Goldman Sachs' (NYSE:GS) closely watched list of hedge fund-favorite stocks is off to a strong start this year, outpacing the broader market. According to analysts at the investment bank, their "Hedge Fund Very Important Positions" (VIP) basket has returned 10% year-to-date, more than doubling the S&P 500's 4% gain.
The VIP list tracks the 50 stocks most commonly found in the top 10 holdings of fundamentally-driven hedge funds. Unsurprisingly, six of the "Magnificent 7" tech giants dominate the list: Amazon (NASDAQ:AMZN), Meta Platforms (NASDAQ:META), Microsoft (NASDAQ:MSFT), Nvidia (NASDAQ:NVDA), Alphabet (GOOGL), and Apple (AAPL). Among them, Amazon appeared most frequently, with 120 hedge funds holding it as a top-10 position as of December 31, followed by Meta (80 funds) and Microsoft (75 funds).
However, despite their strong presence, hedge funds trimmed positions in most of the Magnificent 7 stocks, Goldman's analysts noted. The report, which monitored 695 hedge funds, also highlighted new additions to the VIP basket in the fourth quarter, including Delta Air Lines (NYSE:DAL), Pfizer (NYSE:PFE), Reddit (NYSE:RDDT), and Workday (NASDAQ:WDAY). Financial stocks like Arthur J Gallagher and Capital One Financial (NYSE:COF) also made the list, even as some funds rotated away from the sector following a post-election rally.
Historically, the VIP basket has outperformed the S&P 500 in 60% of quarters since 2001, with an average quarterly excess return of 52 basis points. The list's solid performance comes as the S&P 500 hovers near all-time highs, fueled by investor optimism over potential looser regulations and lower taxes under the new Trump administration.
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