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Hedge funds sometimes have material non-public information, and they even trade based on such information, making stunning profits. Some of them were caught and investigated by SEC recently, but it does not mean the others are clean. There are still a number of hedge funds trading in the grey area. Even when hedge funds do not use material non-public information, they still have a group of experienced investment professionals researching the market and the stocks. Therefore, we recommend ordinary investors focus on the stock picks of hedge fund managers, especially the stocks that are owned by a large number of hedge funds.

Below is a list of consumer stocks that are most popular among hedge funds. The data is sourced from Goldman Sachs’ report on hedge funds.

Ticker

Company

YTD Return

No. of HFs

% of Equity Cap owned by HFs

(NYSE:GM)

General Motors Company

-45

28

6

(NYSE:LEA)

Lear Corp.

-18

15

18

(NYSE:PG)

Procter & Gamble Co.

-2

14

1

(NYSE:PM)

Philip Morris International, Inc.

25

15

2

(NYSE:VC)

Visteon Corp.

-30

16

37

General Motors Company (GM) is the consumer stock that is most popular among hedge funds. Based on the statistics of Goldman Sachs, there are 28 hedge funds that own GM in their 13F portfolio as of September 30. Six percent of the outstanding shares of General Motors was owned by hedge funds. GM has a market cap of $33.8B and a very low P/E ratio of 4.86. It lost 45% so far this year. David Einhorn’s Greenlight Capital invested nearly $300 million in GM shares.

Visteon Corp (VC) and Lear (LEA) are two auto parts stocks that are very popular among hedge funds. There are 16 hedge funds bullish bout VC, and 37% of its equity was owned by hedge funds. The auto parts company had a market cap of $2.9B. It lost 30% since the beginning of this year, and its P/E ratio is also extremely low – only 4.85, indicating that the stock is very likely to be trading at a discount. George Soros was bullish about VC. His Soros Fund Management had over $70 million invested in this stock. Fifteen hedge funds owned 18% of Lear’s equity. LEA has a market cap of $3.3B and lost 18% since the beginning of this year. Hedge funds must be thinking that these auto companies are probably oversold.

Philip Morris International Inc (PM) is the best performing stock this year on the list above. It returned 25% so far since the beginning of this year. The $132B market cap stock has a P/E ratio of 16.04. There are 15 hedge funds bullish about PM, and they own 2% of the equity cap of Philip Morris. Tom Russo’s Gardner Russo & Gardner had over $500 million invested in this cigarette company. It is interesting that hedge funds went for PM instead of domestic tobacco stocks like Altria (NYSE:MO), Lorillard (NYSE:LO) or Reynolds American (NYSE:RAI). Philip Morris grows faster than domestic tobacco companies, and its earnings are a hedge against a decline in the value of US dollar. That's what we like most about PM as well.

Procter & Gamble Co (PG) is another consumer stock that many hedge funds are bullish on. Fourteen hedge funds owned 1% of PG. PG is a mega cap stock. It has a market cap of $178.4B and a P/E ratio of 16.46. The stock has a YTD return of -2%.

Disclosure: I am long PM.

Source: 5 Most Popular Consumer Stocks Among Hedge Funds