Top Funds' Activity in Q2 2020
On August 14th, we had a 13F filing update in the U.S., which gives more insight about the smart money and how it is deploying its capital. Investors are always keen to know and relate this information to their trading strategy. For retail traders, this information can be seen as confirmation of whether their investment strategy is correct and how they can fine-tune it.
Buffett Buys Barrick Gold
The most significant headline of the 13F filing was about Berkshire Hathaway’activity. It has purchased stock in Barrick Gold, a Canada-based mining company. Its position in Barrick Gold (GOLD) is worth nearly $565 million.
Buffett Dumps Goldman Sach, Still Owns Bank Of America
The Oracle of Omaha, Warren Buffett, reduced Berkshire Hathaway's positions in U.S. banks: JPMorgan (JPM), Wells Fargo (WFC) and PNC. It is critical to mention that Buffett still holds some U.S. banks, and Bank of America (BAC) is one of them.
Overall, it may not be a stretch statement to say Warren Buffett's fund was more busy selling its positions— the fund sold its airline stocks—than buying stocks during the coronavirus pandemic.
Saudi Sovereign Wealth Fund Sells Disney, Facebook, BP
The Saudi Sovereign Wealth Fund exited its positions in Disney (DIS), Facebook (FB), Boeing (BA) and BP. Disney stock is mainly beaten down due to coronavirus, as the Disney theme parks are still under the influence of Covid-19. Apart from that, Disney is the stock among its peers that can see massive upside in the coming quarters because of its new initiatives such as Disney+ streaming and also Disney premiering its new movies online—a new territory.
The BP stock is very much an energy story. BP is making efforts in the renewable sector; these bets can pay off in the long term.
Facebook is the giant in the social media space, and with the introduction of Instagram Reels, it is ready to take on its competition, TikTok. As for the Boeing stock, yes, the company is under pressure as the entire airline sector is suffering massively. However, most of the airlines are selling their old planes, and when the traffic does return, we will likely see a surge.
Pershing Square Dumps Berkshire Hathaway
Pershing Square, which acts as more of an event-driven fund, has exited its position in Berkshire Hathaway (BRK.B) and Blackstone (BX). The fund has increased its exposure in the restaurant industry, as the coronavirus has adversely influenced the sector. There are several bargains here, such as Chipotle (CMG).
Aparna Narayanan of Investor's Business Daily also reports that Tesla and Apple are among the ten hottest stocks hedge funds bought in Q2:
Tesla stock saw strong interest from top hedge funds' in the second quarter, with companies gaining from pandemic trends such as online work and play generally in favor, the latest quarterly 13F filings with the SEC show.
Here are the 10 stocks that were most popular among 150 winning hedge funds last quarter, as per new 13F filings tracked by Whalewisdom.com. The website uses a proprietary calculation to rank the stocks.
Individual investors use the regulatory data to assess where the "smart money" is placing its bets. The 13F filings reflect hedge funds' stock portfolio holdings at the end of each calendar quarter.
- Workday (WDAY)
- MercadoLibre (MELI)
- Zoom Video Communications (ZM)
- Apple (AAPL)
- Tesla (TSLA)
- Shopify (SHOP)
- Coupa Software (COUP)
- Zillow (Z)
- Nvidia (NVDA)
- Pinduoduo (PDD)
While hedge funds were generally hot on Tesla stock in Q2, the Scottish fund manager Baillie Gifford, its largest institutional shareholder, trimmed its stake by 2%. Tesla stock remains No. 1 in Baillie Gifford's portfolio, at 10% of assets.
Apple kept its place as the No. 1 stock in Berkshire Hathaway's portfolio in Q2. Berkshire Hathaway CEO Warren Buffett began gathering Apple shares in Q1 2016 and is now one of the iPhone maker's three biggest institutional shareholders. Apple stock accounts for more than 44% of Berkshire's portfolio.
Workday stock is on the IBD 50 list of top growth stocks. So are Zoom Video and Nvidia.
Meanwhile, Zillow stock was recently featured in an IBD Stock of the Day column, which highlights stocks worth watching as they make notable moves on their charts.
Hedge Funds' Stock Buys And Sells
Among other notable hedge fund moves in Q2, activist investor Dan Loeb of Third Point reduced its Raytheon Technologies (RTX) stake by 17%. Loeb had opposed the merger of United Technologies and defense contractor Raytheon Company, which produced Raytheon Technologies.
Third Point also added more than 4 million shares of Disney (DIS) to his portfolio. Disney stock now the biggest stock in Third Point's portfolio at 8.4% of assets.
David Tepper's Appaloosa Management boosted its Alibaba (BABA) stake by 49%, pared Amazon (AMZN) by 10%, and bought 5 million more shares of T-Mobile (TMUS). Those are now the top three stocks in its portfolio, accounting for roughly a third of Appaloosa's portfolio combined.
Hedge fund filings confirmed that Bill Ackman's Pershing Square fully exited its large stake in Berkshire Hathaway last quarter, dumping nearly 5.5 million shares. The sale was first reported in May, with Ackman calling Berkshire Hathaway stock a "strong investment" but suggesting he wished to act on new growth opportunities in the pandemic-hit market.
