When institutional investors are buying stocks, it's generally seen as a positive sign for those picks. This is because institutional investors, with their immense resources and research capabilities, tend to invest unemotionally, and only after thorough due diligence by a team of seasoned, experienced market veterans. These institutions tend to be adept at profitable and strategic stock-picking for the long term, and are unlikely to overreact to temporary bouts of volatility.
To that end, brokerage firm Goldman Sachs (GS) recently compiled a list of stocks that both hedge funds and mutual funds were buying during the second quarter of 2024. Goldman notes that stocks from this overlapping basket of mutual fund and hedge fund picks have beaten the S&P 500 Index ($SPX) in 61% of months since 2013, by 3 percentage points annually.
