Posted by: John S Kiernan

The 50 largest U.S.-based hedge funds on the Barron's Penta Top 100 Hedge Funds boast more than $6 trillion in assets. For comparison, that’s more than the GDP of the 35 smallest U.S. states combined. Furthermore, the roughly $11 billion that the 25 richest hedge-fund managers made in 2016 is enough to end family homelessness within a decade.

So it makes sense that people pay attention to what they’re buying, selling and holding. We want to replicate their success. Hedge funds’ quarterly public disclosures, mandated by the Securities and Exchange Commission, give us a window into their recent activity.

To help investors make informed decisions about where to allocate their money, WalletHub analyzed the filings of over 400 top hedge funds, identifying their biggest holdings, new positions, recent exits and more. You can check it all out below, including a breakdown of the names that billionaire stock pickers – from Warren Buffett to George Soros – prefer these days.

1. Most Popular Hedge Fund Stocks
2. Top Billionaire Stock Picks
3. Most Bought & Sold Stocks
4. Hedge Fund Holdings by Sector
5. Ask the Experts: What Can We Learn From Hedge Funds?
6. Methodology

25 Most Popular Hedge Fund Stocks

Rank	Name of the Company	Ticker	Change from Last Quarter
1.	Microsoft Corp.	MSFT	↗
2.	Apple, Inc.	AAPL	↙
3.	Amazon.com, Inc.	AMZN	↗
4.	Facebook, Inc.	FB	↙
5.	Alphabet, Inc.	GOOG	↙
6.	Wells Fargo & Co.	WFC	↙
7.	JPMorgan Chase & Co.	JPM	↗
8.	Visa, Inc.	V	↗
9.	Bank of America Corp.	BAC	↙
10.	UnitedHealth Group, Inc.	UNH	↗
11.	Citigroup, Inc.	C	↗
12.	Johnson & Johnson	JNJ	↗
13.	Comcast Corp.	CMCSA	↗
14.	The Coca-Cola Company	KO	↗
15.	Mastercard, Inc.	MA	↗
16.	Broadcom Ltd.	AVGO	↗
17.	Oracle Corp.	ORCL	↗
18.	The Boeing Company	BA	↗
19.	Philip Morris International, Inc.	PM	↗
20.	The Home Depot, Inc.	HD	↗
21.	Intel Corp.	INTC	↗
22.	Berkshire Hathaway, Inc.	BRKB	↙
23.	The Priceline Group Inc.	PCLN	↗
24.	Netflix, Inc.	NFLX	↗
25.	DowDuPont, Inc.	DWDP	↗

 

Top Billionaire Stock Picks

Hedge funds have become so popular that the billionaires behind them are now celebrities in their own right. Not only are they rich and famous, but they can move markets with just a few words. Investors worldwide follow their every move.

If you, too, are curious to see how billionaire investors such as Warren Buffett, Carl Icahn and Bill Ackman are making their money these days, just check out the following infographic. You’ll find the top three holdings of 12 big-name billionaires, plus an overview of the stocks they’ve been buying and selling lately.

  Embed on your website<a href="http://ift.tt/2hP58db; <img src="//d2e70e9yced57e.cloudfront.net/wallethub/posts/38566/top-billionaire-stock-picks-v3.png" width="" height="" alt="" /> </a> <div style="width:px;font-size:12px;color:#888;">Source: <a href="http://ift.tt/2jGjCNc;  

Most Bought & Sold Stocks

Hedge funds’ most recent moves clue us into their latest thinking on where the market is moving and which sectors are heating up or cooling down. Below, you can see which companies’ shares hedge funds have been gobbling up of late, as well as those they’ve been shedding particularly quickly.