Zero Hedge also posted a summary of what the most prominent hedge funds did in the second quarter, courtesy of Bloomberg:
ADAGE CAPITAL PARTNERS
- Top new buys: RPRX, ABBV, W, HZNP, FIVE, ST, CCK, TRV, USB, JCI
- Top exits: BMY, GILD, ETN, PNC, MAS, EXC, AON, CCMP, NI, CX
- Boosted stakes in: BURL, PYPL, FTV, ITT, LOW, GOOGL, TMUS, EYE, AZO, BMRN
- Cut stakes in: LMT, JNJ, PFE, HON, VZ, VRTX, TGT, VMC, PXD, LLY
APPALOOSA
- Top new buys: T, V, MA, PYPL, DIS, SYY, EMR, MO, SQ, TEN
- Top exits: INTEQ, XLU, BKLN
- Boosted stakes in: TMUS, BABA, MU, HCA, MSFT, BSX, TWTR, WFC, CRM, GT
- Cut stakes in: PCG, UNH, TSLA, HUM, VST, AMLP, AVGO, NFLX, QCOM, ADBE
BALYASNY ASSET MANAGEMENT
- Top new buys: SCHW, ABT, TGT, HD, ADBE, SHOP, ITW, COST, C
- Top exits: JCI, AMTD, INTC, CHTR, KR, TMUS, TTWO, NVDA, ICE, ROST
- Boosted stakes in: PYPL, FISV, BABA, JPM, FLT, NSC, LITE, DKS, QCOM, LHX
- Cut stakes in: BSX, LOW, DG, FIS, ABBV, BAX, INTU, JD, BK, ETFC
BAUPOST GROUP
- Top new buys: HCA, VRNT, VTR, SSNC
- Top exits: LNG, ET, XPO, SPR, CARS
- Boosted stakes in: LBTYK, TBIO, QRVO, ATRA, HDS
- Cut stakes in: FB, GOOG, PCG, UNVR, ABC, HPQ, CLNY, VIST, AKBA
BERKSHIRE HATHAWAY
- Top new buys: GOLD
- Top exits: DAL, LUV, UAL, AAL, QSR, GS, OXY
- Boosted stakes in: STOR, KR, SU
- Cut stakes in: WFC, JPM, SIRI, PNC, MTB, BK, MA, V, CHTR, USB
BRIDGEWATER ASSOCIATES
- Top new buys: UPS, ZLAB, CSX, ECL, TT, RNG, PAYC, ROP, GWW, FICO
- Top exits: TLT, HYG, EMB, RY, TD, TIP, CNI, BNS, TRP, BCE
- Boosted stakes in: SPY, GLD, IVV, FXI, BABA, MCHI, IAU, JD, PDD, VEA
- Cut stakes in: EWZ, LQD, INDA, EWY, EEM, IEMG, VWO, EWW, BAM, EWT
COATUE MANAGEMENT
- Top new buys: BA, DOCU, INO, DXCM, WYNN, HWM, LYV, ALGN, TDG, DHT
- Top exits: RNG, SNAP, BYND, LKNCY, GLUU, ISRG, CGC, STNE, MCD, VGK
- Boosted stakes in: DIS, PYPL, ZM, SQ, CRWD, PTON, LRCX, SHOP, MU, PODD
- Cut stakes in: MSFT, LBRDK, BABA, TWTR, JD, NKE, GPN, CREE, GH, NFLX
CORSAIR CAPITAL MANAGEMENT
- Top new buys: IWO, IWM, WMB, NATR, MFIN
- Top exits: LAUR, RHP, ECPG, ATKR, NMRK, TROX, KRA, FSK, HHC, SATS
- Boosted stakes in: VRT, WSC, GDDY, CC, BH, BBCP, METC, BRK/B
- Cut stakes in: HGV, HMHC, FMC, NWSA, REPH, GOOG, CHDN, C, CUBI, PLYA
CORVEX MANAGEMENT
- Top new buys: TMUS, EXC, EVRG, CMCSA, JPM, IAA, TIF, LYV, PCG
- Top exits: ZEN, CRM, FANG, UNP, VMC, MPC, UNH, ANTM, SPY
- Boosted stakes in: MGM, GLD, BABA, CNP, NFLX, HUM, CNC, MSGS
- Cut stakes in: ADBE, ATUS, ATVI, AMZN
D1 CAPITAL PARTNERS
- Top new buys: JPM, AVB, EXPE, TGT, DEI, AAP, ESS, CVNA, SMAR, PNC
- Top exits: LIN, GWRE, TME, NKE, UNH, BAC, PDD, DHI, INMD
- Boosted stakes in: BABA, USB, JD, LVS, MSFT, HPP, KRC, CCC, LYV, HLT
- Cut stakes in: NFLX, FB, AMZN, DIS, RACE, ORLY, PPD, AZO, SBUX, GOOGL
DUQUESNE FAMILY OFFICE
- Top new buys: TMUS, JPM, XBI, SBUX, BKNG, SMAR, CCL, WFC, LYV, CB
- Top exits: ABT, QCOM, NOW, ADBE, INDA, COUP, TWOU, EDU, SNE, TWLO
- Boosted stakes in: MSFT, JD, FCX, FSLY, BABA, CRWD, RETA, PLAN, FLEX
- Cut stakes in: NFLX, FB, AMZN, WDAY, ATVI, GOOGL, GE, IQV, FIS, DISH
ELLIOTT MANAGEMENT
- Top new buys: WELL, FSCT
- Top exits: LQD, RRTS, ESI, HYG, XOP, NEWR, CSOD, NTNX, CNHI, EGHT
- Boosted stakes in: DELL, TWTR, RYAAY
ENGAGED CAPITAL
- Top new buys: JACK, MGLN, SMPL, IWM
- Top exits: APOG
- Boosted stakes in: STKL, NCR
- Cut stakes in: HAIN
FIR TREE
- Top new buys: SQ, LYV, PS, SNAP, VG, EIX, SABR, EXPE, J, PCPL
- Top exits: FLT, FPAC, BKNG, SHLL, CCH, GOOG, APXT, OAC, DMS, EXPC
- Boosted stakes in: CNC, CTXS
- Cut stakes in: DIS, MSFT, TMUS, LAUR, ANTM, DELL, EXC, CMCSA, SLM, TRNE
GREENLIGHT CAPITAL
- Top new buys: GDX, AAWW, TECK, REZI, JACK, GLD, APG, TPX, SATS, WHR
- Top exits: ATUS, ADNT, CNC, MO, PAYX, AXP, GS, DHR, BRK/B, DIS
