Where the Hedge Funds Are
Want to rub shoulders with some hedge funders? Buy Expedia stock.
Thirty percent of the online travel company is owned by hedge funds, the highest percentage of any stock in the Standard & Poor’s 500 index. For comparison, hedge funds only own 3 percent of Amazon.com, another popular stock among the exclusive investment funds.
Why should regular investors care where hedge funds put money for wealthy families and big institutional investors? Because these stocks have tended to do better than the S&P 500, say strategists at Goldman Sachs.
Since the summer of 2001, quarterly returns for the 20 S&P 500 stocks with the highest concentration of hedge-fund ownership have beaten the index 68 percent of the time. On average, they beat the S&P 500 by 2.5 percentage points.
Of course, investing alongside hedge funds can also mean risk. Just because a hedge fund owns Expedia today doesn’t mean it will own the stock tomorrow. Hedge funds are notorious for trading quickly, though since the Great Recession they’ve tended to hold stocks longer. Hedge funds replaced 27 percent of their portfolios from the end of June through September.