2012 was not a good year for most hedge funds. When the S&P 500 returned 16%, 88% underperformed, according to a report by Goldman Sach’s (GS) David Kostin. The performance highlights the difficulty for even the pros to beat the market. Investors could look at some of the investment strategies and ideas taken by hedge funds as a source for their own investing.
1. Financials and Information Technology were up 23% each. The sectors accounted for more than 50% of the gains in the S&P 500. Bank of America (BAC) and Citigroup (C) undoubtedly outperformed the markets last year, along with other banks. Despite having book values substantially higher than the share price, the unknown liabilities were enough of a reason to avoid these companies. Banks still need merger and acquisition (“M&A”) and other financing activities to truly grow. Bank of America spent 2012 and previous years cutting on costs.
2. Consumer Discretionary outperformed the markets by 790 basis points in 2012. Home Depot (HD) and Amazon (AMZN) were surprisingly strong performers. Home Depot could offer moderate performance this year, but a continued rebound in US housing could benefit the company.
3. Large Capitalization companies provided stability for funds. Companies like eBay (EBAY) and Gilead Science (GILD) were solid performers. Investors could anticipate these companies will continue to do well. eBay’s PayPal unit is a consistently strong performer, while Gilead keeps reporting good results from its drug studies. Other companies to consider Amgen (AMGN) and Bank of New York (BK).
Other Investing Ideas
A company that did poorly last year includes Apple Inc. (AAPL). This hurt many hedge funds, including David Einhorn. Einhorn though Apple could reach $700 back in May 2012. Although shares reached that level by September 2012, shares are now in the $450-level. Marvell (MRVL) is another company to watch. The company saw its shares drop in the last-month of 2012 at around $7. Marvell closed recently at $9.51.
Business Section: Investing Ideas
Companies mentioned in this article are:
1. Bank of America Corporation (BAC, Earnings, Analysts, Financials): Provides banking and financial services to individuals, small- and middle-market businesses, corporations, and governments primarily in the United States and internationally. Market cap at $126.21B, most recent closing price at $11.71.
2. Citigroup, Inc. (C, Earnings, Analysts, Financials): Provides consumers, corporations, governments, and institutions with a range of financial products and services. Market cap at $130.3B, most recent closing price at $43.02.
5. eBay Inc. (EBAY, Earnings, Analysts, Financials): Provides online marketplaces for the sale of goods and services, as well as other online commerce, platforms, and online payment solutions to individuals and businesses in the United States and internationally. Market cap at $74.03B, most recent closing price at $57.21.
6. Gilead Sciences Inc. (GILD, Earnings, Analysts, Financials): Engages in the discovery, development, and commercialization of therapeutics for the treatment of life threatening diseases worldwide. Market cap at $61.46B, most recent closing price at $40.56.
7. Amgen Inc. (AMGN, Earnings, Analysts, Financials): Develops, manufactures, and markets human therapeutics based on advances in cellular and molecular biology for grievous illnesses primarily in the United States, Europe, and Canada. Market cap at $66.22B, most recent closing price at $86.30.
Picking stocks to outperform the market carries risk. Investors could also invest passively by choosing ETFs:
9. PowerShares QQQ (QQQ, Earnings, Analysts, Financials): The Fund seeks to provide investment results that generally correspond to the price and yield performance of the component securities of the Nasdaq-100 Index.
10. SPDR S&P 500 (SPY, Earnings, Analysts, Financials): The Trust seeks investment results that, before expenses, generally correspond to the price and yield performance of the component common stocks of the S&P 500 Index.
(List compiled by Chris Lau)
Use this article snapshot as a launch pad (click here for help): Simply click on the links, and use Kapitall's tab navigation to browse through the data…
Analyze These Ideas: Getting Started
- Read descriptions for all companies mentioned
- Access a performance overview for all stocks in the list
- Compare analyst ratings for the companies mentioned
- Compare analyst ratings to annual returns for stocks mentioned
- Real-Time Opinion: Scan the latest tweets about these companies (feed will open in a new window)
Dig Deeper: Access Company Snapshots, Charts, Filings
- Bank of America Corporation (BAC, Chart, Download SEC Filings)
- Citigroup, Inc. (C, Chart, Download SEC Filings)
- The Home Depot, Inc. (HD, Chart, Download SEC Filings)
- Amazon.com Inc. (AMZN, Chart, Download SEC Filings)
- eBay Inc. (EBAY, Chart, Download SEC Filings)
- Gilead Sciences Inc. (GILD, Chart, Download SEC Filings)
- Amgen Inc. (AMGN, Chart, Download SEC Filings)
- The Bank of New York Mellon Corporation (BK, Chart, Download SEC Filings)
- PowerShares QQQ (QQQ, Chart, Download SEC Filings)
- SPDR S&P 500 (SPY, Chart, Download SEC Filings)
New to Kapitall?
1. New to the site? Click here to register for a free account, and gain access to more tools and data
2. Looking for more investing ideas like this? Click here to sign up for your free copy of Kapitall Weekly
3. Follow us on SeekingAlpha, Motley Fool, Nasdaq and Twitter