- Boosted stakes in: AER, CHNG, NBSE, GPOR
- Cut stakes in: CNX, XELA, CC
ICAHN
- Top exits: HPQ, HTZ, FCX
- Boosted stakes in: IEP, LNG, TEN
- Cut stakes in: CLDR
IMPALA ASSET MANAGEMENT
- Top new buys: LAD, DRI, NSC, HES, CMI, VAC, TOL, ADNT, DOOO, MU
- Top exits: MSFT, PCAR, CSX, KBH, VMC, MA, AMZN, FDX, EXP
- Boosted stakes in: HOG, RIO, AAWW, FUN, WYNN, UFI
- Cut stakes in: TGT, QCOM, KSU, SBLK, TTWO, SIX, KNX, TCKRF, NVR, TECK
JANA PARTNERS
- Top exits: NEWR, JACK
- Boosted stakes in: PRSP, SPY
- Cut stakes in: AXTA, HDS, HI, BLMN, ELY, CAG
LAKEWOOD CAPITAL MANAGEMENT
- Top new buys: HDS, CRL, LBTYK, LBTYA, UE, CDK, NKLA, ABG, CROX, SHAK
- Top exits: WUBA, AMZN, ICE, FNF, TWO, YY, RNR, TPR, WW, REAL
- Boosted stakes in: FAF, BABA, ANTM, AXS, BIDU, BHC, HCA, SKX, C, ACGL
- Cut stakes in: GOOGL, CI, FB, MA, DELL, GS, AGNC, APO, CMCSA, BC
LANSDOWNE
- Top new buys: C, VMC, LUV, ED, FCX, RYAAY, AES, COG, TMUS, BKNG
- Top exits: DHT, NKLA, AGI, TT, IQ, BABA
- Boosted stakes in: MU
- Cut stakes in: UAL, DAL, FSLR, GE, ETN, ADI, REGI, LRCX, TSM, SMMT
LONG POND
- Top new buys: PEAK, LVS, DEI, EQR, SHO, WELL, SEAS, UDR, INVH, MAR
- Top exits: H, DHI, VNO, PEB, PGRE, MGM, VAC, RRR, JLL, CUZ
- Boosted stakes in: CPT, AVB, MAA, AIV, HLT, ESS, FR, KRC, JBGS
- Cut stakes in: WH, HGV, RHP, HPP, SBRA
MAGNETAR FINANCIAL
- Top new buys: ADCT, NVS, PKI
- Top exits: HPQ, TSG, DLR, DKNG, ET, EPD, KMI, LHCG, CRL
- Boosted stakes in: GRUB, WLTW, LH, BDX, LCA, CPAA, SYNH, ABBV, CRSA, DGX
- Cut stakes in: PFE, ADSW, TIF, UBER, NVST, BAX, WMB, PPD, MEET, FREE
MAVERICK CAPITAL
- Top new buys: AXP, LIVN, VFC, MKC, GE, BGS, THS, GIS, CRI, FL
- Top exits: QSR, COMM, ALKS, H, BX, GME, WING, ARMK, ORCL, LB
- Boosted stakes in: FB, AMZN, DLTR, MSFT, LRCX, APD, ATRA, NFLX, NKTR, UBER
- Cut stakes in: FLT, BABA, DD, CCK, STNE, PRSP, TMUS, CNC, ADBE, KKR
MELVIN CAPITAL MANAGEMENT
- Top new buys: DOCU, TWLO, SE, GOOGL, AEO, LOW, NUAN, HLT, TPX, PINS
- Top exits: TTWO, CPRT, EDU, DG, ADYEN, EFX, ADI, LKNCY, IQV, QSR
- Boosted stakes in: FISV, AZO, BKNG, JD, PYPL, LB, AAP, MA, FICO, DPZ
- Cut stakes in: FIS, FB, CSGP, LH, NFLX, DRI, VRSN, AMZN, EL, PLAN
OAKTREE CAPITAL MANAGEMENT
- Top new buys: PCG, GTH, API, SRNE
- Top exits: CEO, SRLP, WMB, BRFS, ASRT, ORCC, PVAC, MDRIQ
- Boosted stakes in: TMHC, AU, TSM, CX, ITUB, MELI, BIDU, AFYA, IBN, AZUL
- Cut stakes in: BABA, BCEI, CZR, CCS, SMCI
OMEGA ADVISORS
- Top new buys: DNRCQ
- Top exits: GOOGL, SSSS, TWO, GPMT
- Boosted stakes in: COOP, JPM, FOE, GTN, MGY, SNR, SRGA, AMCX
- Cut stakes in: VICI, GCI, FCRD, NBR, ASPU, OCN, EFC, MVC, PE, ABR
PERSHING SQUARE
- Top exits: BRK/B, BX, PK
- Boosted stakes in: QSR, LOW
- Cut stakes in: HHC
SOROBAN CAPITAL
- Top new buys: RTX, CMCSA, HLT, MAR, YUM
- Top exits: LHX, QSR, NSC
- Boosted stakes in: BABA, SNE
- Cut stakes in: NOC, UNP, CSX, ATUS, AMZN, MSFT
SOROS FUND MANAGEMENT
- Top new buys: IGSB, SLQT, HAIN, PCG, DKNG, DRI, SPSB, BAC, MS, C
- Top exits: XLU, WMGI, UNH, LNT, SHW, ALL, CBOE, LEN, DIS, CVE
- Boosted stakes in: LQD, TMUS, NLOK, VICI, TDG, ARMK, BK, GS, ETFC, FOCS
- Cut stakes in: PTON, TIF, TCO, ORCC, VST, KKR, CLVS, AVTR, ATVI, DHI
STARBOARD
- Top new buys: IWM, IWR
- Top exits: REZI
- Boosted stakes in: MD, ACIW
- Cut stakes in: EBAY, IWN, CERN, NLOK, CVLT, BOX, MMSI, GDOT
TEMASEK HOLDINGS
- Top new buys: BLK, PDD, SBUX
- Top exits: BMRN, UNVR, RDS/B, PAGS, STNE, TOUR, FSLY, WORK
- Boosted stakes in: BGNE, HDB, IBN, CBPO, VMW
- Cut stakes in: BABA, FIS, VIRT, NIO, DDOG, VNET, INFO
TIGER GLOBAL
- Top new buys: ZI, API, DADA
- Top exits: IQ, LVGO, BILL, STG, JCPNQ
- Boosted stakes in: JD, AMZN, MSFT, CRWD, SPOT, PDD, DDOG, CRM, WDAY, ZM
- Cut stakes in: ATH, SVMK, RDFN, MA, STNE, PYPL
TUDOR INVESTMENT
