Investing Update: Hedge Fund Buys & Holdings
Investing Update: Hedge Fund Buys & Holdings
What I'm buying, selling & watching
All three major indices finished the week up over 1%. The S&P 500 now sits less than 1% from a new all-time high.
The final boost came on Friday from Jackson Hole as Fed chair Powell indicated that the time has come to start cutting interest rates. He said the following.
"The time has come for policy to adjust"
"It seems unlikely that the labor market will be a source of inflation any time soon”
"We do not seek or welcome further cooling in labor market conditions."
The only question really left to answer is if it will be a 25 bps or 50 bps cut. That answer will come next month.
Market Recap
A lot has changed from a few weeks ago when the fear and worries were running rampant. Now the S&P sits near a record high and the turnaround happened lightning quick.
The S&P 500 didn’t quite make the technical definition of a correction with it just pulling back 8.5%. The Nasdaq meanwhile did briefly touch correction territory with a 10% correction.
As Michael Batnick pointed out, it was actually the fastest 10% rally from a correction low ever for the Nasdaq.
On average, the Nasdaq took 32 days to rally 10% after being in correction territory. This time, it took just eight days, the fastest 10% rally ever given the parameters.
The market strength continues as the S&P 500 has now seen 200 consecutive days where it has closed above the 200-day moving average.
Even the housing and financial sector stocks are sitting at all-time highs. I can count on one hand the number of stocks in the S&P 500 that made a new 52-week low this week. Stocks just aren’t breaking down. This tells me that higher prices are likely to come in the weeks and months ahead.
Broadening Market Strength
The Magnificent 7 have ruled the headlines for well over a year and it’s for good reason. Over the past year the Mag 7 have returned exactly double what the S&P 500 has. 54% for the Mag 7 and 27% for the S&P 500.
That trend has started to change this quarter though. So far this quarter the S&P 500 is outperforming that Mag 7. If this hangs on, it would be the first quarter the Mag 7 underperformed the S&P 500 since Q4 2022.
This quarter is seeing 296 of the 500 stocks outperform the index. That’s the highest number of stocks outperforming the S&P 500 index since 2023.
This shift emphasizes the move we’ve seen to more broad participation in the market. This market isn’t “only” the Mag 7 stocks. It hasn’t been for many months now.
The equal weight S&P 500 just closed at an all-time high.
Another way to look at it is the S&P 493 (excluding the Mag 7) also sits at a new all-time high.
Broadening market participation in the middle of a bull market is about as strong of fundamentals as you will find. It’s like a bull market starting to flex its muscles.
If anyone is still saying this market is only the Mag 7 stocks, it’s probably best you stop listening to what they say about the stock market.
Travel Trends Changing?
An area that is watched closely to get a read on consumers and the outlook ahead for possible recession flags is travel.
Right now after a very long hot streak, we’re starting to see a dip in all three areas. July saw a rather significant drop in the demand for hotel rooms, flights and cruises. This will be a metric to watch into fall.
The outlook for an upcoming recession saw the odds cut, just after just a few weeks ago seeing the odds raise. Goldman Sachs went form 25%, down to 20%. Their reasoning is simple and one that the people still shouting about a recession should read.
"We have now shaved our [recession] probability from 25% to 20%, mainly because the data for July and early August released since August 2 shows no sign of recession."
Election Year Expectations
If you look at the seasonality trends, we’re still in a historically bullish part of the year. As we look at this great chart from Jurrien Timmer you can see things start to get a little bumpy as you get into September and October. With an election upcoming, the bumpiness is highly likely in my view.
When you look at the S&P 500 in election years you can see how well 2024 is performing. At this point in the year this has been one of the best performing elections years in history.
Hedge Fund Buys & Holdings
One of my favorite times each quarter is when the 13F filings come out. Yes the data is a little old but it does give a glimpse into what hedge funds have been buying and selling.
Here are the top 5 buys in Q2 2024 for some of the popular hedge funds. Alphabet and Amazon continue to be popular buys. Apple has rejoined the buys list after being absent. Missing from this list that surprised me a bit was no Microsoft or Tesla.
Here are the top 5 holdings through Q2 2024. This group has stayed rather steady. It’s led by Amazon, Alphabet, Microsoft, Nvidia and Meta. Most hedge funds even have multiple of the Mag 7 names as their top 5 holdings.
This was a great chart on the Tiger Cubs holdings. The Tiger Cubs are hedge funds that were founded by former employees of legendary investor Julian Robertson's Tiger Management.
These are funds that I have always watched closely so I love this chart. Amazon is the only company with 100% ownership. Nvidia has the highest average percentage of the portfolio at almost 10%.
Some notable buys to me as I reviewed the 13Fs were the following.
Warren Buffet started a new position in Ulta.
Bill Ackman started a new position in Nike.
David Tepper was buying both Uber & Lyft.
Dan Loeb started a new position in Apple.
Alex Sacerdote started a new position in Alphabet and it’s his 2nd biggest holding behind Nvidia.
This gives a good roundup of the number of hedge funds that have certain stocks as a top 10 holding. Again the hedge fund loved Amazon leads the way by a big margin. Uber and Hess are higher than I would have thought.
I found this list interesting as it’s a little different way to look at hedge fund holdings. This shows which stocks percentage of the float is most owned by hedge funds. Basically this shows which stocks hedge funds own the highest percentage of.
A Dow Update
I look at the returns of the Dow from time to time. It can be looked over quite easily as it only has 30 stocks in it.
I would not have guessed that Walmart was the top performer so far in 2024. What caught my eye the most though was the company second to last, Nike. It’s down almost 23% so far this year. I’m planning to do a bit more work on Nike.
Upcoming Earnings
Happy Nvidia earnings week. All eyes will be on Wednesday after the close when Nvidia reports. I’m also going to have a close eye on CrowdStrike, Salesforce and Lululemon this week.
Data In The Week Ahead
The Coffee Table ☕
Conor Mac who write
had a good post called Pandemic Darlings That Never Bounced Back. I had forgot about many of these companies. During the pandemic these were the hottest and most talked about names. The rise and fall that some of these stocks have had is astounding.Ben Carlson wrote 15 Ways to Lose Money in the Markets. This was a very good piece on ways to lose money investing. If you invest, this is something that you should read. I agree with all 15 of what Ben says. I find Ben’s line of thinking on a lot of things aligns with mine, which is a reason I like to read Ben’s work.
I found this visual of a ranking of companies by generative AI patents quite eye opening. Chinese companies are leading the patent race. I wasn’t aware they had this big of a lead. It will be interesting where this ranking goes moving forward.
Source: Visual Capitalist
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