Microsoft overtakes Amazon as most popular hedge fund bet: Goldman Sachs

Wall Street’s fast money has a new favorite bet.

Microsoft () has replaced Amazon () as the most popular top 10 holding among hedge funds, strategists at Goldman Sachs led by Ben Snider said in a recent note.

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

Others names found most frequently in hedge funds’ top 10 selections were Alphabet (), Uber (), and Netflix (). Uber and Netflix were ranked among the top 5 most popular hedge fund longs for the first time.

Microsoft CEO Satya Nadella addresses a news conference in Berlin, Germany February 27, 2019. REUTERS/Fabrizio Bensch

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

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

Meta Platforms (), which is 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.

Goldman’s hedge fund “VIP” basket is comprised of the 50 stocks that appear most often among the top 10 holdings of fundamental hedge funds, which have roughly $1.5 trillion worth of long equity positions. Goldman Sachs compiled its latest report from 13F filings as of Nov. 13.

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, Goldman’s data shows.

This year, however, the “VIP” list is down nearly 30% year-to-date compared to a 16% decline in the S&P 500. The underperformance places Goldman’s basket on pace for its second-worst year in the two decades analysts have been tracking the performance of this group.

Goldman notes hedge funds have still generally fared well in recent months despite underperformance by the most popular long positions.

The bank’s VIPs have lagged since early 2021, but outperformed the market during the third quarter of 2022 amid a broader recovery across equity markets; in recent weeks however, Goldman analysts note this basket’s underperformance has returned.

Alexandra Semenova is a reporter for Iheart Finance. Follow her on Twitter

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