Wayne Duggan of Benzinga reports on the Q4 13F roundup, going over how Buffett, Einhorn, Ackman and others adjusted their portfolios at the end of last year:
The latest round of 13F filings from institutional investors is out,
revealing to the world the stocks that some of the richest and most
successful investors have been buying and selling.
Takeaways From 13F Season:
Investors who follow particular fund managers can easily look up what
each was buying and selling in the quarter, but other investors may be
more interested in overall themes from 13F filings. The fourth quarter
of 2020 was a big quarter for the S&P 500, and investors were likely
interested in what top managers were buying and selling heading into
2021.
Google parent Alphabet has the attention of fund managers in Q4, with Tepper and Klarman selling and Soros buying.
Auto stocks have been hot in the market, and Cooperman was buying General Motors on the strength while Soros was taking profits.
Buffett
took huge new positions in Verizon and Chevron, both of which pay
dividend yields above 4.4%. Buffett also reduced exposure to bank stocks
in the quarter, selling Wells Fargo, JPMorgan, M&T and PNC.
Several
fund managers traded ETFs to play particular themes. Tepper bet on the
Energy Sector by buying the XLE fund while Soros made a big bet on
emerging markets by buying the EEM fund.
Here’s a rundown of how the smart money was playing some of the most popular stocks last quarter.
It's that time of the year again where we get to peek into the portfolios of the world's top money managers, with a customary 45 day lag.
Now, you might wonder why a 45 day lag? If Cathie Wood, founder, CEO & CIO of ARK Invest and the hottest portfolio manager on the planet right now can post her daily activity of what they bought and sold in the ARK funds (for example, see her ARK Innovation ETF (ARKK) holdings here), then why can't all these top funds do the same?
The answer? They don't want you to have access to their daily activity and refuse to be as transparent as Ms. Wood is.
Anyway, before I cover 13F holdings, let's go over some market news as the S&P 500 fell slightly on Friday to end a losing week:
Stocks came under pressure Friday afternoon, reversing early gains.
The Dow Jones Industrial Average finished the day up less than 1 point at 31,494.32 after climbing more than 150 points earlier in the session. The S&P 500 finished down 0.19% at 3,906.71 while the Nasdaq Composite gained less than 0.1% to finish at 13,874.46.
Though
the major indexes traded higher for most of the morning, a combination
of rising interest rates and profit taking in some of the market’s
largest technology companies appeared to dampen optimism after noon.
For the week, the S&P 500 lost 0.71% while the Nasdaq shed 1.57%. The Dow fared better with a slight gain of 0.11%.
Cyclical
stocks outperformed the broader market with the materials, energy and
industrials sectors up 1.8%, 1.7% and 1.6%, respectively. Utilities and
consumer staples stocks were among the biggest laggards.
Small-cap
stocks, which also tend to track the ups and downs of the broader
economy, clinched solid gains Friday at the expense of some of the
market’s largest members. The Russell 2000 added 2% while Facebook, Amazon, Netflix, and Microsoft all fell. Apple ended the week down 4%.
Not
all of technology underperformed as chipmakers proved resilient.
Applied Materials, which makes the equipment used to manufacture
semiconductors, gave a better-than-expected second-quarter forecast
after the bell Thursday. The shares gained 5.3% Friday.
The strength among economically sensitive stocks came after Treasury Secretary Janet Yellen told CNBC Thursday after the bell
that more stimulus is necessary even as some economic data suggested a
rebound is already underway. She added a $1.9 trillion stimulus deal
could help the U.S. get back to full employment in a year.
“We think it’s very important to have a big
package [that] addresses the pain this has caused – 15 million Americans
behind on their rent, 24 million adults and 12 million children who
don’t have enough to eat, small businesses failing,” Yellen told CNBC’s
Sara Eisen during a “Closing Bell” interview.
“I
think the price of doing too little is much higher than the price of
doing something big. We think that the benefits will far outweigh the
costs in the longer run,” she added.
Still, the stock market’s rally to records stalled a bit this week as fears of rising rates and higher inflation crept in.
Some
investors have said pessimism over a jump in interest rates and the
potential for inflation have kept Wall Street in check in recent
sessions. The 10-year Treasury yield this week rose to the highest in
nearly a year, and on Friday rose another 5 basis points to 1.34%.