Q2 2017’s Most Bought Stocks

Rank	Company	Ticker Symbol
1	Amazon.com, Inc.	AMZN
2	Oracle Corp.	ORCL
3	Philip Morris International, Inc.	PM
4	AbbVie, Inc.	ABBV
5	Broadcom Ltd.	AVGO
6	Alphabet, Inc.	GOOGL
7	Netflix, Inc.	NFLX
8	Amgen, Inc.	AMGN
9	Alphabet, Inc.	GOOG
10	Microsoft Corp.	MSFT

Q2 2017’s Most Sold Stocks

Rank	Company	Ticker Symbol
1	Kellogg Co.	K
2	Apple, Inc.	AAPL
3	Eli Lilly and Co.	LLY
4	Johnson & Johnson	JNJ
5	JPMorgan Chase & Co.	JPM
6	Merck & Co., Inc.	MRK
7	Alphabet, Inc.	GOOGL
8	Medtronic plc	MDT
9	Pepsico, Inc.	PEP
10	Pfizer, Inc.	PFE

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Hedge Fund Holdings by Sector

Diversification is key to investing success. Everyone knows that. Spreading your chips around reduces risk and allows you to benefit from the broader market’s long-term trend upward. That’s why even the world’s best investors hedge their bets by allocating capital to various segments of the economy.

The allocations don’t simply match the economy’s makeup, however. They’re not always the same, either. That’s why we can learn a lot from the manner in which hedge funds diversify their investments. With that in mind, here’s a breakdown of where the money was during Q3 2017.

 

Embed on your website<a href="http://ift.tt/2hP58db; <img src="//d2e70e9yced57e.cloudfront.net/wallethub/posts/38536/top-billionaire-pie-chart.png" width="" height="" alt="" /> </a> <div style="width:px;font-size:12px;color:#888;">Source: <a href="http://ift.tt/2jGjCNc;  

Ask the Experts: What Can We Learn From Hedge Funds?

In search of insights into how much stock we should put into billionaires’ stock picks, WalletHub posed the following questions to a panel of investing experts. You can check out their bios and responses below.

1. What should be the administration’s priorities for tax reform? How might tax reform, specifically corporate tax reform, impact stock prices in the short and long run?
2. To what extent is President Trump’s administration to credit for the current stock rally?
3. Is the current stock market prone for a correction, or is there still room for growth?
4. What tips do you have for an individual investor? What sectors are expected to grow the most in the coming years?

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• Don M. Chance James C. Flores Endowed Chair of MBA Studies and Professor of Finance at Louisiana State University
• Jimmy Yang Professor of Finance in the College of Business at Oregon State University
• Satish Thosar Professor of Finance in the School of Business at the University of Redlands
• Susanna Gibbons Director of the Fixed Income Fund at the University of Minnesota

