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June 27, 2020, 1:15 p.m. EDT

Here’s a hedge fund strategy that just might work for you

Stocks that flipped from being shorted by hedge funds to being a long position are up 66% from the spring lows

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By Andrea Riquier


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Hedge funds have done a 180: from expecting stocks like Lennar Corp. to decline in value to forecasting an increase.

There are lots of analyses out there about what hedge funds are buying, but strategists at Jefferies Equity Research on Friday published a slightly different spin on that theme. The success of this particular investing trend, they argue, suggests not just that hedge funds are “getting it right,” but that stock-picking may be back in favor.

Steven DeSanctis and Eric Lockenvitz broke out the stocks that hedge funds had swapped from long positions to short — that is, those they think are likely to increase in value versus those that are likely to decline — and vice versa.

It’s not just an academic exercise: “The stocks that hedge funds were short but moved to a long position over the month have posted the best gain in June at 6.7%, and these names are now up 66% from the low,” the Jefferies team wrote (those calculations are as of June 24.) “Stocks that moved from long to short are actually down 2.6% and lagging off of the bottom after being one of the leaders.”

The performance data suggests something intriguing: could hedge funds be making the correct calls, finally, after years of underperformance?

“There will be many Haves and Have Nots across the market and hedge funds and long only investors will be able to separate wheat from chaff,” DeSanctis and Lockenvitz write.

It’s worth noting that many market observers don’t agree. Famed investing guru Burton Malkiel told MarketWatch earlier this week that “more and more active managers are beaten by the index. Every year it’s about two-thirds to 70% of active managers get beaten. Those that win in one year aren’t the same ones that win the next year. There is no evidence that some years are going to be active years. There’s no evidence whatsoever that because of COVID-19 it’s time for active management.”

If, however, you'd like to try, the two lists of hedge fund holdings, long to short and short to long, are below.

New longs New shorts
Southwest Airlines Co. /zigman2/quotes/201071949/composite LUV   Target Corp. /zigman2/quotes/207799045/composite TGT  
Square /zigman2/quotes/205989440/composite SQ   Home Depot Inc. /zigman2/quotes/208081807/composite HD  
Northrop Grumman Corp. /zigman2/quotes/205518355/composite NOC   Johnson & Johnson /zigman2/quotes/201724570/composite JNJ  
Chubb /zigman2/quotes/209397502/composite CB   Intel Corp. /zigman2/quotes/203649727/composite INTC  
Parker-Hannifin Corp. /zigman2/quotes/202924304/composite PH   MSG Networks Inc. /zigman2/quotes/207593671/composite MSGN  
Etsy Inc. /zigman2/quotes/202790087/composite ETSY   Bristol-Myers Squibb /zigman2/quotes/202559280/composite BMY  
GenMark Diagnostics Inc. /zigman2/quotes/208506728/composite GNMK   Verizon Communications Inc. /zigman2/quotes/204980236/composite VZ  
Williams-Sonoma Inc. /zigman2/quotes/202067350/composite WSM   Walmart Inc. /zigman2/quotes/207374728/composite WMT  
Euronet Worldwide Inc. /zigman2/quotes/201180589/composite EEFT   Starbucks Corp /zigman2/quotes/207508890/composite SBUX  
Devon Energy Corp. /zigman2/quotes/209479244/composite DVN   Oracle Corp. /zigman2/quotes/202180826/composite ORCL  
Molina Healthcare Inc. /zigman2/quotes/205492029/composite MOH   PepsiCo Inc. /zigman2/quotes/208744353/composite PEP  
Boeing Co. /zigman2/quotes/208579720/composite BA   T-Mobile US Inc. /zigman2/quotes/204659678/composite TMUS  
3M Co. /zigman2/quotes/205029460/composite MMM   McDonald’s Corp. /zigman2/quotes/203508018/composite MCD  
J.M. Smucker /zigman2/quotes/203835894/composite SJM   Kimberly-Clark Corp. /zigman2/quotes/201766540/composite KMB  
Lennar Corp. /zigman2/quotes/202536373/composite LEN   Duke Energy Corp. /zigman2/quotes/201480230/composite DUK  
MercadoLibre /zigman2/quotes/200678442/composite MELI   Advanced Micro Devices /zigman2/quotes/208144392/composite AMD  
Hexcel Corp. /zigman2/quotes/209574944/composite HXL   Palo Alto Networks /zigman2/quotes/207599953/composite PANW  
Americold Realty Trust /zigman2/quotes/202111693/composite COLD   Gilead Sciences Inc. /zigman2/quotes/210293917/composite GILD  
American Eagle Outfitters Inc. /zigman2/quotes/209429711/composite AEO   Amgen Inc. /zigman2/quotes/209157011/composite AMGN  
UDR Inc. /zigman2/quotes/200760603/composite UDR   Sarepta Therapeutics Inc. /zigman2/quotes/206140855/composite SRPT  
Source: Jefferies Equity Research

