Now that virtually everyone has figured out what we first said in 2012, namely that in the New bizarro Normal, the best trading strategy - the only way to generate alpha in a world in which hedge funds no longer can [8] - is going long a basket of the most shorted names [9], one has to wonder how any hedge fund replicating, 13F-chasing service can remain in business. After all, the last thing anyone wants to do is copycat hedge fund groupthink in a world in which hedge funds have underperformed the S&P 500 for 6 years in a row, especially a world in which one can buy the SPY with virtually no fees instead of paying some bloated billionaire 20% for the privilege of underperforming the Federal Reserve-managed S&P500.
Still, there are those who, for some inexplicable reason, believe in the infallibility of hedge funds and chase every opportunity imitate those who make their money by collecting 2 and 20 not by generating alpha.
For all these, the following charts are for you.
First, here is a list of the top 20 core holdings of the largest 150 hedge funds at the beginning of the quarter. Want to (under)perform like the average hedge fund (which is underperforming the S&P for over five years in a row)? Then just buy an equal-weighted basket of these shares and sit back, waiting for wealth and riches to find you.
Joking aside, something tells us trading in these 20 stocks alone accounts for about 80% of the market volume on any given day.
[10]
Next, here a full list of the most popular hedge fund stocks by sector. Same principle as above but more granular.
[11]
Finally, here is the list of 100 stocks that represent the entire universe of most popular stocks held by hedge funds. As we have shown previously, Google, Apple, GM, Microsoft and AIG are the 5 biggest hedge fund hotel stocks in the world right.
[12]
Source: Bank of America