“I
think that this week may have put a little bit of inflation fear into
people. Not necessarily in the short term, but this could turn really
quickly,” said JJ Kinahan, chief market strategist at TD Ameritrade.
“You
saw some pretty decent-sized swings this week in rates. I don’t want to
get too carried away – it’s not like the 10-year is creeping above 2%,”
he continued. But “I just think that because of the velocity of how
quickly we started the year, it may just be a little bit of people
taking a breather.”
Yellen, though, said she doesn’t believe inflation should be the biggest concern.
“Inflation
has been very low for over a decade, and you know it’s a risk, but it’s
a risk that the Federal Reserve and others have tools to address,” she
said. “The greater risk is of scarring the people, having this pandemic
take a permanent lifelong toll on their lives and livelihoods.”
Many on Wall Street agree with Yellen that a large stimulus is needed
and that a trillion-dollar package, along with a smooth economic
reopening this year, will cause the market rally to continue.
“A
big part of our rationale for additional gains from here is dependent on
a continued belief that the major drivers that helped carry the market
to current levels will remain intact,” Scott Wren, Wells Fargo’s senior
global market strategist, said in a note. One of the drivers is
“additional stimulus from Congress that will help bridge the gap between
now and when vaccines are widely distributed.”
The House of Representatives will try to pass a $1.9 trillion coronavirus relief plan before the end of February, Speaker Nancy Pelosi said Thursday. Democratic Congressional leaders may try to pass a package without votes from Republicans.
After a temporary pullback in December, homebuyers returned to the market in January
despite record low supply. Closed sales of existing homes in January
increased 0.6% compared with December, according to the National
Association of Realtors.
Sales ended the month at a seasonally
adjusted, annualized rate of 6.69 million units. That figure is 23.7%
higher compared with January 2020 and the second-highest sales pace
since April 2006.
The big story this week is the rise in long bond rates with the yield on the 10-year Treasury note on the verge of making a new 52-week high:
As long bond yields back up, it hits risk assets like big tech shares (QQQ) and emerging markets (EEM) but you need to have some perspective, they're still in a bull market:
That's why I don't get too flustered about rates creeping up, they'd have to jump well above 2% for there to be a really significant sell-off.
And to be honest, I think the bond market is wrong, far too worried about inflation which isn't going to happen.
Having said this, the vaccine rollout is going well all around the world (except here in Canada) and I suspect we will reach herd immunity in many OECD countries by late summer.
Once this second stimulus package passes in the US, it will also help boost the ongoing economic recovery, that will boost the US dollar and put a little more pressure on long bond yields.(I see us hovering around 1.6% on the 10-year by summer).
Again, the backup in yields is more of a growth story, nothing to do with inflation which is more cyclical, not secular in nature.
Dhaval Joshi, chief European investment strategist for BCA Research, has
said for some time that low yields meant the rally into stocks and
other assets, made sense — a rational bubble, if you will. “Rational,
because the nosebleed valuations are justified by a fundamental driver.
And not just any fundamental driver, but the most fundamental driver of
all – the bond yield,” he writes.
But not now. Forward price-to-earnings multiples have been rising even
as yields have climbed. The earnings yield in the most growth-focused
sector, technology, has now been surpassed by the bond yield plus a
fixed amount, as the chart shows.
There are three ways this can resolve. One, is for stock prices to
decline; another is for bond yields to decline; a third is for neither
to move but earnings to rise, to improve stock valuations. (That third
factor looks unlikely, for now, at the tail end of earnings season.)
“Our
current recommendation is to stay tactically neutral for the next few
weeks to see whether risk-asset valuations can revert to rationality.
This means keep existing investments in the market, but hold fire on new
deployments of cash,” says Joshi. “If valuation reverts to rationality
in any of the three ways listed above, then investors can safely deploy
new cash into the market.”
And what about if not? Joshi says if
the market turns irrational, the key will be to look if investors at
longer-time horizons join the party. “As investors with longer and
longer time horizons join the irrational bubble, there will be
well-defined moments of heightened fragility, at which correction risk
increases. This is what burst the irrational bubble in 2000, and will
burst any new irrational bubble.”
Looking at the weekly chart of US long bond prices, I wouldn't be surprised if the selling pressure (backup in bond yields) subsides here as the move was a bit too extreme in my opinion:
If long bond prices continue to drop -- ie. long bond yields continue to back up -- then expect there to be some real fireworks in certain vulnerable sectors of the stock market which ran up like crazy since last March.