Related: Expect ‘violently flat’ markets, but be ready to buy the dip, analyst says

/zigman2/quotes/201071949/composite
US : U.S.: NYSE
$ 42.79
+0.86 +2.05%
Volume: 12.52M
Oct. 23, 2020 4:00p
P/E Ratio
N/A
Dividend Yield
0.00%
Market Cap
$25.24 billion
Rev. per Employee
$373,554
loading...
/zigman2/quotes/207799045/composite
US : U.S.: NYSE
$ 160.23
+0.63 +0.39%
Volume: 1.82M
Oct. 23, 2020 4:02p
P/E Ratio
23.13
Dividend Yield
1.70%
Market Cap
$80.21 billion
Rev. per Employee
$209,322
loading...
/zigman2/quotes/205989440/composite
US : U.S.: NYSE
$ 176.77
+0.84 +0.48%
Volume: 4.17M
Oct. 23, 2020 4:00p
P/E Ratio
295.16
Dividend Yield
N/A
Market Cap
$78.40 billion
Rev. per Employee
$984,824
loading...
/zigman2/quotes/208081807/composite
US : U.S.: NYSE
$ 283.00
+1.84 +0.65%
Volume: 1.75M
Oct. 23, 2020 4:00p
P/E Ratio
25.92
Dividend Yield
2.12%
Market Cap
$304.64 billion
Rev. per Employee
$261,993
loading...
/zigman2/quotes/205518355/composite
US : U.S.: NYSE
$ 308.43
+5.44 +1.80%
Volume: 1.11M
Oct. 23, 2020 4:00p
P/E Ratio
21.10
Dividend Yield
1.88%
Market Cap
$51.42 billion
Rev. per Employee
$354,059
loading...
/zigman2/quotes/201724570/composite
US : U.S.: NYSE
$ 145.24
+0.16 +0.11%
Volume: 4.15M
Oct. 23, 2020 4:00p
P/E Ratio
22.82
Dividend Yield
2.78%
Market Cap
$382.39 billion
Rev. per Employee
$603,509
loading...
/zigman2/quotes/209397502/composite
US : U.S.: NYSE
$ 129.02
+1.39 +1.09%
Volume: 1.26M
Oct. 23, 2020 4:00p
P/E Ratio
27.02
Dividend Yield
2.42%
Market Cap
$58.24 billion
Rev. per Employee
$998,012
loading...
/zigman2/quotes/203649727/composite
US : U.S.: Nasdaq
$ 48.20
-5.70 -10.58%
Volume: 97.32M
Oct. 23, 2020 4:00p
P/E Ratio
9.45
Dividend Yield
2.74%
Market Cap
$204.99 billion
Rev. per Employee
$659,665
loading...
/zigman2/quotes/202924304/composite
US : U.S.: NYSE
$ 226.16
+0.81 +0.36%
Volume: 587,786
Oct. 23, 2020 4:00p
P/E Ratio
24.38
Dividend Yield
1.56%
Market Cap
$29.13 billion
Rev. per Employee
$253,951
loading...
/zigman2/quotes/207593671/composite
US : U.S.: NYSE
$ 9.86
+0.12 +1.23%
Volume: 361,724
Oct. 23, 2020 4:00p
P/E Ratio
3.32
Dividend Yield
N/A
Market Cap
$559.17 million
Rev. per Employee
$905,508
loading...
/zigman2/quotes/202790087/composite
US : U.S.: Nasdaq
$ 137.85
+1.91 +1.40%
Volume: 2.10M
Oct. 23, 2020 4:00p
P/E Ratio
113.03
Dividend Yield
N/A
Market Cap
$16.45 billion
Rev. per Employee
$690,724
loading...
/zigman2/quotes/202559280/composite
US : U.S.: NYSE
$ 60.13
-0.63 -1.04%
Volume: 7.34M
Oct. 23, 2020 4:00p
P/E Ratio
N/A
Dividend Yield
2.99%
Market Cap
$135.53 billion
Rev. per Employee
$968,283
loading...
/zigman2/quotes/208506728/composite
US : U.S.: Nasdaq
$ 11.52
+0.22 +1.95%
Volume: 853,580
Oct. 23, 2020 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$818.74 million
Rev. per Employee
$148,342
loading...
/zigman2/quotes/204980236/composite
US : U.S.: NYSE
$ 57.96
