Mutual funds are beating the market this year. Here are their favorite stocks

Mutual funds are beating the market this year. Here are their favorite stocks

An iPhone displays the Uber ride-hailing app on 26 September 2017, in Hong Kong.

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Mutual funds are performing well this year, with more than half of large-cap mutual funds outpacing their benchmark so far in 2021, Goldman Sachs said in a note released Friday.

That’s well above the 10-year average of 33% of funds outperforming and on pace for the highest rate in more than a decade, according to Goldman.

The strong performance can be attributed to high conviction stock positions and the funds holding smaller relative percentages of the struggling FAAMG — Facebook, Apple, Amazon, Microsoft and Alphabet — stocks, which have been underperforming the market, Goldman said.

Goldman Sachs analyzed $2.8 trillion of holdings from 501 mutual funds and identified the most overweight positions — stocks that make up a higher percentage of a portfolio relative to its benchmark.

The 50 most overweight positions, as of the latest filings, have outperformed funds’ 50 most underweight positions by 6 percentage points this year so far, according to Goldman analysis.

Here are 10 of mutual funds’ favorite stocks:

Uber is a new name on the list of mutual fund overweight positions. The ridesharing and food delivery company reported first-quarter fiscal results that beat analysts’ estimates earlier this month. Uber dramatically improved its net loss to $108 million from $968 million in the fourth quarter of 2020, largely due to a $1.6 billion gain from the sale of its self-driving unit, ATG.

Square is one of the top 10 overweight positions in Goldman Sachs’ analysis of mutual funds. A few weeks ago, the company reported blowout earnings of 41 cents per share in the fiscal first-quarter, beating the Street’s estimate of 16 cents per share. Cash App, Square’s Venmo competitor, began facilitating transactions in cryptocurrencies and the company reported $3.5 billion in bitcoin revenue, up 11 times year over year.

General Motors made the list of mutual funds’ favored stock picks. The manufacturer’s autonomous vehicle subsidiary, Cruise, announced earlier in May it expects production of its driverless shuttle called the Origin to begin in early 2023.

Goldman Sachs said investors can use their analysis to identify stocks that mutual fund managers believe will outperform the market and track mutual fund preferences.

— CNBC’s Michael Bloom contributed reporting.

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