Goldman Sachs says hedge funds’ favorite stocks are up 10% this year already after a brutal 2022

Published Wed, Feb 22 202311:26 AM EST

A group of hedge funds' favorite stocks staged a fierce comeback in the new year with a double-digit return, according to Goldman Sachs. The Wall Street bank analyzed the holdings of 758 hedge funds with $2.3 trillion of gross equity positions at the start of 2023, based on regulatory filings. It then compiled a basket of the most popular long positions, dubbed Goldman's "Hedge Fund VIP basket," consisting of 50 stocks that most frequently appear among the largest 10 holdings of hedge funds. This basket dropped a whopping 32% in 2022, suffering its second-worst annual return in its 21-year history, both in absolute terms and relative to the S & P 500 , Goldman said. Growth stocks bore the brunt of the sell-off last year amid rising interest rates. These hedge fund darlings have rebounded more than 10% year to date as technology stocks rebounded from steep losses, the firm said. The strength in these VIPs lifted the average hedge fund to a 3% return in early 2023, Goldman said. "While the concentration of the most popular positions in growth stocks and the Info Tech sector has been a headwind for most of the last two years, those tilts have been boons so far this year alongside a sharp momentum reversal," Ben Snider, equity strategist at Goldman, said in a note. While the basket underperformed last year, it does have a long track record of beating the market. The VIP basket has outperformed the S & P 500 in 59% of quarters since 2001 with an average quarterly excess return of 38 basis points, Goldman said. Microsoft and Amazon remained the two most popular hedge fund long positions last quarter. Microsoft has gained more than 5% this year, while Amazon has rallied over 15%. Meta rebounded to number three on the list after falling out of the top five last quarter for the first time since 2014. Shares of the social media giant have rebounded 23% in the new year after the company reported fourth-quarter revenue that topped estimates and announced a $40 billion stock buyback. Activision Blizzard also appeared on the VIP list. In January 2022 , Microsoft agreed to acquire Activision for $95 a share in cash, or about $69 billion, but the deal has since been embroiled in U.S. regulators' antitrust case attempting to block the sale. Tesla , on the other hand, dropped off the list entirely, according to Goldman. — CNBC's Michael Bloom contributed reporting.