Hedge funds are always looking to gain a competitive edge over the competition. Surprisingly, it would appear that most of them invest in the same stocks, effectively nullifying some of these efforts.
Finding the Right Stocks
Very few stocks are worth investing in by major financial players for longer periods. First and foremost, hedge funds look for something that is relatively stable, yet still provides some upward market potential. Coming across those offerings has become very difficult lately, as the stock market is anything but stable lately.
As one would somewhat expect, there are some stocks that will be of great interest to multiple players. These are often stocks from well-respected companies across multiple industries. That doesn’t necessarily guarantee any big returns, however.
Tech Companies Remain Popular
Our society becomes more reliant on technology. It is only normal that the top publicly traded tech companies attract the attention of hedge funds. None of these tech companies are too big to fail, yet they tend to retain a decent value more often than not.
Microsoft’s stocks are held by many hedge funds. So much even that 79% of them have it in their top 10 of assets altogether. A similar scenario unfolds where Amazon and Facebook are concerned. Service providers such as Visa, Mastercard, and Salesforce are less popular, but still not more than respectable figures across the board.
As far as their total return year to date is concerned, Mastercard had a very impressive year. It is the only stock noting a 50% return, followed by both Microsoft and Facebook with 49%. The worst performer is Amazon at 16%, albeit that is not entirely surprising. It is not a company that is profitable, after all.
Netflix, Apple and Sea Ltd.
Holding stocks of any company that is currently popular is a logical approach among portfolio managers. This explains why many hedge funds hold stocks of Apple, Netflix, Walt Disney, and the likes.
Of those particular offerings, Netflix only notes a 10% return YTD, whereas Apple has a 71% return. Decent enough figures for most, yet there is one particular offering that offerings a higher return despite not being as popular as it could have been.
That offering is Sea Ltd. This company specializes in interactive home entertainment. It has noted a 221% total return YTD, blowing everything else out of the water.
Even though only two dozen hedge funds have this stock as part of their top 10 assets, 30% of the company’s equity cap is owned by hedge funds. Those figures are accurate as of late September 2019.
Dark Horses: RingCentral and Constellium
Two particular stocks stand out in this intriguing report. The names of Constellium and RingCentral can be found near the bottom of the list. That indicates these shares are not as popular among most hedge funds, even though they both have almost a quarter of their equity cap held by such institutions.
Similar to Sea Ltd, both of these stocks noted high returns YTD. RingCentral had a 106% return, whereas Constellium saw a 104% return. Those figures are more than respectable, and may indicate there is future growth ahead.