+0.63 +1.10%
Volume: 12.88M
Oct. 23, 2020 4:00p
P/E Ratio
13.12
Dividend Yield
4.33%
Market Cap
$239.84 billion
Rev. per Employee
$905,626
loading...
/zigman2/quotes/202067350/composite
US : U.S.: NYSE
$ 99.38
+1.72 +1.76%
Volume: 628,877
Oct. 23, 2020 4:00p
P/E Ratio
19.12
Dividend Yield
2.13%
Market Cap
$7.73 billion
Rev. per Employee
$204,014
loading...
/zigman2/quotes/207374728/composite
US : U.S.: NYSE
$ 143.85
+0.30 +0.21%
Volume: 3.51M
Oct. 23, 2020 4:00p
P/E Ratio
22.93
Dividend Yield
1.50%
Market Cap
$407.64 billion
Rev. per Employee
$223,654
loading...
/zigman2/quotes/201180589/composite
US : U.S.: Nasdaq
$ 94.81
-1.32 -1.37%
Volume: 292,219
Oct. 23, 2020 4:00p
P/E Ratio
43.40
Dividend Yield
N/A
Market Cap
$4.96 billion
Rev. per Employee
$357,272
loading...
/zigman2/quotes/207508890/composite
US : U.S.: Nasdaq
$ 90.80
+1.44 +1.61%
Volume: 7.81M
Oct. 23, 2020 4:00p
P/E Ratio
82.01
Dividend Yield
1.98%
Market Cap
$106.15 billion
Rev. per Employee
$86,863
loading...
/zigman2/quotes/209479244/composite
US : U.S.: NYSE
$ 9.36
+0.02 +0.21%
Volume: 8.76M
Oct. 23, 2020 4:00p
P/E Ratio
N/A
Dividend Yield
4.70%
Market Cap
$3.58 billion
Rev. per Employee
$3.49M
loading...
/zigman2/quotes/202180826/composite
US : U.S.: NYSE
$ 59.90
+0.21 +0.35%
Volume: 9.74M
Oct. 23, 2020 4:02p
P/E Ratio
18.78
Dividend Yield
1.60%
Market Cap
$180.35 billion
Rev. per Employee
$289,197
loading...
/zigman2/quotes/205492029/composite
US : U.S.: NYSE
$ 212.55
+1.43 +0.68%
Volume: 178,082
Oct. 23, 2020 4:00p
P/E Ratio
16.37
Dividend Yield
N/A
Market Cap
$12.60 billion
Rev. per Employee
$1.72M
loading...
/zigman2/quotes/208744353/composite
US : U.S.: Nasdaq
$ 139.56
-0.05 -0.04%
Volume: 2.76M
Oct. 23, 2020 4:00p
P/E Ratio
27.64
Dividend Yield
2.93%
Market Cap
$192.87 billion
Rev. per Employee
$242,172
loading...
/zigman2/quotes/208579720/composite
US : U.S.: NYSE
$ 167.36
-1.71 -1.01%
Volume: 10.02M
Oct. 23, 2020 4:00p
P/E Ratio
N/A
Dividend Yield
0.00%
Market Cap
$94.47 billion
Rev. per Employee
$660,961
loading...
/zigman2/quotes/204659678/composite
US : U.S.: Nasdaq
$ 112.38
+0.74 +0.66%
Volume: 2.27M
Oct. 23, 2020 4:00p
P/E Ratio
36.67
Dividend Yield
N/A
Market Cap
$139.10 billion
Rev. per Employee
$832,885
loading...
/zigman2/quotes/205029460/composite
US : U.S.: NYSE
$ 169.80
-0.91 -0.53%
Volume: 2.14M
Oct. 23, 2020 4:04p
P/E Ratio
19.25
Dividend Yield
3.46%
Market Cap
$97.81 billion
Rev. per Employee
$350,368
loading...
/zigman2/quotes/203508018/composite
US : U.S.: NYSE
$ 228.71
-0.44 -0.19%
Volume: 2.28M
Oct. 23, 2020 4:00p
P/E Ratio
36.27
Dividend Yield
2.26%
Market Cap
$170.18 billion
Rev. per Employee
$100,120
loading...
/zigman2/quotes/203835894/composite
US : U.S.: NYSE
$ 115.54
-0.09 -0.08%
Volume: 411,594
Oct. 23, 2020 4:00p
P/E Ratio
15.31
Dividend Yield
3.12%
Market Cap
$13.18 billion
Rev. per Employee
$1.10M
loading...