- Top new buys: ADSW, PCG, TMUS, TME, LHX, ATHM, BXMT, NFLX, ESS, EQR
- Top exits: TIP, DEI, ABBV, FHN, KRC, GLPI, COP, PEG, LAD, MS
- Boosted stakes in: AMTD, ETFC, GLIBA, SOXX, X, O, AAPL, UBER, CRWD, TCO
- Cut stakes in: SPY, JAZZ, CERN, TEAM, HPQ, MCD, EA, LRCX, CUZ, PSB
VIKING GLOBAL INVESTORS
- Top new buys: TMO, HLT, APG, NUAN, MCO, PH, ADI, SHW, DRI, ZNTL
- Top exits: ANTM, GOOGL, FB, NSC, ORLY, A, NOW, PGR, BMRN, AJG
- Boosted stakes in: AXP, CMCSA, FIS, LVS, TMUS, PLAN, JPM, AON, CB, SE
- Cut stakes in: NFLX, BSX, JD, LOW, UBER, CME, MELI, MU, CRM, CHNG
WHALE ROCK CAPITAL MANAGEMENT
- Top new buys: SQ, NXPI, MELI, CREE, VRM, ZI
- Top exits: DIS, BABA, INTC, MU, MIME, ZS, ATVI, TSM, KLIC, PLAN
- Boosted stakes in: FSLY, SHOP, DOCU, TSLA, COUP, AMZN, W, FB, OKTA, BILL
- Cut stakes in: NOW, MSFT, NET, PTON, SMAR, FTNT, CRWD, AVLR, ZM, DDOG
Source: Bloomberg, HSBC
It's that time of the year again, we get a sneak peek into the portfolios of top funds, with the customary 45-day lag.
Before I get into my thoughts on what top funds bought and sold in Q2, a little detour to bring you more up-to-date information on markets.
Earlier this week, Lu Wang of Bloomberg News reported the stock market is at a record forcing everyone to become a believer:
From professional investors to market handicappers, it’s becoming next to impossible to stay bearish in the face of the rally in equities.
Fund managers who went to cash when the pandemic broke out have been forced back in to stocks, pushing measures of positioning toward historical highs. Wall Street forecasters, some of whom threw up their hands in surrender four months ago, are pushing up targets each day. Even Goldman Sachs Group Inc., which once warned that bad loans and falling dividends could drive a second leg of the bear market, now sees another 6% of upside in the S&P 500.
While testament to the career pressure missing a $12 trillion rally creates, the unanimity has become one of the biggest risk factors in markets right now, with positions getting crowded as everyone is forced to buy. A custom gauge of sentiment compiled by Citigroup Inc. showed “euphoria” just hit the highest level since the dot-com era.
“While a new all-time closing high would certainly be encouraging, it’s not always the pedal to the metal trade that it would seem,” said Jonathan Krinsky, chief market technician at Bay Crest Partners. “There is lot of optimism out there, which often makes breakouts harder to sustain.”
Fear of missing out gave birth to the rally and now it’s downright rampant after stocks staged a powerful rebound from the fastest bear market ever. Up more than 50% in less six months, the S&P 500 is poised for the quickest recovery on record. The index rose to as high as 3,395.06 Tuesday, surpassing its prior intraday record reached in February, before trading little changed on the day.
Money managers are embracing the equity rally after cutting their exposure to historically low levels during the downdraft, according to a survey by the National Association of Active Investment Managers. The group’s exposure index, tracking investment advisers from 200 firms overseeing more than $30 billion, has risen to a two-year high. Even the most bearish respondents are 50% long equities, something not seen since late 2017.
“Takeaways from discussions with institutional investors indicate significant comfort with central banks’ willingness to keep rates low for an extended period,” Tobias Levkovich, chief U.S. equity strategist at Citigroup, wrote in a note last week. “This is a marked shift from commentary heard a month or two ago and reflects both complacent/ebullient investor sentiment and a sense of rationalization for the relentless bull run.”
