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Forty-five days after the end of each quarter, hedge funds with at least $100 million in assets under management are required to report their holdings at the end of the quarter. Many investors plan their strategies based on what the most well-known hedge funds are buying, but that might not be the best strategy right now.
NEW YORK, NY – NOVEMBER 03: Chairman of Icahn Enterprises Carl Icahn participates in a panel … [+]
It’s no secret that most hedge funds have been struggling in 2022, but it’s still a good idea to see what they’ve been buying and selling. The value rotation narrative has been going on for several quarters at least, and the purchases and sales recorded during the first quarter show a continuation of this trend.
However, they also show that hedge funds generally won’t give up on Big Tech despite the beating most of those companies have taken. Thus, any story focused on the rotation from growth to value should contain the caveat of “except for these.”
General Q1 trends
In its most recent Hedge Fund Trend Monitor, Goldman Sachs analysts reported that hedge funds are now less tilted toward information technology and consumer discretionary than they have been at any other time in the last decade. On the other hand, they are the most tilted toward industrials than at any other time in the last 10 years.
In general, hedge funds shifted away from “Big Tech” companies, with Apple
leading the decline in exposure. However, the most popular positions on Wall Street remain Big Tech names, with the FAAMG names (Facebook parent Meta Platforms, Apple, Amazon
parent Alphabet) persistently holding the top five most popular hedge fund stocks.
It’s easy to see why hedge funds are struggling so much, given that the FAAMG stocks have all plummeted this year, with declines ranging from 22% to 43% in the first three months of the year. However, the vast majority of stocks have plunged this year, so it’s been extremely difficult but not impossible to choose positions wisely.
Only one of the top 10 most popular hedge fund positions is in the green for the year, and that’s T-Mobile U.S. All but a handful of the top 50 positions among hedge funds are down significantly. Among the 50 most popular stocks that have done remarkably well this year are Activision Blizzard
, Cheniere Energy, EQT
Corporation, Occidental Petroleum
, Valaris, AT&T
, and Chesapeake Energy
According to Bloomberg, investors slashed their holdings in technology companies by 1.4% during the first quarter, with Microsoft leading the sales despite its position as the number one most popular stock among hedge funds. Investors reduced their consumer discretionary and communications weightings by 0.8% each but boosted their weighting in energy by 1.2%.
Loading up on Big Tech
Many hedge funds bought some tech stocks that took a beating. For example, Sachem Head bought Salesforce and Opendoor Technologies. Appaloosa boosted its stakes in Uber
, Amazon and Microsoft. At the same time, Coatue Management established a new position in Advanced Micro Devices
and boosted its positions in Square, Peloton, DoorDash
a and Uber. Corvex Management boosted its positions in Amazon and Uber, while Duquesne added to its positions in Microsoft and T-Mobile.
Stephen Mandel’s Lone Pine Capital established a new position in Meta Platforms and boosted its stakes in Square and Microsoft. Lee Ainslie’s Maverick Capital bought shares of Square and boosted its stake in T-Mobile.
George Soros established a new position in Zynga and added to his stake in Alphabet and Salesforce. Bill Ackman’s Pershing Square bought shares of Netflix
during the first quarter, although the activist said last month that he had unloaded the position since then.
Paul Singer’s Elliott Investment Management added to its position in Twitter, while Viking Global added to its stake in Microsoft. John Paulson added to his stakes in Didi and Alibaba.
Unloading Big Tech
On the other hand, even more funds dumped Big Tech in massive quantities. Soroban Capital unloaded large numbers of Big Tech shares, exiting Meta Platforms and Netflix and cutting its stake in Microsoft. Interestingly, its only new position was a consumer discretionary stock, Yum! Brands. Appaloosa also reduced its positions in some tech names, including Meta Platforms and Alphabet.
Seth Klarman’s Baupost boosted its stake in Alphabet but slashed its position in Meta Platforms, while Coatue cut its stakes in Rivian, Amazon and PayPal. Corvex exited Salesforce, T-Mobile and Zynga while cutting its stakes in Alphabet and Microsoft. Duquesne exited Alphabet and Airbnb during the first quarter while slashing its positions in Booking Holdings, Snap and Expedia.
Elliott exited Dell, while David Einhorn’s Greenlight Capital exited Twitter and slashed its stake in GoPro. Lone Pine exited Adobe Systems and Snowflake and slashed its positions in Shopify, Snap and DoorDash. Maverick Capital exited Activision Blizzard, a top performer year to date, and reduced its positions in Coupang, Netflix, Meta Platforms and Adobe Systems.
Soros exited Apple, Alphabet and Activision Blizzard and reduced his position in Microsoft, while Dan Loeb’s Third Point exited Alphabet and Upstart Holdings and cut its stakes in Amazon, Microsoft and Rivian. Tiger Global dumped Netflix, Adobe Systems, Coupang and PayPal and reduced its positions in Meta Platforms, DoorDash, Uber Technologies and Amazon.
Viking Global exited Twilio
and Peloton and reduced its position in Take-Two Interactive, JD.com and Meta Platforms.
Interestingly, Carl Icahn slashed his exposure to Cheniere Energy by 40%, one of the top 50 most popular stocks among hedge funds and a significant outperformer year to date. He also exited Occidental Petroleum, another popular hedge fund stock and a significant year-to-date outperformer.
Icahn’s only new position was a consumer discretionary name: International Flavors and Fragrances. The company is Sachem Head Capital’s largest position, although it reduced the position slightly during the first quarter.
George Soros exited General Motors
, Uber Technologies and Lithia Motors, although he didn’t sell any shares of Rivian Automotive, his largest position.
Trian Fund Management exited Comcast
and established a stake in Mondelez International
. David Tepper’s Appaloosa bought shares of Las Vegas Sands and Wynn Resorts
. Tepper said earlier this month that he had covered his Nasdaq short. His fund also exited 12 of its positions during the first quarter, including T-Mobile U.S. and GM.