Top 10 Stocks That Matter Most To Hedge Funds Per Goldman Sachs (Q4 2016)

Goldman Sachs' quarterly hedge fund trend monitor outlines what stocks matter most to hedge funds.  Here's the list as the fourth quarter 2016:


Top 10 Stocks That Matter Most To Hedge Funds: Q4 2016

- Alphabet (GOOGL / GOOG)

- Facebook (FB)

- Amazon.com (AMZN)

- Bank of America (BAC)

- Charter Communications (CHTR)

- Apple (AAPL)

- Microsoft (MSFT)

- Yahoo (YHOO)

- Time Warner (TWX)

- NXP Semiconductor (NXPI)


As you can see, it's quite tech-heavy.   The major exception is Bank of America (BAC), which was a consensus buy in Q4 among hedge funds we track in our newsletter.

For more on what stocks hedge funds have been buying & selling, check out the brand new issue of our premium newsletter that reveals the portfolios of 25 top funds.

Jim Chanos & Jim O'Neill on China At Bloomberg Markets 50 Summit (Video)

Kynikos Associates' hedge fund founder Jim Chanos sat down with Jim O'Neill, former Chairman of Goldman Sachs Asset Management at the Bloomberg Markets 50 Summit to chat about China, real estate, and markets.  Here are some of the highlights:

Chanos & O'Neill on China

O'Neill says that most of the reason why China's slowed is because they've deliberately slowed.

Chanos' caution in regards to China stems from credit.  He prefers to bet against China by playing miners, steel companies, construction companies, the building blocks that have boosted the expansion.

O'Neill asked Chanos if he would be against European luxury goods companies that have benefited from a wealthier Chinese consumer and Chanos said he doesn't need to play "third derivative" plays as he's more covered by betting against "first derivatives" such as the miners.

Chanos is bearish on iron ore because he says demand can rise or fall, but there's a ton of supply coming to the market late this year and next year.  Greenlight Capital's David Einhorn has also bet against iron ore.

O'Neill argues that the "old China" is dead and that's what Chanos is betting against.  He thinks it's a great stockpicker's market there as you can bet against old China and bet on new China.

Chanos also recommended a book about China: Red Capitalism.

For other coverage of the Bloomberg Markets 50 Summit, we also posted up video from the hedge fund panel featuring Glenn Dubin, Marc Lasry & Bruce Richards.


Embedded below is the video of Chanos' interview from the Bloomberg Markets 50 Summit:



For more coverage of the various conferences lately, head to:

- Notes from the Value Investing Congress (Ubben, Roepers, McGuire & more)

- Notes from the Alpha Hedge West Conference (Bass, Burbank, Richards & more)

Goldman Sachs VIP List: Most Important Stocks To Hedge Funds: Q1 2012

Goldman Sachs is out with its Q1 2012 Hedge Fund Trend Monitor report.  In it, they reveal the latest VIP list of 50 stocks that are most important to hedge funds.  These are the positions that appear most frequently in the top 10 holdings of fundamental focused hedge funds.

This quarter, they've also released a new list of very important short positions to hedge funds which we've posted up as well.

Goldman's VIP list of the most important holdings is accessible on Bloomberg via < GSTHHVIP >.  It has "outperformed the S&P 500 by 55 bp on a quarterly basis since 2001."

Goldman Sachs VIP List (Q1 2012)

Stock: Number of funds with stock as top 10 holding

1. Apple (AAPL): 106
2. Google (GOOG): 73
3. Express Scripts (ESRX): 56
4. Microsoft (MSFT): 46
5. Qualcomm (QCOM): 38
6. Citigroup (C): 31
7. General Motors (GM): 29
8. Priceline.com (PCLN): 29
9. JPMorgan Chase (JPM): 27
10. Liberty Media (LMCA): 26
11. Delphi Automotive (DLPH): 24
12. BP (BP): 23
13. Pfizer (PFE): 23
14. Tyco (TYC): 22
15. Visa (V): 21
16. Yahoo (YHOO): 21
17. LyondellBasell (LYB): 20
18. Anadarko Petroleum (APC): 19
19. Bank of America (BAC): 17
20. Ford Motor (F): 17
21. WellPoint (WLP): 17
22. American International Group (AIG): 16
23. Charter Communications (CHTR): 16
24. eBay (EBAY): 16
25. Rock-Tenn (RKT): 16


It's no surprise that Apple (AAPL) is the most widely owned top position amongst fundamental hedge funds.  But despite that, Greenlight Capital's David Einhorn argued hedge funds actually have less than 2% of assets in his Ira Sohn conference presentation.  We've also posted Dan Loeb's thesis on AAPL as he was a big buyer of shares.

Both Tyco and Priceline were featured in the equity analysis section of our Q4 2011 Hedge Fund Wisdom newsletter due to heavy ownership by top funds.  TYC is an event-driven play while PCLN is a huge growth and international play.


Here's the rest of Goldman's VIP list:

26. Seagate Technology (STX): 16
27. Berkshire Hathaway (BRK.B): 15
28. Cisco Systems (CSCO): 15
29. Equinix (EQIX): 15
30. Hertz Global (HTZ): 15
31. Liberty Interactive (LINTA): 15
32. Pioneer Natural Resources (PXD): 15
33. Visteon (VC): 15
34. Valeant Pharmaceuticals (VRX): 15
35. Wells Fargo (WFC): 15
36. Baidu (BIDU): 14
37. Dollar Thrifty (DTG): 14
38. Hess (HES): 14
39. Mastercard (MA): 14
40. News Corp (NWSA): 14
41. Williams Companies (WMB): 14
42. Barrick Gold (ABX): 13
43. CIT Group (CIT): 13
44. Capital One (COF): 13
45. Calpine (CPN): 13
46. Devon Energy (DVN): 13
47. EMC (EMC): 13
48. Hewlett Packard (HPQ): 13
49. Illumina (ILMN): 13
50. Salesforce.com (CRM): 12

Of the above, we've previously highlighted why Passport Capital likes LINTA.  And in the brand new issue of our Hedge Fund Wisdom newsletter, we've analyzed Equinix (EQIX), a big new position by Philippe Laffont's Coatue Management and John Thaler's JAT Capital.

Some of the stocks on the list are brand new additions as enough hedge funds boosted their positions in Q1: ABX, AIG, BRK.B, COF, CPN, CRM, DVN, EBAY, EMC, EQIX, F, HES, HTZ, ILMN, RKT, WLP.


Be sure to also check out Goldman's brand new list of hedge fund very important short positions.

Goldman Sachs Very Important Short Positions For Hedge Funds: Q1 2012

Goldman Sachs is out with its Q1 2012 Hedge Fund Trend Monitor and we've already posted up Goldman's VIP list of most important stocks to top funds.  Now we're posting a new addition to their research: the very important short position list.

This tracks short exposure of hedge funds as an equal-weighted basket that "consists of 50 S&P 500 constituents with the highest total dollar value of short interest outstanding."  It can be accessed on Bloomberg via < GSTHVISP >.

Goldman emphasizes that this list is not based on 13F holdings (because hedge funds are not required to disclose shorts).  They also note that it's not a basket of stocks most held short.