Wall Street strategists, who rushed to cut price targets for the S&P 500 during the March selloff, are now trying to catch up with a rally that has defied most of their predictions. More than half of the strategists tracked by Bloomberg have raised their projections since June, when their projections were way below the market.
The latest skeptic giving in is Goldman’s David Kostin, who boosted his 2020 target by 20% to 3,600, the most bullish among peers. The call ended his months of skepticism over the market’s resilience, including a warning in May that the S&P 500 would probably drop to 2,400 over the next three months. Like the others, Kostin’s bullish case is centered around near record-low interest rates.
“Share prices reflect not just the expected future stream of earnings but also the rate at which the profits are discounted to present value,” Kostin wrote in a note. “A plunging risk-free rate partially explains why equities have performed so well despite downward revisions to expected earnings.”
As stocks keep rising and turbulence subsides, demand from computer-driven investors who buy and sell stocks on momentum or volatility signals, is also returning. At Deutsche Bank AG, strategists including Binky Chadha aggregated positioning among stock pickers and quant funds, and found their overall exposure has increased to a one-year high.
Fund positioning tends to show an inverse relationship with future market returns, Deutsche Bank study shows. That is, the more bullish fund managers are, the poorer the market performs in coming coming months. While the current reading still signals positive market returns, with gains averaging 1% over the next month, it also points to one third of chances to go negative.
So much faith is put in the Federal Reserve that investors are willing to pay up for earnings that’s estimated to drop 20% this year. At 26 times forecast profits, the S&P 500 was traded at the most expensive level in two decades. To Peter Cecchini, founder of AlphaOmega Advisors LLC, all the index’s gains above 3,000 are unjustified.
“The equity markets are now like an old elevator way over capacity,” said Cecchini. “It’s just a matter of time before the cable snaps and its passengers end up in the basement. That’s where the Fed will be waiting.”
Now, let me give you a few of my market thoughts:
- Starting in late March, the Fed cranked up its balance by $3 trillion to backstop credit and equity markets. By doing this, it infected the bears with monetary coronavirus and unleashed the mother of all liquidity orgies on Wall Street.
- Speculators which include top hedge funds and bank prop trading desks used all that excess liquidity to buy risk assets, everything from junk bonds to tech stocks, to highly speculative vaccine stocks, some of which ran up as much as 3,000 or 4,000 percent year-to-date (before cooling off recently).
- This is entirely rational behavior but make no mistake, we are in the midst of a massive liquidity bubble and even George Soros has publicly warned it's a liquidity bubble.
- Anyone who thinks stocks would be up more than 50% since March lows and making new record highs without such massive Fed intervention is either a fool or completely delusional.
- It's the Fed, stupid. The Fed took out the big bazooka and prayed it would work. It did, asset prices are all up all over the world, including in emerging markets, but the problem is the Fed has sown the seeds of the next crisis.
- Why? Because a handflul of mega cap tech names -- Apple, Amazon, Microsoft, Google, Facebook, Netflix, NVIDIA, Tesla -- are melting up to bubble territory while the rest of the market is still depressed. This concentration risk is unprecedented as a handful of stocks represent almost 40% of the S&P 500.
- Top hedge funds knew all this, they used the "Ackman bottom" when Bill Ackman went on CNBC in late March to scare the living daylights out of investors, to front-run the Fed and take super concentrated positions in a few tech names.
- But most investors got caught flat footed, sold out of the market and didn't participate in this parabolic liquidity bubble over the last six months. Value investors, in particular, are underperforming once again relative to growth investors and some of them are jumping into this market to try to make some gains going into year-end for fear of missing out (FOMO).
- On top of this, you have commodity trading advisors (CTAs) with trillions under management buying every breakout on the S&P and Nasdaq because that's what their systematic models tell them to do, driving stocks even higher.
- Moreover, you have the passive investor craze where everyone is giving BlackRock, Vanguard, Fidelity and State Street money to invest in passive indexes which also exacerbates concentration risk and forces a handful of mega cap tech shares to fly to the stratosphere.
- Of course, you also have the dumb day traders like Dave Portnoy who used this liquidity bubble to speculate on stocks, delusionally proclaiming "it's the easiest game ever".
- And now, the final clincher, Wall Street strategists throwing in the towel, toppling over each other to raise their S&P 500 targets for the year based on the fact that record low rates warrant these forecast adjustments because there is no alternative (TINA).
It's enough to make any investor shake their head in disbelief.
I'm not a conspiracy theorist but given the vast fortunes Wall Street and a handful of tech gurus made since the pandemic erupted while many people have permanently lost their job, it makes you wonder.
Importantly, once again, the Fed has bailed out Wall Street and extremely high net worth individuals who invest in stocks and left everyone else to collect the crumbs Uncle Sam is sending them every month.
This is what capitalism has been reduced to, a charade that keeps benefiting the power elite and being a student of C. Wright Mills, I should have seen it all coming.
The late comic genius and social commentator George Carlin was dead right: "It's called the American Dream because you have to be asleep to believe it."
In his book, The Myth of Capitalism, Jonathan Tepper argues persuasively that regulators and competition bureaus are to blame, effectively killing competition to ensure monopsonies thrive.
He has many good points but the truth is capitalism is a system which thrives on massive inequality, that's its endemic engine and its ultimate demise because when this massive inequality becomes unsustainable, it will implode the system (we are seeing it every year with rising social tensions).
Why am I sharing all this with you? Because you have to think a lot bigger when looking at the stock market and ask yourself who is benefiting the most from this pandemic and what are the long-term consequences.
