The U.S. markets are up year-to-date 2023 with the tech heavy Nasdaq leading the pack. While the performance of the broad Russell 3000 is above 6%, stock picking can produce outperformance.

Dow Jones

S&P 500

Russell 3000

Nasdaq

30 Day Return (as of 2/10/23)

0.78%

5.55%

6.21%

12.47%

Stock picking, which turns into consensus trading activity, can produce concentration risk for crowded long and short positions. The new S3 Black Map product provides a total view of long and short positioning in the market, allowing for informed Risk Management\Portfolio Construction. This allows a PM or Analyst the transparency to see whether the portfolio is exposed to the “herd” or is contrarian in nature. Over time, the crowded positions make money until they don’t, and then the drawdowns may be severe.

Using our Black Map data to break down the market, we see those Passive Institutions (mutual funds, pension funds, insurance companies, sovereign wealth managers, etc.) performed as expected over the thirty days between January 6th to February 6th, with their most crowded long positions in line with the S&P 500. But the “stock pickers” or Hedge Funds, outperformed the S&P 500, positively on the long side and negatively on the short side, due to their concentration in more volatile stocks, which were expected to produce excess Alpha compared to the widely held broader market.

Passive Longs

Hedge Fund Longs

Short (Mostly) Hedge Fund

30 Day Return

5.67%

7.39%

-8.49%

Top 30% Crowded

5.38%

8.62%

-11.16

Middle 40% Crowded

8.44%

7.56%

-5.42

Bottom 30% Crowded

1.05%

3.21%

-4.59

These Crowded Hedge Fund positions usually exhibit positive returns over the long run and perform better in terms of Sharpe, but they typically have significantly larger drawdowns in periods of market dislocation. These concentrated holdings have strong persistency, with 87% quarter-over-quarter position consistency over the past decade. While these Crowded positions outperform over the long term, there is significant drawdown, blow-up and stop-out risk during the average holding period. The Black Map product identifies passive and active flows that help increase Alpha and aid in portfolio construction, while also providing risk management signals for long\short or overweight\underweight positions.

Using Black Map data, we can identify the Crowded Longs held by passive investors, which generated the most profits over those thirty days.

Most Profitable Longs Held by Passive Investors (last 30 days)

Name

Ticker

Long Position

MTM P\L

P\L %

Apple Inc

APPL

$ 1,189,456,408,026

$ 173,326,838,341

14.6%

Microsoft Corp

MSFT

$ 1,079,109,587,804

$ 133,811,774,256

12.4%

Amazon.com Inc

AMZN

$ 479,795,377,413

$ 78,598,997,615

16.4%

NVIDIA Corp

NVDA

$ 265,893,544,024

$ 78,548,853,870

29.5%

Meta Platforms Inc A

The Most Crowded Stocks on the Long and Short Side

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