Goldman’s stock strategist says these ‘shared favorites’ among top investor types typically beat the S&P
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Goldman Sachs’ chief equity strategist said investors trying to broaden out their portfolios from the Magnificent Seven can start by looking at some shared favorite investments among the two major groups of stock pickers. Wall Street is searching for opportunities beyond the mega-cap tech stocks that delivered outsized gains to the broader market, worrying the major benchmarks may be running out of steam out of their respective rallies. Goldman Sachs anticipates the S & P 500 will rise to 5,200 by the end of the year, the CNBC Market Strategist Survey showed. that’s not too far from where it is today. The S & P 500 is already up by more than 6%, hitting fresh all-time highs just two months into 2024 and breaking above 5,100 last week for the first time ever. Instead, some better opportunities may lie in “shared favorites,” according to David Kostin, chief U.S. equity strategist at Goldman Sachs. These stocks are beloved by mutual funds and hedge funds alike, both of which can sometimes diverge greatly in their equity positions. The strategist noted hedge funds are more likely to overweight Magnificent Seven names, while mutual funds tend to underweight their exposure to these names. Names that are liked by both groups are in the sweet spot, he said. “It’s the shared favorites that you should be owning as a portfolio manager, because statistically they tend to outperform by about three percentage points in a year,” Kostin told CNBC’s “Squawk on the Street” on Thursday. The strategist surfaced 10 “shared favorites” after reviewing common constituents between the firm’s Hedge Fund Very Important Position (GSTHHVIIP) and Mutual Fund Overweight Positions Basket (GSTHMFOW) baskets. These names have returned roughly 6% year to date. They’ve outperformed the S & P 500 a majority of the time, of 63%, in the months since 2013. Here are some of the names. KKR was included in the list. The alternative asset manager was named a top pick this week by TD Cowen, which said the firm will benefit from “room to grow” in the nascent credit capital markets platforms. KKR shares are higher by more than 10% this year. Workday is another “shared favorite.” The enterprise management company was recently called a “forgotten compounder” by Morgan Stanley, which had an overweight rating on the stock. Workday shares have advanced by more than 8% this year. Other names Kostin consider shared favorites include MasterCard , Visa and Danaher . “Some of these shared favorites are … less highly valued and that’s a perhaps more risk adjusted return opportunity set,” Kostin said. — CNBC’s Michael Bloom contributed to this report.
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