Top hedge funds invest on behalf of endowments, large global pensions and sovereign wealth funds but they also invest on behalf of ultra high net worth clients at Blackstone, Goldman, UBS Asset Management, and other big banks and their wealth management divisions.
The Fed has bailed them all out, at least so far, but when the next major crisis hits, even the Bezos and Gates of this world will get hit and hit hard.
Now, let me get back to top funds' activity. Have a look at these charts:
Everyone knows tech shares have outperformed the entire market but two stocks -- Apple and Microsoft -- make up almost 44% of the S&P Technology ETF (XLK) and ten companies which include names like Visa, Mastercard, NVIDIA, PayPal, Adobe and Salesforce, make up 70% of the holdings of this ETF (they've all done well except for Cisco).
This brings me to my next point: who cares what top funds are buying and selling, most of them are buying concentrated positions in the XLK and they're severely underperforming this ETF on an absolute and risk-adjusted basis over the last six months.
Yes, this can and will change when these high-flying mega cap tech shares get clobbered but why pay hedge funds 2&20 when the XLK only charges 13 basis points (0.13%)?
I'm being facetious, of course, but very serious investors have implemented a portable alpha strategy to invest in hedge funds where they swap into a stock or bond index and invest in non directional hedge funds which add pure alpha over a cash benchmark (typically T-bills + 500 basis points or 5%).
Paying fees to a hedge fund for beta bets is a losing strategy in these markets. Even the great Warren Buffett has a portfolio that looks awfully similar to the XLK but not quite which is why he's underperforming again this year.
Still, Buffett isn't stupid, he's raising billions in cash, and for good reason:
Warren Buffett's favorite stock market indicator reaches internet bubble extreme https://t.co/grPkWUVVCK via @YahooFinance
— Leo Kolivakis (@PensionPulse) August 21, 2020
Other top hedge funds are undoubtedly doing the same thing and many of them are likely worried we might get a repeat of last September's Quant Quacke 2.0.
Can Apple and NVIDIA shares go to $600? Amazon and Tesla shares to $4,000? Sure, anything is possible in this Fed induced liquidity madness but be very careful chasing all these high-flyers because when the top hedge and quant funds pull the plug and decide to sell, it will be a bloodbath.
But what about the Fed? What about it? The tweet below summarizes everything you need to know:
"Mr. Powell I saw an overlay of the fed balance sheet against stonks, I mean stocks, and the balance sheet has plateaued and doesn't that imply tha- "
— šššš¢šš¢šš§š ššš«š¤šš šš²š©š (@EffMktHype) August 19, 2020
"Have you seen where the NASDAQ is? Little shit." pic.twitter.com/QFwrJ5Vv0l
Lastly, here are the large cap stocks which have outperformed over the last six months:
And here are large cap stocks making new 52-week highs:
Notice, in the first table there's a bunch of speculative vaccine stocks and in the second, you have Apple, Google but also other names like Fedex, Chipotle, Domino's Pizza and Lululemon.
I was talking to a trader I know earlier today and told him Target (TGT) popped this week and it seems like all the quant funds are just going long anything making a new 52-week high (classic momentum trade).
He told me he sees a market of stocks and too many people are focusing just on mega cap tech names.
It's kind of hard not to when they're measuring their performance relative to the S&P 500.
By the way, maybe all these large powerful hedge funds should measure their performance relative to the S&P Tech ETF (XLK) but that will just decimate them.
Anyway, I've rambled on long enough, wanted to give you a lot of food for thought here.
Have fun looking at the latest quarterly activity of top funds listed below.
The links take you straight to their top holdings and then click on
the column head "Change (%)" to see where they increased and decreased
their holdings (you have to click once or twice to see).
These funds are run almost exclusively by men but one of the most impressive ones, ARK, is run by a lady called Cathie Wood, the best investor you never heard of (she's a Tesla bull and upped her stake in Q2).
Top multi-strategy and event driven hedge funds
As the name implies, these hedge funds invest across a wide variety of
hedge fund strategies like L/S Equity, L/S credit, global macro,
convertible arbitrage, risk arbitrage, volatility arbitrage, merger
arbitrage, distressed debt and statistical pair trading. Below are links
to the holdings of some top multi-strategy hedge funds I track
closely:
1) Appaloosa LP
2) Citadel Advisors
3) Balyasny Asset Management
4) Point72 Asset Management (Steve Cohen)
5) Peak6 Investments
6) Kingdon Capital Management
7) Millennium Management
8) Farallon Capital Management
9) HBK Investments
10) Highbridge Capital Management
11) Highland Capital Management
12) Hudson Bay Capital Management
13) Pentwater Capital Management
14) Sculptor Capital Management (formerly known as Och-Ziff Capital Management)
15) ExodusPoint Capital Management
16) Carlson Capital Management
17) Magnetar Capital
18) Whitebox Advisors
19) QVT Financial
20) Paloma Partners
21) Weiss Multi-Strategy Advisors
22) York Capital Management
Top Global Macro Hedge Funds and Family Offices
These hedge funds gained notoriety because of George Soros, arguably the
best and most famous hedge fund manager. Global macros typically
invest across fixed income, currency, commodity and equity markets.
George Soros, Carl Icahn, Stanley Druckenmiller, Julian Robertson have
converted their hedge funds into family offices to manage their own
money.
