Hedge funds’ favorite stocks have crushed the broader market in 2023, returning 31%, thanks to mega-cap technology companies, according to Goldman Sachs. The Wall Street bank analyzed the holdings of 735 hedge funds with $2.4 trillion of both long and short equity positions at the start of the fourth quarter, 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 hedge funds’ 10 largest holdings. The VIP stocks have hammered the S & P 500 ‘s 18% gain in 2023, continuing a long history of beating the market. Goldman said it has outperformed the S & P 500 by 43 basis points (0.43 percentage point) on average each quarter since 2001. “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,” Goldman said. Most of the ” Magnificent 7 ” mega-cap tech stocks — Microsoft , Amazon , Meta and Google’s Alphabet — remain at the top of the list, the bank said. These tech titans have led the market all year, with Meta soaring 181% in 2023, Microsoft ahead 55% this year and Amazon higher by 70%. “Mirroring the increasing concentration in the equity market, concentration in hedge fund portfolios has risen; the typical hedge fund holds 70% of its long portfolio in its top 10 positions,” Goldman said. Goldman also noted that the overweight in mega-cap names lifted hedge fund exposure to “momentum stocks” to a near record. Uber , Seagen , Visa and Advanced Micro Devices were also among stocks that mattered the most to hedge funds in the third quarter, according to Goldman. — CNBC’s Michael Bloom contributed reporting.
