Daniel Hai

About the Author Daniel Hai

I am a financial quant analyst using systematic data to identify investment opportunities in the long and short term. I write about stocks, ETF's, commodities and currencies. I hold an economics degree from the university of Berlin and specialize in C#/VBA trading algorithms.

Hedge Funds Know More Than the Average Investor. Need Proof?

Traders beware; you are playing at a disadvantage. Hedge funds have billions to invest, resulting in their ability to acquire massive amounts of legal, and sometimes even borderline shady information. Hedge fund analysis service GuruPortfolio, which aggregates hedge fund data based on mandatory SEC filings, highlighted one stock featured at the top of their last report – American Express Company (NYSE:AXP)

It is even more revealing that for this particular stock, nearly all analysts were bearish. Something extremely rare among high market cap stocks.  How can this huge discrepancy among analysts and hedge funds occur? Simply more experience, data, and knowledge.

The massive hedge fund acquisitions of AXP stock last quarter by funds like First Pacific Advisors LLC and Dodge & Cox shot the stock to the front of our Rader. Guru investor Warren Buffet alone holds $10.54 billion worth of stock, which represents nearly 8% of Berkshire Hathaway Inc’s portfolio.

Since GuruPortfolio recommended the stock on February 18, 2016 the stock has climbed a staggering 22.84%, nearly two times the financial index (XLF). The financial sector got hit particularly hard during January’s decline; however the entire sector is showing a strong sign of recovery.

With earnings in line with expectations it is likely that many of the funds will double down on their initial investments at what they are likely considering a discount price. The company currently has a $64 billion market cap accompanied by a 13.24 PE ratio.

Furthermore, while private investors rushed to buy Apple Inc (NASDAQ:AAPL) stock, by far the most popular stock, hedge funds seemed to know about the underlying danger in advance. Apple’s most recent earnings report showed some serious weakness, leading to an 8% decline in the premarket alone.

According to the report downloadable here, these are the top 10 stocks hedge funds are betting on. The next report is due after the next 13f fillings around the 18th of May.

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