Goldman Sachs Very Important Short Positions For Hedge Funds

Stock, value of short interest (in $ billions)

1. Johnson & Johnson (JNJ): $2.9
2. Exxon Mobil (XOM): 2.8
3. Intel (INTC): 2.6
4. International Business Machines (IBM): 2.4
5. Amazon.com (AMZN): 2.4
6. AT&T (T): 2.3
7. Chevron (CVX): 2.1
8. Verizon (VZ): 1.8
9. Duke Energy (DUK): 1.7
10. Walt Disney (DIS): 1.5
11. Abbott Laboratories (ABT): 1.4
12. Coca Cola (KO): 1.4
13. General Electric (GE): 1.4
14. Walmart Stores (WMT): 1.3
15. Caterpillar (CAT): 1.2
16. ConocoPhillips (COP): 1.2
17. Walgreen (WAG): 1.2
18. Time Warner (TWX): 1.1
19. Lockheed Martin (LMT): 1.1
20. Home Depot (HD): 1.1
21. Dell (DELL): 1.1
22. Bristol Myers Squibb (BMY): 1.1
23. Oracle (ORCL): 1.1
24. Schlumberger (SLB): 1.0
25. United Parcel Service (UPS): 1.0


Of the above. David Einhorn recently made comments about Amazon.com (AMZN) at the Ira Sohn conference.  While he seemed to be skeptical of the company during his talk, he did not say he was short.  He highlighted that the company has destroyed other businesses, taking market share, but criticized their weak profit growth.

Jim Chanos is short Dell (DELL) and he points to the decline of personal computing in favor of tablets and other mobile devices.  He's been correct in that regard as Dell recently reported declines in those segments in their latest earnings release.  But of course the bull case points to Dell's other business lines as they shift toward the enterprise. 


Here's the rest of Goldman's Very Important Short Positions List:

26. Amgen (AMGN): 1.0
27. AvalonBay (AVB): 1.0
28. Chipotle Mexican Grill (CMG): 1.0
29. Boston Properties (BXP): 1.0
30. Union Pacific (UNP): 0.9
31. Simon Property Group (SPG): 0.9
32. Procter & Gamble (PG): 0.9
33. Cerner (CERN): 0.9
34. Host Hotels & Resorts (HST): 0.8
35. Kohl's (KSS): 0.8
36. Waste Management (WM): 0.8
37. CenturyLink (CTL): 0.8
38. Carnival (CCL): 0.8
39. Philip Morris (PM): 0.8
40. American Express (AXP): 0.8
41. DuPont (DD): 0.8
42. McDonalds (MCD): 0.8
43. MetLife (MET): 0.8
44. Fastenal (FAST): 0.8
45. Merck (MRK): 0.7
46. Comcast (CMCSA): 0.7
47. Sysco (SYY): 0.7
48. Freeport McMoran (FCX): 0.7
49. Alcoa (AA): 0.7
50. Staples (SPLS): 0.7


Be sure to also check out Goldman Sachs VIP list of most important stocks to hedge funds for Q1 2012.

Goldman Sachs Recommends Staying Long Equities & Buying the Dips

Goldman Sachs' Investment Strategy Group recently reviewed four areas they're watching in regards to the markets and economy. In a research note, they address:

1. The current US trajectory: While they do not project growth above the natural trend, they do believe the country is on a sustainable, slow & steady trajectory.

2. Equity valuations: Goldman uses numerous metrics to measure valuation such as 10-year cash flow, price to book, and price to trend earnings. Using a combination of those, they believe equities are fairly valued. They outline two key questions: are margins at risk of declining? And do earnings have to follow suit and decline as well? They feel that margins will be sustained.

3. Geopolitical and other risks: They highlight Middle East tension, renewed pressures in the European periphery, as well as a hard landing in China as key risks. On the last issue, we've posted up Dan Arbess versus Jim Chanos on whether China is a bubble or bonanza. Goldman outlines a combination of these risks accounting for a 25% downside probability in US markets.

4. The merits - or lack thereof - of the old adage, "Sell in May, and go away": Goldman's team identified statistically significant weakness in the month of September. But historically, they point to positive returns in May through August. The main takeaway here is that if the market is down in September, it has typically gone down a lot. That said, they found no evidence to support a consistent "sell in May and go away" investment strategy.


Goldman's Investment Conclusion

Their Investment Strategy Group writes,

"While the economic backdrop, neutral valuations, and moderate geopolitical and economic risks favor equities in our opinion, we also recognize that investing in equities entails volatility. As an asset class with 15% annual volatility, it is typical for equities to decline by 5% or more about 3 times a year and 10% or more about once a year, on average. So to capture the upward trend in equities, an investor has to tolerate the frequent downdrafts. The latest non-farm payroll and heightened concerns about peripheral Europe might well result in one of these downdrafts; in fact, our very short-term momentum signals have turned negative. But as investors - rather than traders - we recommend staying long equities. For those who are underinvested, we recommend using downdrafts as opportunities to build equity positions."

For additional market commentary, head to strategist Jeff Saut's latest note on being conservative, not conventional.

Goldman Sachs Note on Steve Jobs & Apple (AAPL): Still on Conviction Buy List

Goldman Sachs is out with an updated research note on shares of Apple (AAPL) pending the news that CEO Steve Jobs has taken another medical leave of absence. Today we are focusing on AAPL on the site because according to Goldman, it is the most important stock to hedge funds.

Practically all of the major hedge funds we track have exposure to Apple and for many, it is their top position. We've compiled a list of the top hedge funds that own AAPL here. Combine this with the fact that Steve Jobs IS Apple, you have a potentially volatile situation on your hands. Due to Jobs' medical leave of absence, Goldman expects shares to see near-term weakness. However, they view any dips as a buying opportunity and maintain the stock on their Conviction Buy List.

Goldman's 12-month price target on shares of AAPL is $430. Per the report, "Our target price represents a 19x P/E multiple on our above-consensus CY2010 EPS estimate or a 19% discount to Apple's five-year average multiple of 23x."

Their research essentially outlines 3 reasons that the long-term fundamentals for Apple are still in tact:

1. Tim Cook is a proven leader and step in if Jobs' absence ever became permanent

2. Apple has a massive cash hoard of $51 billion

3. The stock is already trading at a historical discount and Goldman sees no threat to earnings


Embedded below is Goldman Sachs' full research note on Apple (AAPL):



You can download a .pdf copy here.

For more on AAPL, head to our in-depth post on what this means for Apple investors, as well as our summary of the hedge funds that own the most AAPL shares.

Goldman Sachs VIP List & Hedge Fund Trend Monitor: Stocks That Matter Most to Hedgies

Every quarter, Goldman Sachs releases a list of stocks predominantly owned by hedge funds. The aptly named Goldman Sachs VIP list (or 'Very Important Positions' list) aggregates positions held by hedge funds utilizing fundamental strategies. This is just one part of the data aggregation found in Goldman's quarterly Hedge Fund Trend Monitor and we'll detail the latest findings below.

These positions are derived from 13F filings that hedge funds file with the SEC and those of you with Bloomberg Terminals can find this compilation at: GSTHHVIP. First, some background performance of their VIP list. Goldman writes that the VIP list, "contains the 50 stocks that appear most frequently among the top 10 holdings of fundamentally-driven hedge fund portfolios. The basket of stocks that 'matter most' has outperformed the S&P 500 by 71 bp on a quarterly basis since 2001, with a Sharpe Ratio of 0.26. The VIP list underperformed the S&P 500 during 2Q 2010 by 268 bp (-14.1% vs. -11.4%). Since then VIP list has outperformed the S&P 500 by 247 bp (8.8% vs 6.3%)."