That remains to be seen, one thing is for sure, the backup in long bond yields helped propel cyclical shares higher this week and it hurt utilities and other dividend sectors:
Alright, the information above gives you a good macro background of where we are now.
Keeping this in mind, let's go back now to see what top funds bought and sold during the last quarter of the year.
Zero Hedge provided a good snapshot summary of some of the key position changes revealed at the
more popular hedge funds in the 4th quarter, courtesy of Bloomberg:
ADAGE CAPITAL PARTNERS
Top new buys: BMY, LSPD, SAGE, PH, OXY, TWTR, RKT, WEC, ANNX, CMI
Cut stakes in: AMZN, CMCSA, CI, LVS, ALL, DRI, FTV, SE, RPRX, WDAY
Source: Bloomberg
Again, this is all lagged data, which is why I'm going to show you how to look at stocks (any stock) in real time so you can stop fretting over what Soros et al. are buying and selling.
I'm going to use shares of Bausch Health Companies (BHC), a top holding of Paulson, ValueAct, Glenview and now Icahn (see full list of top institutional holders here).
First, let's look at the weekly chart. Go to stockcharts.com and type in BHC and change setting for it's weekly and go back 5 years. For the purposes of this exercise, I used the 10, 50 and 200 week moving averages:
You see how it's breaking out here, well above its 10-week moving average and making a new three-year high? Also, the weekly MACD is positive and rising which supports more gains ahead.
What about short term moves? I typically use one year daily charts and the 9 and 20 day exponential moving averages to see if a stock is overbought or oversold in the short run:
Using the daily chart, it tells me shares of BHC are a little overbought in the short-term and might correct a little but if they hold key levels, it's a buying opportunity to load up as the weekly chart tells me it's headed much higher.
Now, this isn't a science but it can help you navigate a lot of stocks which move, especially meme stocks that were pumped and dumped recently.
Look at the daily chart on BlackBerry (BB) shares:
Now look at the weekly chart:
You see how it spiked to over $28 on the daily, was way overbought and has corrected hard ever since?
Now, I want to see if it holds its 10-week moving average or goes to test its 200-week moving average.
The key point I want to make here, no matter which stock you're buying or selling, you need to make informed decisions and above and beyond the fundamentals, you need to know your key daily and weekly levels or else you're flying blind.
Stop worrying about what top fund managers bought and sold last quarter, start understanding the macro backdrop (most important thing) and then analyze stocks and other risk assets using daily and weekly charts (and monthly if you have access to them).
Capiche? What else? Shares of Palantir (PLTR) soared today, up 15% on massive volume after WallStreetBets touted it (after Cathie Wood touted it earlier this week on CNBC):
This stock is fairly new, doesn't have much history, so I only use the daily chart to gauge it:
And? What does this daily chart tell me? It tells me not to get too excited until the stock breaks above $30 and sustains an uptrend.
The same thing with that Yahoo Finance snapshot of the one -month chart I provided above, it tells me not to get excited about today's pop and not to chase it.
In fact, I'd probably be shorting it here if I was a professional hedge fund trader but managing my risk very tightly as stocks like this can explode up.
My point is do not get too excited, I know many hedge funds and top funds own shares of Palantir (see full list here), but I don't care, I stay emotionless and analyze it like I'd analyze any other stock.
The same goes for QuantumScape, another hot stock with a short history. Here, the daily looks good but not great as the daily MACD is still negative:
I know Fidelity, Soros, Millennium, Baillie Gifford and other top funds loaded up on it in Q4 (see full list here) but that doesn't tel me whether they played the massive run-up and sold or are still holding it (they probably pumped, dumped and bought it back at the end of Q4).
Let's look at another one, Twilio Inc (TWLO), a top holding of Cathie Wood's ARK Innovation fund:
Both the daily and weekly chart tell me this stock is in a bullish uptrend but the daily tells me it's overbought in the short term and is due for a correction and has to hold key levels (like its 10-week moving average).
I would have bought this at $20 and probably gotten rid of it in the low 40s (didn't touch it) and missed the explosive upside.
But look at its daily chart, it's telling me to stay the hell away from this stock:
Sure, short sellers will cover, it might go to $55 but they will come back in hard and short it even harder (short sellers aren’t stupid, they periodically cover to reel in more buyers and then slam them).