Don M. Chance James C. Flores Endowed Chair of MBA Studies and Professor of Finance at Louisiana State University What should be the administration’s priorities for tax reform? How might tax reform, specifically corporate tax reform, impact stock prices in the short and long run? Tax reform needs to focus on two points: lowering the corporate tax rate and simplifying the tax code. It does appear that the administration is committed to these points, but Congress and its special interests will interfere with full achievement of these objectives. It should also be noted that professional trade associations for accounting and tax law will fight this tooth and nail, because it would cut their business. Nonetheless, corporate tax reform looks more likely than not. It may not be as much as it needs to be. Still, its effect has already been factored into stock prices. In the long run, it should lead to more corporate earnings and more jobs in the U.S. To what extent does President Trump’s administration deserve credit for recent stock market performance? Presidents are like quarterbacks. They get too much blame and too much credit. Still, like quarterbacks, they set the tone, which influences the psychology of the markets. In other words, they have less direct effect than most people think, and more indirect effect. Is the current stock market prone for a correction or is there still room for growth? The median PE ratio of the S&P 500 firms is slightly under 15 and that puts in a range to where stocks are not terribly expensive. I start to think a correction looms when the PE gets around 25. As long as companies can keep earnings going at a reasonable rate and inflation stays low, both of which I expect to happen, I see no correction in the future. Of course, I’ve been wrong before, but so have all the so-called market experts. Plenty of times. What tips do you have for an individual investor? What sectors are expected to grow the most in the coming years? Buy low-cost, broadly diversified index funds or ETFs. Anything else you do just feeds more and more of your hard-earned money into the pockets of an industry that gets rich off the desire of the individual investor to get rich as quickly as possible, without having a good sense of what they’re paying for asset management services. Jimmy Yang Professor of Finance in the College of Business at Oregon State University What should be the administration’s priorities for tax reform? How might tax reform, specifically corporate tax reform, impact stock prices in the short and long run? I think the priorities should be on the balance between tax cuts and long-term tax revenues, in order to stimulate economic growth and have a sustainable balanced budget, which is not an easy task. Tax reform is going to have real impact on corporate cash flows, which are important determinants of stock prices. In the short run, I believe stock prices have already reflected the perceived corporate tax reform to cut corporate tax rates. In the long run, the actual impact of the corporate tax reform can be materialized, and stock prices are expected to reflect the true impact coming from the tax reform. Of course, in the long run, there are other potential factors that could affect stock prices, so it is difficult to single out the impact from the tax reform. To what extent does President Trump’s administration deserve credit for recent stock market performance? It would be fair to say that his administration deserves some credit for the recent stock market performance. As I said earlier, the corporate tax reform has real impact on the corporate cash flows, and stock prices reflect this potential impact. However, the economy was already in recovery mode before he took office, so the recent stock market performance could simply reflect the strong signal from various economic indicators. Is the current stock market prone for a correction or is there still room for growth? Some sort of correction following record highs is definitely possible. The question is when that’s going to happen. There are indicators showing another financial crisis might be near, but again, no one knows the exact timing. What tips do you have for an individual investor? What sectors are expected to grow the most in the coming years? For individual investors, I would suggest a diversified portfolio that includes both stocks and bonds with appropriate weights according to their investment horizon. For stocks, a good balance among key sectors and between domestic and international would be great. I believe international stocks are expected to outperform domestic stocks in the coming years. I also believe the health care sector is expected to grow the most in the coming years. However, I am wrong most of the time, which says how difficult it is when it comes to forecasting stock market movements. That’s exactly why having a diversified portfolio with an appropriate asset allocation is the key. Satish Thosar Professor of Finance in the School of Business at the University of Redlands What should be the administration’s priorities for tax reform? How might tax reform, specifically corporate tax reform, impact stock prices in the short and long run? Considering corporate tax reform first, my view is that the federal tax rate could be reduced to around 25 percent without losing revenue. Currently, the rate is 35 percent, but most companies pay only a fraction of that due to legal tax avoidance strategies. The reform focus ought to be on ensuring that companies pay close to the statutory rate. This could be done by making international sheltering of income more difficult, by cracking down on creative transfer pricing schemes and reducing incentives to report revenue/profits in zero- or low-tax jurisdictions. Other steps, like limiting the tax deductibility of interest expenses, would also be helpful. Tax reform in general ought to be guided by similar principles: simplification of the tax code aimed at lowering marginal rates, while eliminating special interest loopholes, broadening the tax base without sacrificing progressivity, and revenue neutrality. As far as stock prices are concerned, there will be winners and losers depending on what kind of tax reform bill ultimately gets passed. Highly leveraged entities will be negatively affected if the interest expense deduction is limited; capital-intensive industries will benefit if depreciation expensing is accelerated, and so on. In aggregate, the stock market will benefit from properly conceived tax reform (even if revenue neutrality is maintained) due to improved economic efficiency. To what extent does President Trump’s administration deserve