Last quarter, we posted up the previous iteration of the Goldman Sachs VIP list and for Q2 there are a few new additions to the list this time around including: Fidelity National Information (FIS), a stock many hedgies added after the company announced a leveraged recapitalization plan. Another new stock on the list, Comcast (CMCSA), has been a favorite of Columbia's University's value investing professor, Bruce Greenwald.

Two other stocks just added to the VIP list have been favorites of 'Tiger Cub' hedge funds as Andreas Halvorsen's Viking Global has a sizable position in Tyco International (TYC), and Stephen Mandel's Lone Pine Capital is bullish on Cognizant Tech Solutions (CTSH). Other stocks added to Goldman's VIP list in Q2 include: Barrick Gold (ABX), Viacom (VIA.B), Covidien (COV), Freeport McMoran (FCX), Covanta (CVA), Davita (DVA), Schlumberger (SLB), US Bancorp (USB), Halliburton (HAL) and General Electric (GE). These stocks previously did not have enough hedge fund ownership to make the cut, so it's apparent that hedgies were buying those names in Q2.

Without further ado, here are the top 10 stocks on the VIP list ranked by the number of hedge funds with the stock as a top 10 holding:

1. Apple (AAPL): 75 funds
2. JPMorgan Chase (JPM): 42
3. Pfizer (PFE): 36
4. Bank of America (BAC): 34
5. Microsoft (MSFT): 34
6. Citigroup (C): 32
7. Alcon (ACL): 30
8. Google (GOOG): 24
9. Exxon Mobil (XOM): 23
10. Mastercard (MA): 22

In our brand new quarterly newsletter, hedge fund wisdom, we highlighted that many hedgies had been adding Alcon (ACL) in Q2 and the stock consequently has now garnered a place in the top 10 of Goldman's VIP list. What's interesting is that 8 out of the 10 stocks above have seen negative returns year-to-date. Despite Apple's solid performance this year, the weakness in other top holdings could potentially be why so many hedgies are struggling. Mastercard (MA) recently hit a new 52-week low and many hedgies were buying at higher levels in Q2. This stock just broke into the top 10 of the VIP list this quarter.

On a sector basis, hedge funds had their highest weighting in consumer discretionary at 17% followed by information technology at 16%. One interesting find in Goldman's data is that stocks with the least hedge fund ownership have actually outperformed stocks with the highest hedge fund ownership concentration. This just ties into the notion of the hedge fund herd mentality that we've discussed before. Sometimes it's best to head in the opposite direction of the pack.

Embedded below is Goldman Sachs' Hedge Fund Trend Monitor report in its entirety for the second quarter. It includes the VIP list and much more:



You can download a .pdf copy here.

Keep in mind that you can receive complete portfolio updates on 20 of the top hedge funds in the industry via hedge fund wisdom by market folly, our brand new quarterly publication. Readers can receive a free sample issue here.

Goldman Sachs' VIP List: Stocks That Matter Most to Hedge Funds

Each quarter, Goldman Sachs updates a list of stocks owned by an overwhelming majority of hedge funds. The aptly named VIP list details 'very important positions' to hedge funds that employ fundamental strategies (rather than trading oriented firms) and we like to cover it due to the obvious tie-ins with our hedge fund portfolio tracking series. Last quarter, we posted up the previous iteration of Goldman Sachs' VIP list and this time around there are a few notable changes to the basket of fifty stocks.

Goldman updates the list each quarter to reflect the most recent hedge fund holdings using the same 13F forms filed with the SEC that we use for our tracking here on Market Folly. Twelve new stocks appeared on the list, representing stocks hedge funds as a whole were buying in the first quarter 2010, including: CIT Group (CIT), Alcon (ACL), CF Industries (CF), Coca-Cola Enterprises (CCE), Kraft Foods (KFT), Xerox (XRX), Assured Guaranty (AGO), Baidu (BIDU), Equinix (EQIX), Gilead Sciences (GILD), Liberty Global (LBTYA), and News Corp (NWSA).

As we've already detailed in our selective hedge fund tracking, many funds have large stakes in CIT Group, such as David Einhorn's Greenlight Capital. Not to mention, many firms are bullish on shares of Kraft, like Bill Ackman's Pershing Square. The addition of Xerox is curious because we've slowly but surely started to see more hedgies adding shares to their portfolios but have yet to see anyone provide a thesis. It should come as no surprise that Baidu joins the list given the hoopla surrounding Google's exit from China, as Baidu has been the prime beneficiary there. And lastly, we make note of Equinix gracing the VIP list as we've seen numerous prominent hedge funds in and out of this name over the past few quarters.

Hedge fund returns are often dependent on only a few key stocks and a fund's top 10 holdings typically represent 60% of their assets. As such, it makes complete sense that the VIP list tracks stocks that most frequently appear in the top ten holdings of various fundamentally driven hedge funds. Goldman's VIP basket of 50 stocks has outperformed the S&P 500 by 67 basis points on a quarterly basis since 2001 with a Sharpe ratio of 0.24. Those of you with Bloomberg Terminal access can look it up via GSTHHVIP.

Here are the top 10 stocks from Goldman Sachs' VIP List ranked by the number of hedge funds that owned that specific stock as a top holding at the end of the first quarter:

1. Apple (AAPL): 72 hedge funds owned it as a top 10 holding
2. Bank of America (BAC): 46
3. Google (GOOG): 43
4. Microsoft (MSFT): 40
5. JPMorgan Chase (JPM): 39
6. Pfizer (PFE): 34
7. CIT Group (CIT): 31
8. Intel (INTC): 25
9. Qualcomm (QCOM): 25
10. Cisco Systems (CSCO): 22

And embedded below is the rest of the 50-stock basket that makes up Goldman Sachs' VIP List:



You can download a .pdf here.


Keep in mind that if you wish to replicate hedge fund portfolios via SEC filings like Goldman's VIP list, you can easily do so via Alphaclone (MarketFolly readers receive a free 30 day trial). It is by far the best replicator out there and we use it for all of our hedge fund tracking. And if you want to know what prominent hedge funds are up to specifically, head to our portfolio tracking series that is updated daily.

Hedge Fund Magnetar Capital's Letter to Investors Re: CDOs

John Gapper from GapperBlog at the Financial Times has just posted up hedge fund Magnetar Capital's latest letter to investors. If you peruse our 'What We're Reading' links that we post up each week, you'll recall that recently we linked to a ProPublica piece on Magnetar Capital and how they profited from the subprime trade. Needless to say, Magnetar wasn't too pleased with that and has fired back a retort, deeming the story misleading.

To follow the timeline accordingly, we of course recommend reading ProPublica's piece on the hedge fund first. Then, once you've finished, head down the page to read hedge fund Magnetar Capital's penned assault on ProPublica's story.

Embedded below is Magnetar's letter to investors, courtesy of John Gapper at the FT:



You can directly download a .pdf here.

It's obvious that Magnetar is rightly concerned with how they are being portrayed at a time when Goldman Sachs has come under siege for actions relating to their collateralized debt obligations (CDOs). Magnetar profited off of subprime's downfall much like John Paulson's hedge fund Paulson & Co did. This is certainly the time to 'set the record straight' to avoid any confrontations with the SEC now that the regulatory body seems to be on a CDO-related witch hunt.

