Hedge Funds' Top 10 Stocks: For This They Get Two-and-Twenty?
Hedge fund managers barely old enough to buy their first Ferrari keep showing up on the Forbes 400 list of richest Americans, so, one surmises, these guys must really be smart. And names like David Einhorn, Bill Ackman, Stephan Mandel, David Tepper and John Paulson fill the financial pages, as they badmouth stocks they’ve shorted, tell corporate CEOs how to run their companies, and make mega-bets on commodities and industries. The geniuses must file a 13F filing at the end of each quarter, disclosing their positions, and here we look at the top ten stocks they were holding at March 31.
Before we launch in: do you think your S&P 500 fund in that under-contributed 401K of yours got trounced by the Einstein’s, or held its own?
Apple (AAPL) was the most owned stock within the group, which has helped drive Apple to the top of our market cap rankings. Even after the run up over the last several years, Apple's EV to EBITDA multiple looks reasonable -- assuming it can keep people wanting the latest iPhone, iPad and Macbooks.
Next is Google (GOOG). The stock is flat going back to the beginning of 2008 but up significantly since the 2009 lows. Google's market cap is approaching $200 billion with $50 billion in cash and an EV to EBITDA multiple around 12. The search giant is still trying to expand beyond search. Google Chrome recently passed Internet Explorer as the most used internet browser, according to StatCounter. Google entered the hardware market for mobile phones with the acquisition of Motorola Mobility. And a lot of effort is being put behind Google+ to compete in social networks where Facebook (FB) and Twitter dominate.
Apple, Google, Microsoft – it takes a Ph.D. in applied mathematics to come up with those choices? Half the day traders who didn’t shower this morning own those stocks, or are making options bets on them.
Between the hedge fund pros and the at-home Joe’s, the three big stocks are doing well. Only Google underperformed the broader market on a total return basis.
All well-known names. Citigroup one could call a surprise, given its basket case condition until recently, but the pros know the awesome spring-back power of large banks. Pfizer, too, a curious choice given loss of its Lipitor patent, but the stock has been so beaten down that to many it looks cheap.
Among the bottom seven hedge fund favorites, only Express Scripts and Qualcomm outperformed the S&P 500 on a total return basis. So, if you’re 100% invested in Apple, you smoked the M.I.T. grads but might be losing some sleep at night over being too concentrated in one stock.
So, 4 of 10 hedge fund favorites outperformed the S&P 500 on a total return basis. You can easily follow the large hedge funds by tracking their 13F filings. But don’t count on catching any hot stock tips.