Is This The Best Idea These Hedge Funds Can Come Up With?

Financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on September 30th.

We at Insider Monkey have made an extensive database of 752 of those established hedge funds and famous value investors’ filings. Only a small percentage of these hedge funds are truly talented, and only a small percentage of these hedge funds’ ideas are truly exceptional. We have been following hedge funds’ moves since 2012 and our database extends all the way back to 1999. So, we have 20 years of detailed hedge fund holdings data. Our analysis revealed that hedge funds’ top consensus picks delivered market beating returns.

In this article we are going to focus on one of these consensus picks, Berkshire Hathaway Inc. (NYSE:BRK-B), and then compare it against Facebook Inc (Nasdaq:FB), Alibaba Group Holding Limited (NYSE:BABA), Visa Inc (NYSE:V), and JPMorgan Chase & Co. (NYSE:JPM). All of these stocks are in the same market cap cluster.

Berkshire Hathaway Inc. has been experiencing an unfathomable increase in enthusiasm from hedge fund managers since early 2018. BRK-B was in 99 hedge funds’ portfolios at the end of the third quarter of 2019. There were 93 hedge funds in our database with BRK-B holdings at the end of June. Our calculations also showed that BRK-B now ranked 12th among the  30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).

5 Most Popular Stocks Among Hedge Funds

Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. Our research has shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

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Disclosure: None.

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