Here Are Some Of The Stock Pickers' Favorite Names In 2023 Following A Good Year

Here are Goldman Sachs' highest conviction bets for stock pickers after a strong year in the market.

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The Wall Street investment bank examined the holdings of 543 mutual funds with $2.4 trillion in assets under management at the start of 2023, based on the information provided by them in their regulatory filings. As a next step, the company compiled a basket of the most popular bets, dubbed the "Mutual Fund Overweight Basket," which consisted of 50 stocks in which mutual funds were overweighted the most.

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During the first half of this year, 43% of large-cap mutual fund managers have outperformed their benchmarks, a number well above the long-term average of 38%, Goldman said. Bank of America said that the value managers have been the biggest winners, with 53% of the funds outperforming the Russell 1000 Value index by a wide margin.

Goldman has recorded a 35 percentage point gap between mutual funds that are overweight in stocks that are favored by hedge funds in 2022, the widest gap Goldman has ever observed between mutual funds and hedge funds.

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In line with the performance of the S&P 500, Goldman's overweight mutual fund basket has gained 2% in 2023 as well.

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As David Kostin, Goldman's head of U.S. equity, said in a note to clients, "Stock picks are paying off for Goldman.". “The rising equity return dispersion and falling stock correlation signal that fund managers have the potential to generate greater alpha.”

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Mutual funds preferred Mastercard and Visa as credit card brands at the start of 2023, according to Goldman Sachs. Visa has gained more than 6% in share price this year, while Mastercard's stock has gained a more modest 2%, according to data from Trade Algo.

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Goldman also found that mutual funds preferred Wells Fargo and Charles Schwab among the other financial institutions, both of which earned top spots on the list of Goldman's top financial institutions.

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Additionally, stock pickers were also attracted to insurance names such as American International Group and Cigna. Unlike those stocks that are more defensive in nature, healthcare stocks are typically more defensive in nature and, in an uncertain macroeconomic environment, they tend to hold up well, at least in the case of Cigna, whose insurance business is oriented around medicine.

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