Microsoft, Amazon top 10 hedge fund longs, according to Goldman Sachs

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Microsoft, Amazon top 10 hedge fund longs, according to Goldman Sachs

According to Ben Snider, strategists at Goldman Sachs said Microsoft MSFT has replaced Amazon AMZN as the most popular top 10 holding among hedge funds.

The investment bank's Hedge Fund Trend Monitor, which analyzes positions across 786 firms, found 82 have Microsoft among their top 10 long positions, while Amazon appeared across the leading cohort of picks 79 times.

Alphabet GOOGL Uber UBER and Netflix NFLX Uber and Netflix were among the 5 most popular hedge fund longs for the first time, and Alphabet GOOGL and Netflix were the top 10 most frequently found in hedge funds.

Mega-cap technology giants dominate the list of most popular top hedge fund holdings even as Big Tech has seen a draw down this year due to rising interest rates.

Federal Reserve officials have worked to rein in inflation by raising interest rates aggressively in 2022, with the central bank a cumulative 3.75% increase in its benchmark interest rate range this year. The growth outlook and challenge valuations in the tech sector have been hampered by higher rates.

Meta Platforms META, down 66% this year and among the worst performers in the S&P 500, fell out of the top five among top hedge fund holdings for the first time since 2014.

The VIP basket of Goldman s hedge fund is comprised of 50 stocks that are the most commonly held by the top 10 holdings of fundamental hedge funds, which have approximately 1.5 trillion worth of long equity positions. Goldman's data shows that this basket has outperformed the S&P 500 in 58% of quarters since 2001, with an average excess return of 34 basis points across the winning quarters.

The VIP list is down nearly 30% year-to-date compared to a 16% decline in the S&P 500 this year. The underperformance puts Goldman's basket on pace for its second-worst year in the two decades analysts have been watching the performance of this group.

Goldman notes that hedge funds have not fared well in recent months despite underperformance by the most popular long positions.

Since early 2021, the bank's VIPs have lagged, but they have outperformed the market during the third quarter of 2022 because of a broader recovery across equity markets. In recent weeks, Goldman analysts note that the basket's underperformance has returned.