credit for recent stock market performance? The S&P 500 index is up 23 percent since the 2016 election. However, the Dax (Germany) is up 22 percent, Nikkei (Japan) is up 26 percent, and the Hang Seng (Hong Kong) is up 31 percent over the same period. In general, it is difficult to attribute stock market performance to executive branch initiatives, especially in the short run. That said, while few actual economic policies have been implemented, the overall business-friendly and regulation-averse tenor of the Trump administration has clearly not hurt the stock markets. Is the current stock market prone for a correction or is there still room for growth? Shiller’s CAPE ratio is currently at 31.5 (the historic high was in December 1999 at 44.2; the mean over the period the ratio has been calculated is 16.8). Given that the stock market has mean-reverting tendencies over long horizons, a correction is due -- the question is whether it will be next week, next month, or over the next several years. What tips do you have for an individual investor? What sectors are expected to grow the most in the coming years? I believe in the efficient markets hypothesis to the extent that while “prices are not always right,” it is extremely difficult for the average investor to earn excess returns through stock picking or market timing. Thus, it is best for the non-professional investor to stick to a low-cost, well-diversified equity index (tracker) fund and follow a buy-and-hold strategy. The crucial decision in my view is the asset allocation choice: broadly, the portfolio weights assigned to risky assets (equities) versus less risky assets (bonds). This determination can be made by ascertaining the individual’s risk tolerance -- a financial planner (or financial planning tool) could be very helpful in this regard. Susanna Gibbons Director of the Fixed Income Fund at the University of Minnesota What should be the administration’s priorities for tax reform? How might tax reform, specifically corporate tax reform, impact stock prices in the short and long run? I think that stocks have clearly been driven by the expectation that tax reform will deliver more cash to the bottom line for most corporations. There have been many headlines about the drop in the tax rate from 35 percent to 20 percent. However, I spent some time looking at the actual taxes that corporations are paying -- the companies in the S&P 500 are paying approximately 20 percent in cash taxes right now, so I don't expect there to be a huge shift in income in the aggregate. I think the main thing that congress and the administration should be focused on is creating a path to a simpler tax structure. Unfortunately, the path to a simpler tax structure is actually quite complex. The range of current effective tax rates right now is anywhere from 0 percent to over 100 percent (although the high end is unusual, nonrecurring situations). One example of how difficult it can be to change tax structure is found in Puerto Rico. In 1976, Congress passed section 936 of the tax code, which allowed manufacturing companies to avoid corporate income taxes on profits coming from the island. As a result, many companies, primarily pharmaceuticals, built significant operating facilities on the island. Those tax breaks were eliminated in the 1990s, and over time, Puerto Rico's tax base has eroded until it reached the crisis phase of the last few years. The tax system is rife with tax breaks targeting specific industries, and the issue for tax reform is not that there will be a significant decline in overall taxes, but that there will be significant shifts in who pays what as a result of changes in the law. Figuring out who the winners and losers will be can be tricky business, and I would advise individual investors to stay away from that game. One example that has come up recently is in the Cruise industry -- these companies, such as Norwegian Cruise Line, Carnival Cruise, and Royal Caribbean, pay virtually nothing in taxes because of certain provisions of the tax code. If those provisions are eliminated, they might actually have to paying U.S. taxes, and the stocks of those companies reacted somewhat negatively to the proposed tax plan. What tips do you have for an individual investor? What sectors are expected to grow the most in the coming years? With respect to the current stock market -- are we prone for a correction or is there still room to run? The answer, I think, is both. We really have not had a meaningful retreat all year, so I would not be surprised at all to see a 10 percent correction. But the economy is really on much firmer footing than it has been in a while, growth has accelerated modestly, and that supports continued strength in the equity markets. Finally, I have spent most of my career dealing with institutional investors rather than individuals, but my tips would be the same. I would really emphasize developing a solid, long-term investing strategy, and then sticking with it. I would never advocate chasing the hot growth story, because all too often, that sets you up for a riskier portfolio. Five or six years ago, there were a lot of people chasing energy, which was a huge growth story in the U.S., but too much money flowed in, and bad investment decisions were made, both by companies and by individuals.

Methodology

This report is based on information from the latest public disclosures (Form 13F-HR for Q3 2017 and SC amendments from Oct. 1 to Nov. 14) for over 400 of the largest U.S. hedge funds. Data refer only to equities (i.e. not American Depository Receipts, Global Depository Receipts, Notes, Bonds or any other type of tradable securities).

To construct the “Most Popular Stocks” list, we looked at each of the over 400 funds’ positions, added up the positions for the same stock and rank-ordered the stocks by their total holdings value.

To calculate the “Sector Breakdown” of the positions held by the tracked hedge funds, we added up all the positions of the hedge funds from the same sector and then divided by the total amount of the hedge funds’ positions.

For the “Most bought/sold stocks”, we added up all the sold transactions and all the buy transactions for a given stock in the last quarter and rank-ordered based on total activity.

Report Disclaimer: The information on this web page is provided as general and impersonalized investment information and is not a recommendation or solicitation to buy or sell any security. Please obtain additional appropriate professional advice as needed in making any investment decisions. Past performance does not guarantee future results.

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