Where the Hedge Funds Are

Daily Freeman (Kingston, NY) - - BUSINESS -

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.

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