Last Updated Mar 8, 2010 2:50 PM EST
On Friday, Goldman Sachs released its much heralded list of stocks most widely found in top ten holdings of hedge funds. The aptly named VIP list (Very Important Positions), has done a pretty handy job of outperforming the S&P for the past decade or so. Here's my thinking. In tumultuous times - like we have now - hedge funds look for calm in the storm. And markets that are broadly represented in hedge fund top holdings should be solid growth markets, right?
To be entirely accurate, Goldman only looks at hedge funds that employ "fundamental" strategies, as opposed to ones that employ "technical" methods. Otherwise, this would be a meaningless exercise.
Moreover, if you assume that the average hedge fund manager, tasked with managing billions of dollars of other people's money, is pretty good at that sort of thing, and you look at an aggregate of 487 funds, as Goldman does, then you can get a pretty good idea of some solid growth markets, even in this extraordinarily challenging economic and political environment.
That's exactly what I did and came up with 10 solid markets in risky economic times:
- Banking and lending. Four of the top nine were banks or lenders: Bank of America, JPMorgan, Mastercard, Wells Fargo.
- Tech gadgets. Apple's #1 on the list, but it's not just about Apple; the other big tech guns are high up on the list too.
- Pharma and healthcare. Six of the top 25 included Pfizer, CVS, Wellpoint, Merck, and Johnson & Johnson.
- IT. Microsoft, HP, Cisco, Oracle, Intel, EMC, and IBM were all there. IT in a nutshell.
- TV. DirecTV and Comcast, the nation's top satellite and cable providers, are both on the list.
- Fast-food and cigarettes. McDonalds and Philip Morris, who else?
- The Internet. The Big 5 were all on the list: Google, Microsoft, eBay, Amazon, and Yahoo.
- Wireless technology and infrastructure. Qualcomm, SBA Communications, Crown Castle, and American Tower; the last three are "wireless tower" companies.
- Energy. Exxon Mobil, Apache (natural gas and crude), Transocean (drilling), and Anadarko Petroleum (oil and gas exploration), a broad energy play.
- Precious metals. No hedge fund list would be complete without a few precious metal stocks. The list had two.
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