In any event, an interesting read from Magnetar in their latest letter to investors. We haven't covered much of the Goldman Sachs fraud case as the SEC examines deals done with John Paulson's hedge fund. We figured we'd let the mainstream media cover that as the information flow has been non-stop. But if you want to learn more about Paulson's subprime trade, we highly recommend Gregory Zuckerman's The Greatest Trade Ever, which has intriguingly been a source of information regarding the recent CDO witch hunt.

Goldman Sachs' VIP List: Most Important Stocks For Hedge Funds

Given our focus on following hedge fund movements, we thought it would be prudent to post up Goldman Sachs' VIP list. The 'VIP' stands for 'Very Important Positions' for hedge funds that employ fundamental strategies rather than technical or trading. In essence, these are the 50 stocks that most frequently appear among the top ten holdings of hedge funds. In our hedge fund portfolio tracking series you may have noticed various stocks popping up over and over again in their top 10 holdings. This is simply an aggregation of a larger set of data and stems from our previous coverage of the top ten hedgie holdings.

This basket of stocks returned 40% in 2009 versus 27% for the S&P 500. Goldman also notes that this list has, "outperformed the S&P 500 by 81 bp on a quarterly basis since 2001, with a Sharpe Ratio of 0.29." Quarterly turnover on this list is typically around 15 positions out of the 50. Those of you with Bloomberg Terminal access can look it up via GSTHHVIP.

Goldman has aggregated data from 487 funds based on the recent slew of 13F filings so these were the most popular stocks owned as of December 31st, 2009. Again, they focus on fundamentally focused hedge funds but have taken a much broader view of hedge fund land than we typically have. We instead focus on a select list of funds to track that are ideal due to their strategy and portfolio concentration. What's most interesting about the data Goldman has assembled is that many of the positions have actually been down year-to-date for 2010. We found that intriguing given that these are essentially 'groupthink' or consensus picks.

Below you will find Goldman Sachs' VIP List with the name of the stock followed by the number of hedge funds that own that stock in their top ten holdings.

1. Apple (AAPL): 67 hedge funds hold it as a top ten holding
   
2. Pfizer (PFE): 45
3. Bank of America (BAC): 37
4. Google (GOOG): 37
5. JPMorgan Chase (JPM): 36
6. Microsoft (MSFT): 36
7. Mastercard (MA): 29
8. DirecTV (DTV): 27
9. Wells Fargo (WFC): 27
10. CVS Caremark (CVS): 24
11. Citigroup (C): 23
12. Hewlett Packard (HPQ): 23
13. Monsanto (MON): 23
14. Visa (V): 23
15. Cisco Systems (CSCO): 21
16. Walmart (WMT): 21
17. Oracle (ORCL): 18
18. Qualcomm (QCOM): 18
19. Exxon Mobil (XOM): 18
20. Ebay (EBAY): 17
21. Wellpoint (WLP): 17
22. Intel (INTC): 16
23. Mead Johnson Nutrition (MJN): 16
24. Merck (MRK): 16
25. Johnson & Johnson (JNJ): 15
26. Liberty Media (LSTZA): 15
27. Amazon (AMZN): 14
28. Apache (APA): 14
29. EMC (EMC): 14
30. Express Scripts (ESRX): 14
31. Ford Motor (F): 14
32. IBM (IBM): 14
33. Lear (LEA): 14
34. Teva Pharmaceutical (TEVA): 14
35. Yahoo (YHOO): 14
36. Crown Castle (CCI): 13
37. McDonald's (MCD): 13
38. Transocean (RIG): 13
39. Barrick Gold (ABX): 12
40. SBA Communications (SBAC): 12
41. US Bancorp (USB): 12
42. Anadarko Petroleum (APC): 11
43. Berkshire Hathaway (BRK.B): 11
44. Philip Morris International (PM): 11
45. Transdigm Group (TDG): 11
46. Target (TGT): 11
47. Thermo Fisher Scientific (TMO): 11
48. American Tower (AMT): 10
49. Comcast (CMCSA): 10
50. Freeport McMoran (FCX): 10
    

Of the stocks mentioned, there are a handful that are brand new additions to Goldman's VIP list. This means that enough hedge funds have brought their stakes in the company up to a top 10 position in their respective portfolios. Positions that hedgies added largely to in the fourth quarter include: Wells Fargo (WFC), Mead Johnson (MJN), Merck (MRK), Liberty Media (LSTZA), Amazon (AMZN), Apache (APA), IBM (IBM), Lear (LEA), Crown Castle (CCI), SBA Communications (SBAC), US Bancorp (USB), Anadarko Petroleum (APC), Target (TGT), American Tower (AMT), and Freeport McMoran (FCX).

Readers will take note that all three major tower stocks are included as we've been harping on this for some time now. We've highlighted how hedgies had increased exposure to AMT, CCI, and SBAC as demand for wireless data service continues to grow. Overall, an insightful list and now you can easily follow the smart money with these consensus plays. For more research from Goldman Sachs, head to our other post which covers an extensive look at the top hedge fund holdings. And don't forget that you can also get specific hedgie portfolio updates by heading to our tracking series where we specifically focus on bottom-up stockpickers.

Top Hedge Fund Long & Short Positions: Goldman Sachs Report

Goldman Sachs is out with their latest hedge fund trend monitor report and they've highlighted some key takeaways from the slew of fourth quarter SEC filings and portfolio disclosures. Focusing on hedge fund exposure to equities, they note a broad trend of rotation into industrials and out of information technology. Goldman interestingly notes that this is the first time since 2005 that hedge funds are underweight IT.

Now, let's dive into the good stuff.

Here's a list of Ten Stocks That Most Frequently Appear In Hedge Funds' Top Holdings:

1. Apple (AAPL)
2. Pfizer (PFE)
3. Bank of America (BAC)
4. Google (GOOG)
5. JPMorgan Chase (JPM)
6. Microsoft (MSFT)
7. Mastercard (MA)
8. DirecTV (DTV)
9. Wells Fargo (WFC)
10. CVS Caremark (CVS)


Also, we wanted to highlight the Top 10 Stocks Added Most By Hedge Funds In Q4:

1. Mead Johnson Nutrition (MJN)
2. Wells Fargo (WFC)
3. Citigroup (C)
4. Amazon (AMZN)
5. 3Com (COMS)
6. Hewlett Packard (HPQ)
7. Wellpoint (WLP)
8. Black & Decker (BDK)
9. CVS Caremark (CVS)
10. Jefferies (JEF)


This is pretty much right in line with what we've seen when we've detailed hedge fund portfolios as we've noticed prominent managers picking up shares of MJN, WFC, and CVS in particular.

Based on various short disclosures, Goldman has also estimated what short positions a 'typical' hedge fund would employ. This hypothetical portfolio would be short the likes of Haverty Furniture (HVT), Lifeway Foods (LWAY), Great Southern Bancorp (GSBC), Travelzoo (TZOO) and many other names.

In their trend monitor report, Goldman concludes the same thing we've detailed previously: that hedge funds have recently de-risked, having spent the vast majority of 2009 re-risking before that. Some other research we've looked at has even indicated that hedge funds have their lowest net long equities position since May 2009. Also, an interesting tidbit from Goldman's research: they conclude that hedge funds use exchange traded funds (ETFs) as a hedging tool, rather than for directional bets.