Who bought GME in Q4 of 2020? The full list is available here and some big name hedge funds like Maverick Capital made a killing but I know they're long gone now.
That brings me to another important point, be careful with these WallStreetBets stocks, I'm almost sure they are in cahoots with big hedge funds pumping and dumping stocks.
Every week I see pump-and-dumps in the stock market and I know it's big hedgies driving the insane action, mostly in small biotechs but not exclusively, they do it all over.
Where is the SEC? The SEC doesn't care as long as big hedge funds make a killing and pay big banks big fees (read my comment on YOLOers of the world uniting, the game is totally rigged!).
Alright, let me wrap it up there, there are a lot of interesting stocks I wanted to cover like Freeport McMoran (FCX), Cameco (CCJ), Haliburton (HAL), Vale (VALE) and BioCryst Pharmaceuticals (BCRX) but you definitely don't pay me enough to cover all these stocks and a lot more.
Use the information above wisely, use 13F filings wisely, stay disciplined, stay nimble, manage your position and portfolio risk well, these markets may look easy and made for trading but one wrong move taking too much risk and you're dead.
Trust me, it takes years of analyzing macro markets and stocks across all sectors to be a great investor and trader, I'm just giving you a glimpse of what I look at on a daily level.
The majority of the people out there are better off buying the S&P 500 ETF (SPY), the Nasdaq (QQQ) and emerging markets (EEM) although they make me nervous now.
I typically end these quarterly comments with links to top funds and their holdings but the new Nasdaq site doesn't provide this information yet (only for stocks, you type in your symbol at the top, scroll down the left hand side and click on institutiotnal holdings).
Alternatively, you can copy and paste the following link in your web browser:
Just change XYZ for the stock symbol of your choice to see which funds own it as of the end of last quarter (remember, the data is lagged by 45 days).
Once the new Nasdaq site starts provided fund data, I will edit this comment to add the links.
The links below 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 (well, by now, you've all heard of her).
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:
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.
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.
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.
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.
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.
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.
Pension Funds, Endowment Funds, Sovereign Wealth Funds and the Fed's Swiss Surrogate
Last but not least, I the track activity of some pension funds,
endowment, sovereign wealth funds and the Swiss National Bank (aka the Fed's Swiss surrogate). Below, a
sample of the funds I track closely:
Below, ARK Invest founder, CIO and CEO Cathie Wood is the hottest portfolio manager on the planet right now, delivering incredible returns, and she appeared on CNBC's Halftime Report earlier to discuss her Tesla, Teledoc and Zoom positions and the future of a bitcoin ETF with Scott Wapner and Bob Pisani.
Whether or not you agree with her, take the time to listen to her insights. You can see the holdings of the ARK Innovation Fund ETF (ARKK) by clicking here, it is updated every day. The holdings for other ARK funds are available here.
And yesterday, the US House Comittee on Financial Services held hearings online to look into the GameStop saga. the hearings featured Robinhood CEO, Vlad Tenev, Melvin Capital CEO Gabriel Plotkin and Ken Griffin, CEO of Citadel.
I wasn't impressed, some parts were revealing but there was way too much moralizing by some Democrats who used this forum to chastize rich hedge fund managers.
But I didn't agree with everything Ken Griffin said, praising Gabriel Plotkin as "one of the best traders of his generation" (umm, he might be great at picking stocks but his risk management totally sucks!) and truth be told, I thought AOC asked the best questions (she did her homework and others should have ceded their time to her). Still, if you have patience, take the time to watch this.
The hedge fund manager who impressed me the most last year wasn't even Chase Coleman, although he delivered great results and cashed in big time, it was Perceptive Advisors' Joseph Edelman, who picked some great biotech winners like Novavax (NVAX) and many others. When it comes to biotech, they are at the top of their game.
Third, Interactive Brokers founder and chairman Thomas Peterffy says there's nobody to blame, but there is a clear problem in the system that caused the massive run in GameStop stock. He joined 'Closing Bell' earlier this week to discuss a simple fix to the problem which the SEC can regulate (don't hold your breath).
Lastly, take the time to watch an interview with hedge fund legend Stanley Druckenmiller where he discusses his current outlook on the market, his approach to risk management throughout his career, and his perspective on the conversation surrounding the role of capitalism in American society.
My favorite part is when he talks about VaR and how he doesn't need it because he looks at his portfolio's P&L. Great interview, don't agree with him on everything but love listening to his insights.
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