Investing

Goldman Sachs Identifies Top 10 Hedge Fund Stocks

One thing we have related to 24/7 readers over the years is that for all of their pedigreed executives and portfolio managers, hedge funds tend to go a lot in the same direction. Why is that you ask? Because hedge fund honchos hang out together and talk to each other quite often. What is pretty evident when you see the Goldman Sachs list of Hedge Fund “VIP” stocks that the funds are long or own in their portfolios is that the list is outstanding, but hardly an overly eclectic group of names.

While we have seen variations of this list over the past week, we wanted to create one with explanations and references to what Goldman Sachs sees, versus what the rest of the analyst pack was seeing. Here is the list of Goldman Sachs VIP stocks that hedge funds owned the most as of the end of the first quarter.

American Airlines Group Inc. (NYSE: AAL) leads off the list, and it has been absolutely on fire this year, up more than 50%. American Airlines Group is the holding company for American Airlines and U.S. Airways. Together with wholly owned and third-party regional carriers operating as American Eagle and U.S. Airways Express, the airlines operate an average of nearly 6,700 flights per day to 339 destinations in 54 countries. Despite high fuel prices and the cost of the merger and emerging from the bankruptcy, the stock continues to draw followers. The Thomson/First Call price target for the stock is $46.31. The stock closed trading on Friday at $40.16 a share.

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American International Group Inc. (NYSE: AIG) is a top financial sector name hedge funds buy on the VIP list, and it has performed outstanding for investors over the past two years. AIG is the marketing name for the worldwide property-casualty, life and retirement, and general insurance operations of American International Group. After being buried during the financial crisis of 2008, the company has slowly, but surely not only fought its way back to prominence, but posted stellar earnings. Investors are paid a 0.9% dividend. The consensus price target is $57.40. AIG closed Friday at $54.07.

Apple Inc. (NASDAQ: AAPL) remains a top stock on the Goldman Sachs list. Excitement over the new iPhone 6 is starting to gain traction as rumors of a larger screen and other new improvements are getting the Apple nation stirred up. Plus with a huge earnings beat, a stunning seven-for-one stock split, an increased dividend and share buyback, the company seems right back on its game. There is chatter that something big is in the works as the company is going to live-stream its big keynote address this year. Trading at just 12 times forward earnings, the stock remains a solid buy for investors. Shareholders are paid a 2.1% dividend. The consensus price target for Apple is $642.42. The stock closed Friday at $633.

Citigroup Inc. (NYSE: C) has been a poor performer this year for hedge funds, down more than 10% year-to-date. The bank trades at an incredible 9.5 times forward earnings and is down 16.3%. With loan activity and other banking services starting to ramp up as the economy improves over the second half, adding this quality large cap bank to a portfolio at an incredibly low price now makes good sense. Investors are paid a tiny 0.1% dividend. The consensus price target is $58.31. Citigroup closed Friday at $47.57.

General Motors Co. (NYSE: GM) is a top consumer discretionary name on the VIP list. Despite all its recent recall troubles, hedge funds are continuing to stick with the name. GM trades at a low 9.8 times forward earnings. The company has benefited from incredible sales in China to boost revenue. GM invested heavily in China and grabbed a big chunk of what is now the world’s largest auto market. The company sold 3.16 million vehicles in 2013, which was an increase of 11%. Investors are paid a solid 3.5% dividend. The consensus price target is $43.73. GM closed Friday at $34.58.

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Google Inc. (NASDAQ: GOOG) is known as the online leader for search and advertising, and hedge funds are big owners of the stock. In addition to recently rolling out its driverless car, the company is becoming a large vertical player in retail, and some on Wall Street think its commitment to e-commerce fulfillment should come as no surprise. Google Shopping Express is now available in the San Francisco/Bay Area, as well as in Manhattan and West Los Angeles. The service allows a user to search for and buy in-stock items from local retailers without leaving the Google page. The user can select a delivery window and a Google courier delivers the goods to the customer. The company is signing up major retailers to participate, and it is estimated the yearly cost to consumers will be $64.99 or slightly higher. The per-use charge is estimated to be $5. The consensus price target for this hedge fund favorite is $662.32. Google closed trading Friday at $559.89.

Hertz Global Holdings Inc. (NYSE: HTZ) is perhaps a surprise name to make the Goldman Sachs VIP list. Hertz operates its car rental business through the Hertz, Dollar, Thrifty and Firefly brands from approximately 10,400 corporate, licensee and franchisee locations in North America, Europe, Latin America, Asia, Australia, Africa, the Middle East and New Zealand. Hertz is the largest worldwide airport general use car rental brand, operating from approximately 8,800 corporate and licensee locations in approximately 150 countries. Hertz is the number one airport car rental brand in the United States and at 111 major airports in Europe. The consensus price target for this rental giant is $30.56. Hertz closed Friday at $29.52.

Microsoft Corp. (NASDAQ: MSFT) has moved forward with new CEO Satya Nadella, and many on Wall Street feel the company has been invigorated by his presence and ideas. The venerable Silicon Valley giant is focusing on its Windows product, which has shown serious intent in becoming one of the top players, and perhaps even unseat iOS as the second-most popular operating system after Google’s Android. Windows phone is now the fastest-growing smartphone platform, and the second-most popular smartphone platform in Latin America and India. Investors are paid a nice 2.7 % dividend. The consensus price target is $41.60. Microsoft closed Friday at $40.94.

Micron Technology Inc. (NASDAQ: MU) posted very solid earnings for the most recent quarter and the stock was promptly down more than 15% in the spring tech sell-off, but it has rallied back strongly. The company, which is a leader in DRAM chip sales and is one of the top Wall Street memory picks, has seen a nice streak of beating earnings estimates, especially when looking at the previous two reports Micron beat estimates by at least 35% in both cases, suggesting it has a nice short-term history of crushing expectations. The consensus price target is $30.08. Micron closed Friday at $28.59.

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Time Warner Cable Inc. (NYSE: TWC) is in the final stages of being gobbled up by Comcast and soon may drop off the VIP list. The company provides various residential services that comprise video services, including video on demand, digital video recorder, and start over and look back services; high-speed data services that include communication tools and personalized services, such as email, PC security, parental controls and online radio services; and voice services that comprise local and long distance calling throughout the United States, Canada and Puerto Rico. Investors are paid a 2.1% dividend. The consensus price target is $156.05. The stock closed Friday at $141.16.

Again, hedge fund managers tend to share ideas, and that was very apparent when holdings came out recently showing many high-profile managers, including Warren Buffett, Kyle Bass and others, taking large positions in Verizon. Ideas get tossed around, regurgitated and end up in many of the same places. Not a thing wrong with that if the stocks getting shared as ideas perform well.