Probably the most intriguing thing to note from Goldman's research is their conclusion regarding the impact of timelag in these position disclosures. Goldman writes, "Importantly, we believe our analysis of December 31 hedge fund holdings based on filings made in mid-February is probably more reflective of actual current holdings than many market participants are inclined to believe. Hedge fund holdings turnover is lower than most expect, as highlighted previously. Most securities (68%) that were in hedge fund portfolios on September 30, 2009 also appeared in portfolios on December 31, 2009. Because the overall holdings picture was surprisingly constant, it is reasonable for us to believe the most recent holdings data is not so 'out-of-date' as some might suggest."

They also draw attention to an obvious fact: hedge fund returns are largely reliant on the performance of a few stocks, usually their top holdings. This is why we like to track concentrated funds on the site even more, as their holdings are typically higher conviction plays. There are many investors out there in hedge fund land, and when it comes to equities, you have to know who to track. This is something we strive for on a daily basis as we've compiled a great list of hedge funds to track.

Below you will find Goldman Sachs' entire hedge fund trend monitor report as an embedded document. RSS & Email readers will need to come to the site in order to read it:



Overall, an impressive set of in-depth research well worth the read. And, importantly, their conclusions and findings fall directly in line with what we've discovered in our constant hedge fund coverage. The essential non-issue of the timelag between the portfolio disclosure date (12/31/09) and the date when the filings are released to the public (2/15/10) is very notable. When following hedge fund movements, you have to focus on their core positions and ideally you want to trail equity funds that have long-term time frames, typically employ value strategies, and run concentrated portfolios. To see what specific positions prominent hedge funds are buying, head to our hedge fund portfolio tracking series and our coverage of hedge fund investor letters.

Goldman Sachs & Hedge Funds Bullish On Tower Stocks

While we don't typically highlight shifts in analyst sentiment, we found some moves out of Goldman Sachs late last week intriguing as they were out positive on tower stocks. They raised price targets on American Tower (AMT) from $52 to $53, on SBA Communications (SBAC) from $40 to $43, and on Crown Castle (CCI) from $42 to $46. While AMT is rated a 'buy,' SBAC in particular is on Goldman's Conviction Buy List.

With their updated coverage, Goldman also added Crown Castle to their Conviction Buy List. They believe that CCI trades at a discount to peers and note that shares have recently underperformed. Goldman also feels that of the tower companies, CCI is the most likely to increase guidance. So, now why did this recent adjustment catch our eye? Well, because plenty of hedge funds own these names, of course!

In our hedge fund portfolio tracking series we've noted that a sizable concentration of long/short equity hedge funds have built up large positions in these various tower companies. Now, before we begin, keep in mind that these funds are set to update their portfolio disclosures with the SEC in the next few weeks so their portfolios could have changed drastically. But for now, we want to focus on the data we have, as this has been a building trend for a few quarters now. Here's what we've found:

John Griffin's Blue Ridge Capital has held shares of Crown Castle for over 3 quarters now. It had previously been their 17th largest US equity holding but most recently CCI was their 6th largest position as they added to their stake in the third quarter of 2009.

David Stemerman's Conatus Capital has previously owned both American Tower and Crown Castle. Their most recent portfolio disclosures show they currently prefer SBAC and CCI (their 17th & 18th largest positions), as they sold out of AMT in favor of those names.

Lee Hobson's Highside Capital Management has owned American Tower (AMT) for at least three quarters now, although it has slipped from their 8th largest holding 3 quarters ago to now their 12th largest holding most recently (SBAC was their 14th largest).

Chase Coleman's Tiger Global has owned American Tower for the past few quarters and it has hovered around their 7th and 10th largest US equity holding. They had last sold some shares when we covered Tiger's portfolio.

Matt Iorio's White Elm Capital had CCI as their third largest US equity holding when we looked at their portfolio via 13F filing and we noted they had also started a new position in SBAC.

Chris Shumway's hedge fund Shumway Capital Partners has been involved with all three in some fashion as they were recently selling out of CCI, reducing their SBAC holdings and starting a new position in AMT which we noticed when looking at their portfolio.


So, quite a few prominent names involved in tower stocks as you can see (and that's not even all of them). Again, keep in mind that this data is set to be refreshed in a few weeks and we could see a completely different story then. However, the fact that many of the above funds have held various tower companies over the past three quarters should say something. We track fundamentally research driven hedge funds with longer-term investment timeframes in hope of finding their next big plays.

We've previously touched on how many of the 'Tiger Cub' funds often hold similar positions in their portfolios and this is no different. (A Tiger Cub is a fund started by someone who was previously involved with legendary hedge fund manager Julian Robertson's Tiger Management). In fact, hedge fund replicator Alphaclone even has a Tiger Cub portfolio that takes the most popular stocks amongst Tiger Cub hedge funds and combines them into a portfolio that outperforms the market by a wide margin. These tower stocks are by far some of their more common holdings.

So, given the recent bullishness out of Goldman Sachs on tower companies, we thought it would be prudent to examine the large hedge fund presence as well. We'll have to see if this theme continues when the new sets of portfolio disclosures come out in a few weeks. As always, we'll cover those in our hedge fund portfolio tracking series.

Where To Invest: Research From Goldman Sachs

Below is an intriguing presentation from Goldman Sachs regarding the topic of where to invest your money in the current markets. This is a great tie-in with another one of their recent pieces that we also covered on the blog where Goldman examined the best long & short strategies in the current markets.


Embedded below is Goldman's piece entitled, "Where To Invest Now: Sustainability Of Rally Depends On Final Demand":



Additionally, you can download the .pdf here.


Make sure to also check out the other recent Goldman research we've posted up:

- The Best Long & Short Strategies Currently
- Market Structure Overview

Goldman Sachs Presentation: Market Structure Overview (September 2009)

The fine folks over at Business Insider have obtained a copy of Goldman Sachs' September presentation on the overall market structure these days. The topics covered include short selling, dark pools, high frequency trading, and more. (Primer on high frequency trading for those unfamiliar here). This is a broad overview of the markets and you can check it out embedded below or you can download the .pdf here.

This presentation comes in contrast with the other two we've covered on the blog. If you're looking more for strategy and analysis, we've covered the best long & short strategies for the current market from their perspective. Additionally, turning more to our focus on hedge fund portfolios, we've posted up Goldman's hedge fund trend monitor which looks at what positions have the highest hedge fund presence.

Here's the market structure overview:

Possible Current Long & Short Hedge Fund Strategies

There has been some interesting work coming out of Goldman Sachs as of late and we wanted to take a moment to highlight the latest piece we've stumbled across. If you missed it, make sure you check out their hedge fund trend monitor where they identify portfolio holdings across the hedge fund universe as well. Turning now to another recent report, we examine their piece entitled 'State of the Markets.' Members of Goldman Sachs' sales/trading desk have compiled possible current long & short strategies they are seeing in the markets. They touch on tradable themes and various other market opportunities. In particular, they focus on the topics of commercial real estate, balance sheets of public companies, Japan, the consumer and retail, as well as commodity and event-driven opportunities. Keep in mind that these thoughts do not reflect an official view of Goldman Sachs and are solely those of the sales/trading authors.