1) Soros Fund Management
2) Icahn Associates
3) Duquesne Family Office (Stanley Druckenmiller)
4) Bridgewater Associates
5) Pointstate Capital Partners
6) Caxton Associates (Bruce Kovner)
7) Tudor Investment Corporation (Paul Tudor Jones)
8) Tiger Management (Julian Robertson)
9) Discovery Capital Management (Rob Citrone)
10 Moore Capital Management
11) Element Capital
12) Bill and Melinda Gates Foundation Trust (Michael Larson, the man behind Gates)
Top Quant and Market Neutral Hedge Funds
These funds use sophisticated mathematical algorithms to make their
returns, typically using high-frequency models so they churn their
portfolios often. A few of them have outstanding long-term track records
and many believe quants are taking over the world.
They typically only hire PhDs in mathematics, physics and computer
science to develop their algorithms. Market neutral funds will
engage in pair trading to remove market beta. Some are large asset
managers that specialize in factor investing.
1) Alyeska Investment Group
2) Renaissance Technologies
3) DE Shaw & Co.
4) Two Sigma Investments
5) Cubist Systematic Strategies (a quant division of Point72)
6) Numeric Investors now part of Man Group
7) Analytic Investors
8) AQR Capital Management
9) Dimensional Fund Advisors
10) Quantitative Investment Management
11) Oxford Asset Management
12) PDT Partners
13) Angelo Gordon
14) Quantitative Systematic Strategies
15) Quantitative Investment Management
16) Bayesian Capital Management
17) SABA Capital Management
18) Quadrature Capital
19) Simplex Trading
Top Deep Value, Activist, Event Driven and Distressed Debt Funds
These are among the top long-only funds that everyone tracks. They
include funds run by legendary investors like Warren Buffet, Seth
Klarman, Ron Baron and Ken Fisher. Activist investors like to make
investments in companies where management lacks the proper incentives to
maximize shareholder value. They differ from traditional L/S hedge
funds by having a more concentrated portfolio. Distressed debt funds
typically invest in debt of a company but sometimes take equity
positions.
1) Abrams Capital Management (the one-man wealth machine)
2) Berkshire Hathaway
3) TCI Fund Management
4) Baron Partners Fund (click here to view other Baron funds)
5) BHR Capital
6) Fisher Asset Management
7) Baupost Group
8) Fairfax Financial Holdings
9) Fairholme Capital
10) Gotham Asset Management
11) Fir Tree Partners
12) Elliott Associates
13) Jana Partners
14) Miller Value Partners (Bill Miller)
15) Highfields Capital Management
16) Eminence Capital
17) Pershing Square Capital Management
18) New Mountain Vantage Advisers
19) Atlantic Investment Management
20) Polaris Capital Management
21) Third Point
22) Marcato Capital Management
23) Glenview Capital Management
24) Apollo Management
25) Avenue Capital
26) Armistice Capital
27) Blue Harbor Group
28) Brigade Capital Management
29) Caspian Capital
30) Kerrisdale Advisers
31) Knighthead Capital Management
32) Relational Investors
33) Roystone Capital Management
34) Scopia Capital Management
35) Schneider Capital Management
36) ValueAct Capital
37) Vulcan Value Partners
38) Okumus Fund Management
39) Eagle Capital Management
40) Sasco Capital
41) Lyrical Asset Management
42) Gabelli Funds
43) Brave Warrior Advisors
44) Matrix Asset Advisors
45) Jet Capital
46) Conatus Capital Management
47) Starboard Value
48) Pzena Investment Management
49) Trian Fund Management
Top Long/Short Hedge Funds
These hedge funds go long shares they think will rise in value and short
those they think will fall. Along with global macro funds, they
command the bulk of hedge fund assets. There are many L/S funds but
here is a small sample of some well-known funds.
1) Adage Capital Management
2) Viking Global Investors
3) Greenlight Capital
4) Maverick Capital
5) Pointstate Capital Partners
6) Marathon Asset Management
7) Tiger Global Management (Chase Coleman)
8) Coatue Management
9) D1 Capital Partners
10) Artis Capital Management
11) Fox Point Capital Management
12) Jabre Capital Partners
13) Lone Pine Capital
14) Paulson & Co.
15) Bronson Point Management
16) Hoplite Capital Management
17) LSV Asset Management
18) Hussman Strategic Advisors
19) Cantillon Capital Management
20) Brookside Capital Management
21) Blue Ridge Capital
22) Iridian Asset Management
23) Clough Capital Partners
24) GLG Partners LP
25) Cadence Capital Management
26) Honeycomb Asset Management
27) New Mountain Vantage
28) Penserra Capital Management
29) Eminence Capital
30) Steadfast Capital Management
31) Brookside Capital Management
32) PAR Capital Capital Management
33) Gilder, Gagnon, Howe & Co
34) Brahman Capital
35) Bridger Management
36) Kensico Capital Management
37) Kynikos Associates
38) Soroban Capital Partners
39) Passport Capital
40) Pennant Capital Management
41) Mason Capital Management
42) Tide Point Capital Management
43) Sirios Capital Management
44) Hayman Capital Management
45) Highside Capital Management
46) Tremblant Capital Group
47) Decade Capital Management
48) Suvretta Capital Management
49) Bloom Tree Partners
50) Cadian Capital Management
51) Matrix Capital Management
52) Senvest Partners
53) Falcon Edge Capital Management
54) Park West Asset Management
55) Melvin Capital Partners
56) Owl Creek Asset Management
57) Portolan Capital Management
58) Proxima Capital Management
59) Tourbillon Capital Partners
60) Impala Asset Management
61) Valinor Management
62) Marshall Wace
63) Light Street Capital Management
64) Rock Springs Capital Management
65) Rubric Capital Management
66) Whale Rock Capital
67) Skye Global Management
68) York Capital Management
69) Zweig-Dimenna Associates
Top Sector and Specialized Funds
I like tracking activity funds that specialize in real estate, biotech,
healthcare, retail and other sectors like mid, small and micro caps.
