 2001.

The basket also outperformed the market by 9.4 percentage points this year through Nov. 18. On the flip side, the average hedge fund's overall return is lagging the S&P 500 by 5 percentage points year to date, according to Goldman.

Here are the 20 stocks in Goldman's hedge fund 'Most Concentrated' basket.