Stocks with Highest Conviction from Hedge Funds

Also Interesting

• Asset Allocation Strategy October 2019
• Will the next crash kill diversification?
• Q4 outlook: pushing through bottlenecks

The NOVUS 4C Indices

Hedge funds express conviction in companies they hold by sizing them up in their portfolios. Does hedge fund conviction play a role in the future performance of stocks? Evidence shows that it does. If a stock accounts for a significant portion of a manager’s portfolio, it is considered an investment with conviction. We constructed a historical portfolio of stocks with the highest number of managers invested with conviction. The results are compelling. The Index outperforms the market (S&P 500) annually with similar volatility. Investors would be wise to pay attention to the stocks in this Index as they represent the cumulative stock selection and position sizing skill of the hedge fund industry. According to our data, these two skills are some of the most persistent in active management, and happen to be the ones that are easily isolated through public ownership data.