One of the best tools for ordinary investors who are on the hunt for new ideas is 13F filings. Once every quarter, hedge funds with at least $100 million in total positions in publicly traded US stocks are required to disclose the number of shares and the total value of its positions in each of the stocks and options in their portfolios. In the last 7 days we processed 835 13F filings from as many hedge funds and prominent investors to produce our quarterly report.

On Wednesday we published the list of 30 most popular stocks among hedge funds. This list’s top 20 stock picks have been performing much better than the market indices that you see on your financial news websites and channels. In 2019 the top 20 most popular hedge fund stocks returned more than 41% and outperformed the S&P 500 Index by more than 10 percentage points. If you have $500,000 invested in an index fund that tracks the market, you left $50,000 on the table last year by not imitating hedge funds’ top 20 stock picks. Below, you can watch our video about hedge funds’ top 5 stock picks. The list of top 5 stock picks didn’t change from Q3 to Q4.

If you read the mainstream financial media you’d read articles about hedge fund underperformance, capital outflows, and hedge fund closures. There are two main reasons for hedge fund underperformance. First, hedge funds are hedged. Even though they beat the market on the long side, their short stock picks also rise during strong bull markets and bring down their gross returns.

Second, hedge funds charge an arm and a leg for their services. This is really at the heart of why investors hate hedge funds and yank their capital away from them. We have been showing your for more than 7 years how to generate market beating returns. For example, you could have invested in the top 20 hedge fund stocks in 2019 by yourself without paying a dime to anyone and beat the market by 10 percentage points. This is what hedge funds are doing. Unfortunately, a hedge fund that generates a 41% gross return, charges close to 2 points in management fees and 8 points in performance fees bringing down their investors’ net returns to 31%.

Hedge funds’ top stock picks don’t change much from quarter to quarter. So, the 45 day delay in 13F filings doesn’t materially affect the performance of investors who are riding the coattails of successful hedge fund managers. The top 20 stocks among hedge funds at the end of December are performing spectacularly so far in the first quarter. The top 20 stocks among hedge funds returned 8.9% through February 18th and outperformed the market by another 4.3 percentage points. Since the end of 2018 hedge funds’ top picks returned 53.8% and beat the market’s 37.3% gain by 16+ percentage points.

Here is our list of the 5 financial stocks hedge funds are piling into:

5. J P Morgan Chase & Co (NYSE:JPM): $135.64
Number of Hedge Funds: 98
Total Dollar Amount of Long Hedge Fund Positions:$13.1 billion
Percent of Hedge Funds with Long Positions: 11.8%
First Quarter Return (through February 18th): -2.1%
Popularity Ranking (Q3): 20
Noteworthy Hedge Fund Shareholders: Warren Buffett, Ken Fisher

4. Bank of America Corporation (NYSE:BAC): $34.27
Number of Hedge Funds: 99
Total Dollar Amount of Long Hedge Fund Positions:$38.4 billion
Percent of Hedge Funds with Long Positions: 11.9%
First Quarter Return (through February 18th): -2.7%
Popularity Ranking (Q3): 13
Noteworthy Hedge Fund Shareholders: Warren Buffett, Richard S. Pzena

3. Mastercard Incorporated (NYSE:MA): $341.24
Number of Hedge Funds: 125
Total Dollar Amount of Long Hedge Fund Positions:$14.6 billion
Percent of Hedge Funds with Long Positions: 15.1%
First Quarter Return (through February 18th): 14.4%
Popularity Ranking (Q3): 8
Noteworthy Hedge Fund Shareholders: Tom Russo, Charles Akre

2. PayPal Holdings, Inc. (Nasdaq:PYPL): $122
Number of Hedge Funds: 126
Total Dollar Amount of Long Hedge Fund Positions:$6.2 billion
Percent of Hedge Funds with Long Positions: 15.2%
First Quarter Return (through February 18th): 13.0%
Popularity Ranking (Q3): 14
Noteworthy Hedge Fund Shareholders: Peter Rathjens, Bruce Clarke and John Campbell, Gabriel Plotkin

1. Visa Inc. (NYSE:V): $211
Number of Hedge Funds: 143
Total Dollar Amount of Long Hedge Fund Positions:$16.8 billion
Percent of Hedge Funds with Long Positions: 17.2%
First Quarter Return (through February 18th): 12.6%
Popularity Ranking (Q3): 7
Noteworthy Hedge Fund Shareholders: Ken Fisher, Warren Buffett