Here are some funds worth tracking closely.
1) Avoro Capital Advisors (formerly Venbio Select Advisors)
2) Baker Brothers Advisors
3) Perceptive Advisors
4) Broadfin Capital
5) Healthcor Management
6) Orbimed Advisors
7) Deerfield Management
8) BB Biotech AG
9) Birchview Capital
10) Ghost Tree Capital
11) Sectoral Asset Management
12) Oracle Investment Management
13) Palo Alto Investors
14) Consonance Capital Management
15) Camber Capital Management
16) Redmile Group
17) RTW Investments
18) Bridger Capital Management
19) Boxer Capital
20) Bridgeway Capital Management
21) Cohen & Steers
22) Cardinal Capital Management
23) Munder Capital Management
24) Diamondhill Capital Management
25) Cortina Asset Management
26) Geneva Capital Management
27) Criterion Capital Management
28) Daruma Capital Management
29) 12 West Capital Management
30) RA Capital Management
31) Sarissa Capital Management
32) Rock Springs Capital Management
33) Senzar Asset Management
34) Southeastern Asset Management
35) Sphera Funds
36) Tang Capital Management
37) Thomson Horstmann & Bryant
38) Ecor1 Capital
39) Opaleye Management
40) NEA Management Company
41) Great Point Partners
42) Tekla Capital Management
43) Van Berkom and Associates
Mutual Funds and Asset Managers
Mutual funds and large asset managers are not hedge funds but their
sheer size makes them important players. Some asset managers have
excellent track records. Below, are a few funds investors track closely.
1) Fidelity
2) BlackRock Inc
3) Wellington Management
4) AQR Capital Management
5) Sands Capital Management
6) Brookfield Asset Management
7) Dodge & Cox
8) Eaton Vance Management
9) Grantham, Mayo, Van Otterloo & Co.
10) Geode Capital Management
11) Goldman Sachs Group
12) JP Morgan Chase & Co.
13) Morgan Stanley
14) Manulife Asset Management
15) RCM Capital Management
16) UBS Asset Management
17) Barclays Global Investor
18) Epoch Investment Partners
19) Thornburg Investment Management
20) Kornitzer Capital Management
21) Batterymarch Financial Management
22) Tocqueville Asset Management
23) Neuberger Berman
24) Winslow Capital Management
25) Herndon Capital Management
26) Artisan Partners
27) Great West Life Insurance Management
28) Lazard Asset Management
29) Janus Capital Management
30) Franklin Resources
31) Capital Research Global Investors
32) T. Rowe Price
33) First Eagle Investment Management
34) Frontier Capital Management
35) Akre Capital Management
36) Brandywine Global
37) Brown Capital Management
38) Victory Capital Management
39) Orbis
40) ARK Investment Management
Canadian Asset Managers
Here are a few Canadian funds I track closely:
1) Addenda Capital
2) Letko, Brosseau and Associates
3) Fiera Capital Corporation
4) West Face Capital
5) Hexavest
6) 1832 Asset Management
7) Jarislowsky, Fraser
8) Connor, Clark & Lunn Investment Management
9) TD Asset Management
10) CIBC Asset Management
11) Beutel, Goodman & Co
12) Greystone Managed Investments
13) Mackenzie Financial Corporation
14) Great West Life Assurance Co
15) Guardian Capital
16) Scotia Capital
17) AGF Investments
18) Montrusco Bolton
19) CI Investments
20) Venator Capital Management
21) Van Berkom and Associates
22) Formula Growth
23) Hillsdale Investment Management
Pension Funds, Endowment Funds, and Sovereign Wealth Funds
Last but not least, I the track activity of some pension funds,
endowment and sovereign wealth funds. I like to focus on funds that
invest in top hedge funds and have internal alpha managers. Below, a
sample of pension and endowment funds I track closely:
1) Alberta Investment Management Corporation (AIMco)
2) Ontario Teachers' Pension Plan
3) Canada Pension Plan Investment Board
4) Caisse de dƩpƓt et placement du QuƩbec
5) OMERS Administration Corp.
6) British Columbia Investment Management Corporation (BCI)
7) Public Sector Pension Investment Board (PSP Investments)
8) PGGM Investments
9) APG All Pensions Group
10) California Public Employees Retirement System (CalPERS)
11) California State Teachers Retirement System (CalSTRS)
12) New York State Common Fund
13) New York State Teachers Retirement System
14) State Board of Administration of Florida Retirement System
15) State of Wisconsin Investment Board
16) State of New Jersey Common Pension Fund
17) Public Employees Retirement System of Ohio
18) STRS Ohio
19) Teacher Retirement System of Texas
20) Virginia Retirement Systems
21) TIAA CREF investment Management
22) Harvard Management Co.
23) Norges Bank
24) Nordea Investment Management
25) Korea Investment Corp.
26) Singapore Temasek Holdings
27) Yale Endowment Fund
Below, CNBC's Dominic Chu joins "Closing Bell" to discuss financials in the Berkshire Hathaway 13F filing. Is there a reason why Buffett dumoed so many US banks?I think he sees low growth and low rates are here to stay and hedged this deflation call with a stake in Barrick Gold.
More importantly, Howard Marks, co-founder and co-chairman at Oaktree Capital, the largest investor in distressed securities worldwide, warns the Federal Reserve and US Treasury can't keep stimulating the economy forever. He speaks with Bloomberg's Erik Schatzker on "Bloomberg Markets."
Comments
Post a Comment