Goldman has a portfolio which tracks hedge funds that is trouncing the market — here's what's in it

  • The so-called hedge fund "very important position" basket contains the 50 stocks that appear most often on the top 10 holdings of fundamentally-driven hedge funds.
  • The portfolio is up 14 percent year to date, more than doubling the average equity hedge fund's 6 percent gain and outperforming the S&P 500's 11 percent return.
  • Goldman revealed that the most-owned holdings in the basket are very tech heavy, with Amazon, Microsoft, Facebook, Alphabet and Alibaba being the top five.
  • The basket also has a track record of beating the market as it has outperformed the S&P 500 in 62 percent of quarters since 2001, Goldman said.
Traders work at Goldman Sachs booth on the floor of the New York Stock Exchange in New York.
Scott Eells | Bloomberg | Getty Images
Traders work at Goldman Sachs booth on the floor of the New York Stock Exchange in New York.

One of Goldman Sachs' secret portfolios that tracks hedge funds' most popular long positions is crushing the market.

The so-called hedge fund "very important position" basket contains the 50 stocks that appear most often on the top 10 holdings of fundamentally-driven hedge funds, according to the firm. Goldman analyzed 880 hedge funds with $2.1 trillion of gross equity positions to compile the latest portfolio, which is based on funds' recently released fourth-quarter regulatory filings.

The portfolio is up 14 percent year to date, more than doubling the average equity hedge fund's 6 percent gain and outperforming the S&P 500's 11 percent return. Goldman revealed that the most-owned holdings in the basket are very tech heavy, with Amazon, Microsoft, Facebook, Alphabet and Alibaba being the top five. These five stocks also made last quarter's top five.

"Recent hedge fund returns have benefited from the outperformance of the most popular long positions as well as the decision to increase net length ahead of the equity market bottom in December 2018," Ben Snider, an equity strategist at the bank, said in a note Friday.

The smart money managed to chase the huge tech comeback with these top-five names rebounding from their December lows and rising as much as 25 percent in the new year. Social media giant Facebook is up 22 percent in 2019 after losing more than 20 percent amidst fourth quarter's market turmoil. E-commerce powerhouse Amazon has posted a nearly 8 percent gain in the new year after losing more than 25 percent in the fourth quarter. Alibaba has returned more than 25 percent year to date.

The basket also has a track record of beating the market as it has outperformed the S&P 500 in 62 percent of quarters since 2001, Goldman said.

Other stocks in the hedge fund VIP basket include Visa, Netflix, Bank of America, Paypal and Citigroup.

Rising Stars

By the end of the fourth quarter, hedge funds had ramped up their bets on CVS Health as 108 out of 880 hedge funds held the drugstore chain, up from 64 fund last quarter, the largest increase in hedge fund popularity, according to Goldman Sachs.

Software company Red Hat also gained popularity with 83 hedge funds owning the stock, up from 42 last quarter. Notably, Warren Buffett's Berkshire Hathaway last week revealed a new stake of 4.175 million shares in Red Hat, according to the company's 13-F filing.

Although gaining popularity, CVS and Red Hat still didn't make Goldman's hedge fund VIP portfolio because they're not yet in the top holdings of enough funds.