Drilling down those talking points, the main trading and hedging opportunities they see are derived from a notion that the combination of the housing bubble and equity market decline have essentially destroyed wealth (we touched on this theme way back in December). This leads to consumer debt repayment and a higher savings rate. Due to the economic malaise, elevated and prolonged unemployment becomes a real source of problems. In turn, you then see lower consumer spending. They've also identified a second theme to take advantage of: risk shifting to public balance sheets. Based on all of these notions, various members of Goldman Sachs' sales/trading desks have highlighted the following strategies as opportunistic within the context of the current market landscape:

- Short REIT Equities
- Buy AAA CMBS
- Buy FX Options on commodity linked currencies
- Buy Equities of non-US commodity producers
- Sell Caps on the US Tax Index
- Short JPY
- Buy Yen CMS Caps
- Short US consumer and retail companies (via equities or CDS)
- Sell Aluminum Caps
- Long crude oil vs short heating oil (short the crack spread)
- Engage in market neutral strategies (event-driven, etc)

As you can see, some of these strategies are obviously not executable by your average retail investor and that is why the piece is deemed possible hedge fund strategies. As such, we insert the necessary note of caution here: Don't trade anything you aren't familiar with. Nothing herein is a recommendation and we won't be responsible for your acts of stupidity when you decide to go leverage-happy trading FX options when you've barely even traded equities. Use your head with this stuff. More so than anything, we found their report to be intriguing and figured it was good food for thought. Acting like a lemming and just following whatever you read on the internet is not a smart investment strategy (in fact, it's not one at all). Just keep all this in mind when reading and do note our disclaimer at the bottom of the site.

Overall, this is definitely an interesting mix of possible hedge fund strategies being pursued in the current markets. (These strategies were compiled in August 2009). Since we typically focus on equity holdings of various hedge funds, we'll leave all the macro trades for another day and will instead focus on the equity strategies presented.

Firstly, we'll turn our attention to the proposed strategy of shorting REIT equities. This has already been widely discussed before as the collapse in commercial real estate intensifies by the day. Yet through equity dilutions-a-plenty, REIT equities have managed to stay afloat. The fundamental problems and macro picture duly noted, members of Goldman's team have identified an opportunity to capitalize on the divergence in commercial real estate price estimates between REIT equity and CMBS markets. They identify possible trade ideas as follows: short REIT equity, long CMBS through buying AAA CMBS or selling protection on AAA CMBX.

According to S&P's rating stress for CMBS, CRE values have apparently dropped 26% from their peak and could potentially drop another 20-30%. A few recent transactions have sold around 60-65% below the peak in 2007 prices. Not to mention, you have the awesome problem of store closings that could shut down numerous regional malls over an extended timeframe. It is all a domino effect as the consumer has been wounded from the economy. As the consumer goes, so does the retail sector. As retail slowly ceases to bask in their former profitable glory, commercial real estate property owners start to suffer from lost tenants, amongst other problems.

While US REITs have raised almost $13 billion in capital year to date (mainly courtesy of the equity dilutions we referenced earlier), they still might need $40-60 billion more to stay afloat and meet impending debt maturities. Despite property values falling and equity dilution, REIT share prices have continued to ramp up. REIT indices are up well over 50% since the lows in March, yet the problems in commercial real estate seem to be accelerating to the downside.

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If there is indeed a 25% mis-pricing in loss expectations for CRE, there could be further trouble ahead.

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An example of putting on the short portion of the trade would be to buy puts or put spreads on a REIT equity index or a basket of various REITs (they highlight retail and office REITs). You can either buy the put outright or sell a further out of the money put to create a put spread (and cheapen your cost). With put options, you define the amount you are willing to lose as opposed to shorting common where a stock can rally > 100%, compounding your losses. While this could potentially be an effective short strategy, you also have to keep in mind that they have also presented a long strategy that retail investors can't pursue. But, for those of you interested, the idea as referenced earlier is a long of AAA CMBS. Obviously the risk there is that if the loans cease to pay their mortgage payments, the value of the bond price could be impaired. In the past, we've covered how various hedge funds have been short REITs as this theme definitely looks to be in play. That about sums up the CRE play for now, and you can bet we aren't done hearing about the problems in this industry.


Secondly, we'll shift the focus to public balance sheet conditions. Goldman's team has identified strength in emerging market balance sheets as developed countries increase their public debt. As such, they have proposed shorting developed countries overloaded with debt and going long select emerging market economies. They also highlight the possibility to buy equities of non-US commodity producers or inflation proxy commodity indices.

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And another idea:

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While we don't typically cover currencies here, you could implement a makeshift version of this trade using currency baskets created with ETFs such as the Australian Dollar (FXA) and the Canadian Dollar (FXC). We've seen this theme (longing commodity producers) mentioned numerous times and we would venture a guess that hedge funds like John Burbank's Passport Capital have executed some form of this trade (we've also covered their curve steepener play in the past too). Commodities definitely have piqued the interest of many this year (especially Jim Rogers) so we'll continue to keep track of that trend.


Lastly, we want to cover the theme of lower consumer spending as it pertains to the retail sector. This theme is relatively straightforward as a weaker economic outlook will impact the consumer. This obviously hurts participants in the retail sector and Goldman's team highlights a possibility of buying 6 month or 1 year put spreads on the S&P Retail Select Index (you could also sell a Call to cheapen the option). Buying protection on an individual retailer or basket of names would make sense should consumer spending drop off due to continued weakness in the economy.

They postulate that we could be seeing a structural ( rather than cyclical) change as it relates to consumer spending. While many will argue that the American consumer is the engine that somehow miraculously keeps on chugging, it's tough to argue with the fact that the US household has lost 23% in net wealth over the past 18 months (totaling over $14 trillion).

(click to enlarge)

Yet, similar to REIT equities, retail equities are up massively from their lows.

(click to enlarge)

Unemployment continues to rise and the economy is by no means 'in the clear' yet. Many macro hedge funds (Clarium Capital, Tudor Investment Corp) will be quick to highlight unemployment as a main contributor to continued pain. Can consumer spending go back to normal at the drop of a hat? We'll have to wait and see if the giant American consumption machine will be fettered by the continued effects of the recession.


Overall, very relevant propositions as it pertains to possible hedge fund strategies in the current markets. Keep in mind that these are not recommendations and do not represent the views of Goldman Sachs (or Market Folly either for that matter). If you missed the previous hedge fund report out of Goldman, it is definitely worth reading. Their hedge fund trend monitor surveys the hedge fund portfolio landscape much as we do here at Market Folly. For more on hedge fund holdings, make sure to check out our hedge fund portfolio tracking series as well.

Goldman Sachs: Manipulation Kings of the Market?

*Update: Unfortunately, the document has been removed. However, a reader has pointed us to this link which has the full text of the article if you're interested.

Interesting read by Matt Taibbi in Rolling Stone regarding the postulation that Goldman Sachs has been behind every major market manipulation to date. Don't take the fact that it's from Rolling Stone too lightly either. It confused us as well at first, but after reading the piece and going back and reading some of Taibbi's other work, it made more sense as to why our friends over at Zero Hedge posted it up initially. Here is the slide-deck of the article which RSS/Email readers will need to come to the blog to view. Let us know if you're having problems printing the document from Scribd with margin errors, as we can recommend a fix.

Goldman Sachs Conviction Buy List Changes

With the market ramping up the past few months, Goldman Sachs has been quite busy editing their coveted Conviction Buy List. For those unaware, Goldman's Buy List is simply a list of the names they deem to be 'the best' at present. They also have a Conviction Sell List, which outlines stocks to be avoided at all costs. Just last week, we went through and updated the changes to their Conviction Buy List. And, here we are yet again with another round of some additions and a lot of subtractions.

Before we begin, do note that we don't necessarily place too much weight on individual analyst calls. As evidenced by the massive market decline of 2008, many analysts were behind the ball and were reactive rather than proactive. As such, we take it all with a grain of salt. That said, we also realize that many of these reports can move markets and influence opinion of various stocks, which is why we cover them. As we like to say, you have to "trade the perception, not the reality."

