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Naughty or nice – financials lead most-loved stocks


Goldman Sachs this week released its latest crossover report, which seeks to identify the “most loved” and “unloved” stocks in the US. The report reviews the quarterly reports of some 507 US mutual (or “managed”) funds, representing US$2.7 trillion ($3.4 trillion) in assets under management, and compares these to the reports of 820 hedge funds, with US$2.8 trillion ($3.5 trillion) under management.

The primary purpose of the analysis is to understand which companies fund managers have decided to overweight compared to their benchmark, and therefore prefer, and compare this to the long and short positions of the hedge fund industry. The sweet spot is clearly where there are both overweight positions and outright holdings, with the not-so-sweet spot being those companies that are being shorted by hedge funds, as well as being held underweight in mutual funds.

  • Understanding the short position of hedge funds has only grown in importance in recent months following the GameStop saga, with renewed attention paid to these large positions. In the latest report, a clear trend has emerged being the preference for financial companies amid a broad economy recovery. The conventional wisdom suggests that financials are the most likely to benefit from the higher interest rate environment that is emerging, due to the fact that their net interest margin, or the difference between what they can lend money at and pay for deposits, can increase. 

    The most loved stocks in the latest report were Bank of America (NYSE: BAC), Visa (NYSE: V), Mastercard (NYSE: MA), Square (NYSE: SQ), Fiserv (NASDAQ: FISV) and Workday (NASDAQ: WDAY). With the likes of Bank of America, Visa, Mastercard and Square well-known, the interesting additions are clearly Fiserv and Workday.

    Fiserv is considered as the fintech to traditional financial services companies, offering support with transactions, processing, compliance and most importantly the collation of data. The company has more than US$14 billion ($17.7 billion) in revenue and is well-known for its sponsorship of the NBA Milwaukee Bucks stadium. Workday, on the other hand, offers a software-as-a-service (SaaS) platform covering HR, finance and forward planning, boasting clients like Astra Zeneca and Quicken.

    The less-loved list is likely of greater interest and offers a who’s who of well-known US brand names. The biggest names among those both being shorted and underweighted are a number of healthcare and biotech businesses, AbbVie (NYSE: ABBV), Abbott Labs (NYSE:ABT) and Johnson & Johnson (NYSE: JJ). A number of less-popular technology names are also on the list, such as Intel (NYSE: INTC) and Tesla (NASDAQ: TSLA), with professional investors likely concerned about the sustainability of recent sales growth for Walmart (NYSE: WMT), Home Depot (NYSE:HD) and Cost Co (NYSE: COST).

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