Goldman Sachs says the stocks most owned by hedge funds are crushing the market this year, leading to stock pickers' strongest start since 2013.
The bank's hedge fund VIP (very important positions) list consists of the 50 stocks that "appear most often among the top 10 holdings of fundamentally driven hedge fund portfolios" for the September quarter. Goldman analyzed the positions of 804 hedge funds with total long and short stock holdings of $2.1 trillion.
"Our Hedge Fund VIP list of the most popular long positions … has outperformed the S&P 500," strategist Ben Snider wrote in a note to clients Tuesday. "From an implementation standpoint, the hedge fund VIP list represents a tool for investors seeking to 'follow the smart money' based on 13-F filings."
The firm's basket of the top holdings of hedge funds is up 25 percent this year through Nov. 20 versus the S&P 500's 17 percent gain, according to Goldman Sachs. As a result, the average hedge fund is up 10 percent, the industry's best performance in four years, according to the strategist.
The VIP list has beaten the market's performance in 65 percent of quarters and by 62 basis points on average per quarter since 2001. Turnover for the VIP list was below normal, with 10 new stocks in the September quarter compared with the historical average turnover of 16.
Here are the top 10 stocks on the Goldman's hedge fund VIP list.