Conviction Buy List

Additions to the Buy List: International Game Technology (IGT), Bank of New York Mellon (BK), Teradyne (TER), Tenneco (TEN), Devon Energy (DVN), Owens Illinois (OI), and Lincoln National (LNC).

Stocks removed from the Buy List: Federal Mogul (FDML), Penn National Gaming (PENN), Chesapeake Energy (CHK), Northern Trust (NTRS), PMC Sierra (PMCS), Biiogen Idec (BIIB), Gap (GPS), L-3 Communications (LLL), Dollar Tree (DLTR), EOG Resources (EOG) and W. W. Grainger (GWW).

There are a lot of moves listed above, but let's check in on some of the more extravagant and bold calls. Goldman has practically doubled IGT's price target from $11 to $20, which is somewhat hard to stomach given the fact that they supply casinos and Vegas is in massive amounts of pain. Originally, Goldman had IGT listed as neutral, so they've really changed their stance on this one. Interestingly enough, they removed Penn National Gaming (PENN) from their Buy List at the same time. While we realize that each company in the gaming segment should be treated as an individual entity, we can't help but notice the interesting dynamic here. Goldman still lists PENN as a buy, but it is no longer on their coveted list, most likely due to the recent earnings release.

In typical Wall Street fashion, we see that as the financials all rally back from the abyss, Goldman adds Bank of New York Mellon (BK) to their Conviction List. "Oh, everything's fine and dandy again, buy buy buy!" Where was this upgrade back on the lows? This is a textbook example of being reactionary rather than proactive. In fairness to them, we're being pretty harsh here because BK is only up 10% over the past 3 months and is considered to be in slightly better shape than most other financials out there. BK has surfaced in our coverage before when we looked at the gap between tangible common equity and tier 1 capital in some financials. While BK was added to their Conviction List, we curiously see Northern Trust (NTRS) removed from the Conviction List. Both of these financial institutions are perceived to be less risky and more stable than most of the other volatile financials out there. As such, it's interesting to note that Goldman currently favors BK over NTRS.

We also noted that Chesapeake Energy (CHK) has also been removed from the Conviction List, but still retains a buy rating from Goldman. You'll remember that last week we touched on the highest paid CEOs of 2008 and Aubrey McClendon of CHK controversially topped the list.

Also, we see that Biogen Idec (BIIB) has been removed from the Conviction Buy List. We highlight this because longer-term readers of ours will know that we've documented a large hedge fund presence in this name. Hedge fund Shumway Capital Partners had BIIB as their 5th largest holding in the fourth quarter of 2008. Additionally, rabblerouser and well-known activist Carl Icahn has a sizable position in BIIB, as he looks to shake things up there. Goldman still remains a regular buy rating on the name.

In another sizable call from Goldman, they have upgraded Tenneco (TEN) from neutral to buy and have added it to the Conviction List. Their price target on the name is now $10, way up from their previous $2.10 price target. Tenneco designs automotive emission controls and clearly Goldman sees a lot of upside in this name. In fact, their upgrade alone pretty much sent the stock up 10%.

In one last big call, we also see Goldman's big change of heart on shares of Lincoln National (LNC) as they upgrade it from sell all the way up to buy and add it to their Conviction List. This move is very perplexing, seeing how shares of LNC are already up over 80% in the last month. Again, we ask, where was this upgrade a month ago?

That about covers the major moves this time around, as we saw a lot of names removed from the Conviction Buy List. Make sure you also check out our update from last week where we outlined some of the other recent changes to Goldman's Conviction List. We'll continue to track the major movements on Goldman's coveted lists.

Goldman Sachs Conviction Buy List Updates: May 2009

We used to cover Goldman Sachs' Conviction Buy & Sell lists pretty frequently on the blog, but then we became so inundated with hedge fund tracking that we never had the time. But now, with the 4th quarter 2008 hedge fund portfolio tracking behind us, we've got some spare time before the Q1 2009 portfolios are released and we're swamped again.

Here's the caveat with this coverage: we don't normally place a ton of weight on individual analyst calls and upgrades/downgrades. That said, we are very cognizant that they often move markets and have to at least be monitored. As such, we've covered Goldman Sachs' list because for whatever reason, everyone loves a "V.I.P." or "Best of" and "Worst of" list. So, Goldman's lists are essentially the cream of the crop in either direction. If they add it to their Conviction Buy List, they love it, and if they add it to the Conviction Sell List, they (at least for the moment) hate it. That much is self-explanatory but we just wanted to give a preface for those unaware. Now, to the changes:

Conviction Buy List

The bulk of their recent changes were made to their Conviction Buy List. As the month of May begins, Goldman has decided to ambush everyone with a ton of changes.

Here are the names they have just recently added to their Conviction Buy List: Liz Claiborne (LIZ), Massey Energy (MEE), Joy Global (JOYG), and Research in Motion (RIMM).

And, here are the names that Goldman has removed from their Conviction Buy List: Mastercard (MA).

Their addition of Claiborne to the list is interesting given that they have doubled their price target on the stock from $3.30 to $7.20. Is it just us, or did the economy NOT get 100% better overnight? Apparently all the Wall Street wives and girlfriends who had cut back on their purchases of make-up are rampantly buying again. Previously, Claiborne was rated as neutral but now graces their Conviction Buy List. This seems to stick with the market theme of the past few months of what we crassly call "sh*t rallies." Essentially, all the horribly beaten down stocks with poor fundamentals and poor outlooks are rallying for hardly any reason other than that they are oversold and are hopeful that the economy will rebound a.s.a.p.

Goldman removed Mastercard from the Conviction Buy List, but still retains a 'buy' rating on the name. More than anything, this is due to a combination of the recent earnings release, valuation, and taking some profits off the table after the rally. Interestingly enough, Mastercard (and Visa too) are holdings currently present in our Market Folly portfolio that we created based on hedge fund cloning. Our portfolio has seen a total return of over 190% since mid-2002 and has annualized returns of 17%. Year to date for 2009, our portfolio is outperforming the S&P by a handsomely wide margin, and Mastercard and Visa are certainly to thank for part of that.

We don't have a problem with this Goldman removing MA from the Buy List, as we recently sold some of our Visa (V) into the earnings release pop, as shares have rallied over the past few months. We post all of our portfolio updates in our Twitter stream, so definitely follow us on Twitter if you're not already. Again, MA is still rated a buy, but no longer graces the Conviction List.

Massey Energy (MEE) was also added to their Conviction Buy List as Goldman sees shares more than doubling from their previous $12 price target to a new target of $26. Massey was previously rated as Neutral and now graces the Buy List. And, as we'll touch on below, this upgrade was a part of a sector-wide coal upgrade on Goldman's part. But, it definitely appears as if Massey is their favorite at the moment.

Sticking to the energy and raw material meme, we see that they also added Joy Global (JOYG) to their Conviction Buy List. Joy provides the equipment and servicing related to the mining industry and since Goldman is bullish on the Coal industry, they're projecting somewhat of a trickle-down effect where Joy will see more action as the Coal companies ramp up. Goldman had just recently upgraded Joy from neutral to buy back in late April. But, they've now essentially upgraded it again by adding it to their Conviction List. Also, interestingly enough, we had noted that in Q4 2008, numerous hedge funds had sold out of Joy Global. We'll have to see if they have reversed course when they release their Q1 '09 holdings.

