BOSTON May 23 Hedge funds turned their backs on
Johnson & Johnson and Amazon.com Inc in the
last months, kicking the former market darlings into a group
where they see stock prices dropping, research from Goldman
Healthcare company Johnson & Johnson, whose share price
slipped 3.14 percent through mid-May from Jan. 1, now heads
Goldman's newly created list of "50 Very Important Short
Positions." Exxon Mobil Corp., Intel Corp,
International Business Machines and Amazon.com round out
the top five companies that represent the largest short
positions in the $2 trillion hedge fund industry.
The listing is the newly created counterweight to Goldman's
widely followed VIP list which ranks the 50 stocks that matter
most to hedge funds. Four of the five top names now on the short
list - Exxon, J&J, Amazon.com and IBM - were listed among the
industry's 50 favorites only three months ago when Goldman last
issued its list in February.
The change in heart comes even as some of the named short
companies saw share prices rise or dip only modestly. Online
retailer Amazon, for example, was up 24 percent through mid-May
from the start of the year.
But now some managers are clearly worried.
Greenlight Capital's David Einhorn, who has been known to
tank a stock by simply uttering its name, cast doubt over Amazon
a week ago when he called the company's future a "riddle" at the
Ira Sohn investment conference. His musings sparked speculation
that he might be short Amazon or might soon go short Amazon. His
spokesman declined to comment.
For hedge fund managers, going short, or betting a stock
will fall, has long been a key to success. But not this year.
Goldman research found that hedge funds' "short stock
selections have caused hedge funds to lag both the S&P 500 and
the average large-cap mutual fund so far in 2012."
The average hedge fund had gained 4 percent through the
middle of May while the broader market was up twice that,
Goldman's research showed.
During the first three months of 2012, hedge funds turned
more optimistic, increasing their net long exposure slightly to
49 percent from 46 percent at the end of the fourth quarter
2011. Most hedge funds still liked what they already liked,
leaving them to turn over only 31 percent of all positions.
The industry continued its love affair with technology
industry darling Apple Inc, where the stock price is up
37.5 percent despite some roller-coaster moves. Apple ranked No.
1 on the list of stocks that matter most to hedge funds followed
by internet software giant Google Inc.
Financial services giant JP Morgan Chase, whose
acknowledgement of a multi-billion dollar trading loss has
pushed its share price down 21 percent this month, still ranked
among the industry's favorite stocks but did drop to No. 9 from
Newcomers on the favorites list include car company Ford
Motor Co, whose dramatically improved financial health led
to a ratings upgrade from Moody's Investors Services this week,
insurer American International Group, whose earnings
more than doubled in the first quarter, and billionaire investor
Warren Buffett's Berkshire Hathaway.
Goldman found that the basket of 50 stocks that "matter
most" has outperformed the S&P 500 by 55 basis points on a
quarterly basis since 2001 and has outperformed the S&P 500 by
62 basis points for the year to date through May 15.