/zigman2/quotes/201766540/composite
US : U.S.: NYSE
$ 136.88
-1.21 -0.88%
Volume: 2.66M
Oct. 23, 2020 4:03p
P/E Ratio
19.90
Dividend Yield
3.13%
Market Cap
$46.56 billion
Rev. per Employee
$450,878
loading...
/zigman2/quotes/202536373/composite
US : U.S.: NYSE
$ 78.27
+1.73 +2.26%
Volume: 3.41M
Oct. 23, 2020 4:00p
P/E Ratio
10.93
Dividend Yield
1.28%
Market Cap
$23.92 billion
Rev. per Employee
$1.77M
loading...
/zigman2/quotes/201480230/composite
US : U.S.: NYSE
$ 92.78
-1.11 -1.18%
Volume: 4.53M
Oct. 23, 2020 4:02p
P/E Ratio
32.75
Dividend Yield
4.16%
Market Cap
$68.23 billion
Rev. per Employee
$815,112
loading...
/zigman2/quotes/200678442/composite
US : U.S.: Nasdaq
$ 1,312.16
+17.84 +1.38%
Volume: 262,070
Oct. 23, 2020 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$65.23 billion
Rev. per Employee
$198,875
loading...
/zigman2/quotes/208144392/composite
US : U.S.: Nasdaq
$ 81.96
+2.54 +3.20%
Volume: 46.56M
Oct. 23, 2020 4:00p
P/E Ratio
160.45
Dividend Yield
N/A
Market Cap
$96.23 billion
Rev. per Employee
$641,089
loading...
/zigman2/quotes/209574944/composite
US : U.S.: NYSE
$ 35.50
+2.01 +6.00%
Volume: 1.66M
Oct. 23, 2020 4:00p
P/E Ratio
24.22
Dividend Yield
0.00%
Market Cap
$2.97 billion
Rev. per Employee
$330,516
loading...
/zigman2/quotes/207599953/composite
US : U.S.: NYSE
$ 236.54
-1.06 -0.45%
Volume: 530,249
Oct. 23, 2020 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$22.46 billion
Rev. per Employee
$484,742
loading...
/zigman2/quotes/202111693/composite
US : U.S.: NYSE
$ 37.19
+0.07 +0.19%
Volume: 1.43M
Oct. 23, 2020 4:00p
P/E Ratio
71.95
Dividend Yield
2.26%
Market Cap
$7.58 billion
Rev. per Employee
$145,677
loading...
/zigman2/quotes/210293917/composite
US : U.S.: Nasdaq
$ 60.79
+0.12 +0.20%
Volume: 30.97M
Oct. 23, 2020 4:00p
P/E Ratio
N/A
Dividend Yield
4.47%
Market Cap
$76.21 billion
Rev. per Employee
$2.02M
loading...
/zigman2/quotes/209429711/composite
US : U.S.: NYSE
$ 14.68
+0.21 +1.45%
Volume: 2.98M
Oct. 23, 2020 4:00p
P/E Ratio
N/A
Dividend Yield
0.00%
Market Cap
$2.44 billion
Rev. per Employee
$89,683
loading...
/zigman2/quotes/209157011/composite
US : U.S.: Nasdaq
$ 227.16
-0.82 -0.36%
Volume: 2.10M
Oct. 23, 2020 4:00p
P/E Ratio
18.57
Dividend Yield
2.82%
Market Cap
$133.05 billion
Rev. per Employee
$1.11M
loading...
/zigman2/quotes/200760603/composite
US : U.S.: NYSE
$ 32.79
+0.01 +0.03%
Volume: 1.22M
Oct. 23, 2020 4:00p
P/E Ratio
52.36
Dividend Yield
4.39%
Market Cap
$10.12 billion
Rev. per Employee
$828,095
loading...
/zigman2/quotes/206140855/composite
US : U.S.: Nasdaq
$ 137.73
-0.07 -0.05%
Volume: 372,417
Oct. 23, 2020 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$10.81 billion
Rev. per Employee
$603,274
loading...

Andrea Riquier reports on housing and banking from MarketWatch's New York newsroom. Follow her on Twitter @ARiquier.

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