A common strategy many investors use around each quarter’s 13F reporting period is to “follow the smart money.” This strategy works most of the time, but this year, investors who have done so have watched their portfolios shrink rapidly and dramatically — along with most of the hedge fund industry.
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The most popular hedge fund stocks
In its quarterly “Hedge Fund Trend Monitor,” Goldman Sachs presented its list of the most popular long positions among fundamentally driven hedge funds. This basket has outperformed the S&P 500 in 58% of quarters since 2001, although at the cost of high volatility.
However, the basket has underperformed the index dramatically since early 2021, lagging by more than 30 percentage points. Thus, in the current climate, this list could offer some stocks that investors might want to avoid, at least in the near term, until things turn around.
Goldman’s “Hedge Fund VIP” basket isn’t sector-neutral to the S&P 500 and contains stocks from only eight of the 11 sectors. Interestingly, there were no consumer staples stocks among the top 50 hedge fund positions — despite the firm’s finding that hedge funds generally rotated from consumer discretionary to consumer staples. The other two missing sectors are materials and real estate, and information technology is the largest weight in the basket at 30%.
Analysis of Goldman’s list
Microsoft
MSFT
AMZN
Interestingly, Apple
AAPL
Meta Platforms was down 65% year to date, while Netflix was off by 49% and Amazon declined 41%. All but two of the top 10 positions were in the red by double digits, with Visa down only 2% and Mastercard losing only 4%. PayPal
PYPL
The vast majority of the top 50 hedge fund stocks were in the red, and many were deeply in the red. However, there were some significant outperformers, including Chesapeake Energy
CHK
Mining and resources stocks
With Goldman’s list of the top 50 most popular hedge fund stocks in mind, we start to see some trends emerge in the third-quarter batch of 13F filings. In particular, some of the most well-known hedge fund managers seemed to have their own themes.
For example, John Paulson made quite a few trades in resources-related stocks, and Dan Loeb’s Third Point also traded some resources names. One theme that several funds dabbled in was hydrocarbons, with hydrocarbon explorer EQT
EQT
Paulson maintained his positions in International Tower Hill Mines, Agnico Eagle Mines
AEM
OSG
Third Point established new positions in Range Resources
RRC
Media and communications
Seth Klarman’s Baupost made a significant number of trades in TV and media-related stocks. For example, the fund dramatically boosted its position in Warner Bros Discovery, adding 11 million shares. Baupost also added to its positions in Gray Television
GTN
VSAT
LBTYA
Viking Global established a new position in Rogers Communications and exited Walt Disney
DIS
Warren Buffett’s Berkshire Hathaway
BRK.B
Healthcare and biotech
Healthcare, particularly biotech and insurance, were also major themes in 13F filings this time around.
For example, Paulson maintained his positions in Bausch Health Companies and Horizon Therapeutics and exited Pacira Biosciences. Meanwhile, Third Point bought a new stake in Relay Therapeutics and boosted its position in UnitedHealth Group
UNH
Baupost bought a new stake in home health and hospice company Enhabit and maintained its positions in Theravance Biopharma and Encompass Health.
Viking Global established new positions in Apellis Pharmaceuticals, UnitedHealth, and Tenet Healthcare
THC
MCK
CNC
Glenview Capital maintained its stake in HCA Healthcare, while Jana Partners established a new position in Enhabit.
Consumer staples versus discretionary
There was also some rotation in the mix between consumer staples and consumer discretionary. For example, Paulson trimmed his position in Bally’s, while Baupost cut its stake in packaging company Veritiv.
Third Point established a new position in plumbing and heating supplier Ferguson and increased its stake in Colgate. The fund exited can manufacturer Crown Holdings
CCK
Viking Global established new positions in Valvoline and Clorox
CLX
GE
DG
Starboard Value exited Kohl’s, as did Appaloosa, while Berkshire Hathaway cut its stake in General Motors
GM
CZR
Top tech trades
The lack of crowding among the top hedge fund stocks was especially apparent in technology, as demonstrated by the wide variety of positions reported. Paulson established a new position in Rumble and trimmed his positions in VMware
VMW
KWEB
Baupost maintained its position in Meta Platforms and exited Intel
INTC
Viking Global established new positions in ZoomInfo Technologies, PayPal, Sea Ltd., Alibaba, and salesforce and boosted its stakes in Western Digital
WDC
David Einhorn‘s Greenlight Capital established a new position in Intel and maintained its position in GoPro.
Glenview Capital established new positions in Expedia and Alibaba and increased its stakes in Amazon and Fiserv
FISV
Appaloosa maintained its positions in Alphabet and Uber and exited Micron Technology
MU
Berkshire Hathaway established a new position in Taiwan Semiconductor Mfg. and decreased its stake in Activision Blizzard
ATVI
Stanley Druckenmiller’s Duquesne took up new positions in Amazon, Sea Ltd., and Shopify and boosted its positions in Opendoor Technologies and Workday
WDAY
PLTR
Tiger Global bought new positions in PayPal and Taiwan Semiconductor and increased its positions in Workday, Snowflake and DoorDash while maintaining its stakes in JD.com, Meta Platforms and Amazon. The fund exited Carvana.
George Soros also established a position in Taiwan Semiconductor and added to his position in Applied Materials
AMAT
GDDY
Other standouts
Other stocks of note included PG&E, Occidental Petroleum
OXY
Appaloosa exited PG&E, while Third Point trimmed the position.
Appaloosa, Paulson and Soros exited Occidental, while Berkshire increased its stake.
Third Point and Duquesne increased their stakes in T-Mobile, while Viking Global and Soros cut their positions.
