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The theme of professional money managers underperforming their respective benchmarks is not new, but it's getting worse. In an effort to help defend their profession from passive investing (and extinction), David Kostin, chief U.S. strategist at Goldman Sachs, published a research report providing advice – and a list of stocks – for U.S. fund managers looking to beat their equity indexes in 2015.

In the United States, CNN Money reported that 89 per cent of large-cap equity fund managers underperformed the S&P 500 for the five years ended Dec. 31, 2014. This was up from 73 per cent for the five years to the end of 2013.

Mr. Kostin blames low dispersion – the majority of stocks performing in line with the broader index – for the poor performance. "Low dispersion … indicates that the potential [outperformance] to be gained from stock picking is small as stocks tend to move in unison." In effect, there are so few reasonably valued stocks performing better than the S&P 500 that managers can't find them.

Mr. Kostin's report outlined a strategy to uncover stocks with high levels of company-specific volatility as potential targets for both long and short positions. Many stocks on the list are short candidates – likely to underperform the index significantly.

To identify potential targets for lucrative trades, the strategist implemented a complex, two-stage stock-screening process. The first stage measures individual stock performance relative to the S&P 500, its industry sector, and other stocks of comparable market capitalization.

Valuation levels are also considered at this initial stage. Stocks that perform well because of low valuations, or poorly because of high valuations, are also screened out.

The intent of these steps is exclude stocks that are performing in line with the broader market – otherwise, investors might as well just buy the index.

The second stage is an assessment of non-market drivers of stock performance, "with [company]-specific risk is measured as the volatility of the micro-drivers of stock returns."

The two-step methodology is designed to isolate equities that will succeed or fail solely as a result of their individual business plans and management execution. In these cases, the portfolio manager's (possible) skill in identifying successful companies is most likely to succeed.

The final list of stocks – Mr. Kostin lists the top 100 in the report and the top 25 are in the accompanying table – represent those least influenced by market forces. Importantly, these represent both long and short ideas – equities most likely to outperform or underperform the S&P 500.

In sector terms, the strategist found consumer discretionary and technology as the most potentially lucrative hunting ground for professional investors.

The stock selection methodology virtually guarantees that these stocks will be more volatile than the benchmark – that's really the whole point – so the table represents a minefield for investors and is not for the risk-averse. Nonetheless, for sophisticated investors with strong convictions and the time to follow their investments carefully, the list represents a highly credible, informed view on where outperformance may lie.

Not for the risk averse

Ticker12M Rtn %PE Ratio TTMFwd PE Ratio
S&P 500 IndexSPX-I14.618.4017.59
Genworth Financial Inc. -Cl AGNW-N-57.4N/A6.85
Netflix Inc.NFLX-Q17.897.4798.61
Monster Beverage Corp.MNST-Q102.148.9541.30
Regeneron Pharma.REGN-Q53.2142.2142.32
Vertex Pharma. Inc.VRTX-Q78.8N/AN/A
Intuitive Surgical Inc.ISRG-Q16.439.0930.21
Wynn Resorts Ltd.WYNN-Q-39.217.5620.91
F5 Networks Inc.FFIV-Q9.626.0117.66
Sandisk Corp.SNDK-Q-18.314.8914.69
Skyworks Solutions Inc.SWKS-Q173.433.7419.76
Gamestop Corp. -Cl AGME-N-4.010.659.67
Harman Int'lHAR-N30.923.9921.69
Fossil Group Inc.FOSL-Q-29.711.5114.00
United Rentals Inc.URI-N-0.615.4911.33
TripAdvisor Inc.TRIP-Q-7.253.6137.27
Tesoro Corp.TSO-N83.715.5211.66
Cerner Corp.CERN-Q32.048.4035.03
Under Armour Inc. -Cl AUA-N38.785.5474.07
The Macerich Co.MAC-N45.18.5964.99
Expedia Inc.EXPE-Q31.528.2924.21
Delta Air Lines Inc.DAL-N37.013.449.30
Newmont Mining Corp.NEM-N-7.521.4618.91
Urban Outfitters Inc.URBN-Q25.927.0722.47
Chipotle Mexican Grill Inc.CMG-N15.546.0638.27
Nvidia Corp.NVDA-Q22.018.5314.72