Goldman Sachs lists the favorite U.S. stocks of fund managers, with AppLovin among them
Goldman Sachs strategists listed a common favorite U.S. stock list for hedge funds and mutual funds at the end of the fourth quarter, including AppLovin, CRH Cement, Mastercard, Spotify, and Visa. The report noted that hedge funds' positions in financial stocks are more selective. AppLovin is the only new addition, with a year-to-date stock price increase of 39%. Overall, the stocks favored by both sides have risen by 14%, with a median price-to-earnings ratio of 35 times. Goldman Sachs also mentioned that Fiserv, Progressive, and Vertiv Holdings were excluded in the fourth quarter of last year
According to Zhitong Finance, strategists at Goldman Sachs have stated that at the end of the fourth quarter, the stocks "jointly favored" by hedge funds and mutual funds include AppLovin (APP.US), CRH Cement (CRH.US), Mastercard (MA.US), Spotify (SPOT.US), and Visa (V.US). The firm also noted that hedge funds appear to have more selective positions in financial stocks compared to mutual funds.
Goldman Sachs strategist David Kostin mentioned in a report on February 21: "The stocks favored by both hedge funds and mutual funds have historically performed well, but at the cost of increased volatility. Since 2013, the annual return of the jointly favored stocks has been 16%, with a standard deviation of 21%."
According to Goldman Sachs data, the application marketing platform AppLovin is the only new addition to the jointly favored list for the fourth quarter of 2024. As of last Friday's close, the stock has risen 39% year-to-date, having previously increased more than sevenfold over the past 12 months.
As a whole, the jointly favored stocks have risen 14% so far this year, outperforming the S&P 500 index by 10 percentage points. However, these stocks are priced quite reasonably, with a median price-to-earnings ratio of 35 times, compared to a median price-to-earnings ratio of 19 times for the S&P 500 index.
According to Goldman Sachs, in the fourth quarter of last year, Fiserv (FI.US), Progressive (PGR.US), and Vertiv Holdings (VRT.US) were excluded from the list of popular stocks.
Goldman Sachs stated that mutual funds have increased their exposure to financial services stocks on average, while hedge funds "exited" in the fourth quarter. This difference is noteworthy because both types of funds had increased their exposure to the financial sector before the election day, believing that the sector would benefit from "growth-supporting and deregulation policy agendas."
However, by the end of this quarter, the proportion of mutual funds increasing their holdings in financial stocks rose by 36 basis points to 223 basis points. In contrast, hedge funds reduced their holdings by 41 basis points from an increase of 135 basis points in the third quarter, marking "the largest decline."
Hedge funds have cut their exposure to diversified banks such as Wells Fargo (WFC.US), U.S. Bancorp (USB.US), and Bank of America (BAC.US), as well as diversified financial services like Apollo Global Management (APO.US) and transaction and payment processing services like PayPal (PYPL.US).
Hedge funds have added regional banks and brokers like Robinhood (HOOD.US), which Goldman Sachs described as a "rising star" in the fourth quarter.
Meanwhile, mutual funds have generally increased their exposure to the financial sector, particularly in banking, capital markets, and insurance. More specifically, Goldman Sachs identified six large mutual funds that increased their exposure in the fourth quarter: Wells Fargo, Mastercard, Bank of America, Charles Schwab (SCHW.US), U.S. Bancorp, and Citigroup (C.US)