Last, but not least, they've also added Research in Motion (RIMM) to the list and have only mildly adjusted the price target to $85, up from $82. We're not quite sure what exactly has changed or what merited this move, but oh well. We've noted that previously RIMM was hedge fund Maverick Capital's 9th largest holding.

Also, we wanted to touch a major move by Goldman that undoubtedly help shake up the Coal industry yesterday (5/4/09). We couldn't help but notice that coal stocks were all rallying hard, and Goldman is partially responsible for this as they upgraded the entire American coal sector to 'Attractive' from 'Neutral.' And, as we mentioned above, Massey Energy in particular was even added to the Conviction Buy List. Stocks in the specific sector who were all seeing action include: Patriot Coal (PCX), Arch Coal (ACI), Consol Energy (CNX), Alpha Natural Resources (ANR), Peabody Energy (BTU), and Foundation Coal (FCL) among others.

Other Recent Moves

The names mentioned above all were added/subtracted from the list here in the first few days of May. But, in fairness of playing catch-up, we also wanted to quickly list which names Goldman also added/subtracted from their Conviction Lists at the end of April and on the 1st of May.

Further additions to the Conviction Buy List: Brinker (EAT), Activision (ATVI), Och-Ziff (OZM), & CVS Caremark (CVS).

Further removals from the Conviction Buy List: DR Horton (DHI) and ITT (ITT).

So, there you have it. You are now all caught up with Goldman Sachs' Conviction Buy & Sell Lists. (That is, until they release the next batch of changes). From here on out we'll try and update these lists, provided that our hedge fund tracking doesn't get in the way.

The Deception & Reality of Earnings Season: Q1 2009 (Goldman Sachs, Wells Fargo, et al)

Before presenting Goldman Sachs' earnings release below, I want to touch on something we'll be witnessing in the coming weeks. Yesterday on twitter, I was joking that Goldman Sachs does everything with an implicitly silent "biiiatch!" at the end of every statement/action/filing/etc. (Definition/use of of "biiiatch" here). The headlines yesterday were "Blowout Earnings" and "Goldman Secondary Offering" and yadda yadda. Those headlines obviously didn't contain Goldman's sweet new tagline. So, just imagine a bunch of old bankers coming out and saying "Goldman Sachs biiiatch!" ... "Blowout Earnings biiiatch!" ... "Secondary offering at insane prices biiiatch!" It's cool though, we let it slide because after all, they're Goldman Sachs (GS) and they do what they want. This implicitly silent tagline let's them puff out their chest and show just how much better they are than everyone else.

But all joking aside, this earnings season will be littered with absolute dominance and absolute disaster. And, by dominance, we of course mean beating estimates by way of government help/intervention, accounting tricks, and other fun loopholes. *Cough* Wells Fargo (WFC) *Cough*. If you missed their tomfoolery, Wells Fargo basically came out and announced earnings that seem outright impossible given that they were getting their ass handed to them just a few quarters ago. This anomaly was made possible by various accounting sidesteps referenced in the article linked above. Yet, there seems to be no mention of the fact that they might need billions of dollars. Curiously enough, KBW comes out yesterday and claims that Wells Fargo (WFC) might need up to $50 billion in order to cover loan losses and pay back the government.

Wow, but they just came out and killed their numbers... why would they ever need that much money?!? /End sarcasm.

We bring this point up because in a normal world, earnings season is a field of land mines. Yet, given the circumstances specific to this past quarter, the field of mines has now quadrupled in size. So, you are now more likely than ever to step on a mine. There are two categories of companies reporting this earnings go-round: Firstly, there are those with accounting sidesteps and government ties due to help/intervention. Secondly, there are those without any of that... i.e. the rest of the companies reporting. The harsh reality is that both categories are equally as scary for different reasons.

Companies who "beat" estimates and "profit" all of a sudden will do so because of abnormalities unique to their reporting situation. Many of the financials will appear to "dominate" their numbers, when in reality they have only masked them by putting pretty flowers around them. So, this datapoint becomes essentially useless in gauging just how far along (or far behind) we are in this mess. Should we buy them now because they're doing "just great" with an asterisk next to their name? Should we sell them because they've rallied so much already? The reactions will be interesting to gauge. But, thus far, most companies in this category have been bid up. The problem with earnings season is you have just as much of a shot at hitting a land mine that instead of showering you with dollar bills, rips your face off.

There will also be companies out there who have not had as much government intervention and are lacking in the ability to mask their true faces. Those companies will miss earnings, will lower guidance, and will warn about impending doom. They will paint pictures of reality as they drop 30% in a single day. So, as you can see, we have some polar outcomes here. The companies who have been at the center of a lot of the crisis (financials, etc) are benefiting from their ability to sweep things under the carpet by way of the government or accounting changes. The companies that are not so fortunate, however, will not have such luck when it comes to reporting their earnings. So, while the tide (read: herd) rolls in directions that make absolute zero sense, you have to respect them. Because, if you don't, you'll be mauled. (Case in point: Financials spiking 20-30% off crazy earnings announcements). The problem with all this is that we're still left wondering, "What's changed?"

We're simply here to kick off what we have already deemed the Q1 '09 Earnings Season Clusterf*ck. You will most likely be deceived, tricked, and possibly even lied to. But, it's cool, because everyone is all of a sudden profitable out of NOWHERE. We just want to tell our readers not to place too much weight or emphasis on this earnings season simply because if the earnings already reported are any indication, this past quarter took place in Candyland, not recessionary America. So, keep on your toes and don't put on any big positions before these releases... you'll have better luck at blackjack or baccarat. As a matter of fact, Vegas & Atlantic City desperately need your money right now. So, go there and kill two birds with one stone: get better odds and help save the American past-time known as gambling.

The point of all this is merely a precautionary tale. Earnings of Q1 will be polar... to say the least. Just keep that all in mind as you are hit with a progressive barrage of earnings. In the end, it will be pretty clear who is being realistic and who is toying around in Candyland, accomplishing not much of anything. We're trying to take steps of progress forward. Unfortunately, we're most likely stepping sidways or even backwards.

To those destitute yet admirable companies that will tell it like it is (only to see your stock plummet instantaneously): we salute you. No, seriously. We are being 100% honest when we say thank you for providing some transparency to the macro environment and thank you for keeping it real. It has to get worse before it can get better.

And, on that final note: Let the games begin... Hiyo!


*Disclaimer I: Due to the recent Goldman Sachs legal tirade against a blogger, we are inserting this disclaimer to say that we have no affiliation with Goldman Sachs whatsoever. All 'taglines' in this article are fictional, are created solely by us, and are by no means a representation of Goldman's official slogan, mission, values, etc, etc, etc, etc. Everything in this post (well, mostly everything) is a satire and witty in nature. Please take this into account as you digest this delectably delicious derision.

*Disclaimer II (herein referred to as 'Disclaimer of the Disclaimer'): Please also note that while the aforementioned Disclaimer I is serious in nature, this aptly named Disclaimer of the Disclaimer is in and of itself a mockery of the Goldman Sachs proceedings referenced above as the 'legal tirade.' Those responsible for the sackings have been... well, sacked.

Market Folly biiiatch!

And now to the afore-promised and obligatory relevant content: Goldman Sachs' Q1 2009 Earnings Release:


Goldman Sachs Q1 2009 Earnings - Free Legal Forms