Goldman found ‘shared favorites’ stocks that both mutual and hedge funds love

Published Mon, Aug 30 20212:21 PM EDTUpdated Mon, Aug 30 20212:29 PM EDT

Mutual funds and hedge funds are generally very different from each other when it comes to risk and exposure, but Goldman Sachs has released a list of stocks loved by both so far this quarter. Most stocks represented are financial services data companies, and there's only one traditional bank on it, Wells Fargo. Communications companies Liberty Broadband and Twilio are newcomers to the list, out Friday. Goldman analyzed 573 mutual funds with $3 trillion of assets under management and 813 hedge funds with $2.9 trillion of gross equity positions. Each stock was screened into both Goldman's Hedge Fund VIP list and its Mutual Fund Overweight baskets. While Big Tech stocks are represented on the former, they're screened into the underweight basket for mutual funds. Owning shared favorites as an investment strategy historically carries a record of outperformance. On average, they have more volatile relative returns compared to stocks in the hedge fund VIP and mutual fund overweight baskets. For the year, they've underperformed the S & P 500 by 14 percentage points, according to Goldman. Since 2013, however, an equal-weighted list of shared favorites has generated an annualized return of 20%, compared to 16% for S & P 500, and outpaced the S & P 500 in 62% of months. Visa and Mastercard are among the favorites and are expected to benefit from the continued reopening of the economy as well as growth of digital payments. Visa shares are more than 5% higher year-to-date, while Mastercard's are less than 1% in the red. In the same realm, Fiserv is in the same realm, as its banking customers fight to stay relevant by providing consumers the types of digital financial services that are making fintech apps increasingly popular. Square, the stock one Mizuho analyst likened to owning JPMorgan stock in the 1870s, is another mutually loved stock that spans consumer and business banking and payments. It's also reaching into stock and crypto investing for retail customers and is in the process of acquiring the Australian buy-now, pay-later giant Afterpay. Its stock is up 24% for the year. Automaker General Motors is one of the more cyclical stocks that mutual funds have been piling into this year , and is loved by hedge funds. It's up 18% for the year.

Mutual funds and hedge funds are generally very different from each other when it comes to risk and exposure, but Goldman Sachs has released a list of stocks loved by both so far this quarter.