Hedge fund managers appear to have lost some of their courage in the fourth quarter of 2019.
Managers bet big on the U.S. stock market, riding the S&P 500 index’s outsized gains to power their returns. Two of the three largest net buys in the period — at a total of $12.4 billion — were exchange-traded funds tracking the benchmark, which rose 8.5% in the final three months of the year. Most of the other top purchases were technology stocks, according to data compiled by Bloomberg from fund filings.
That’s hardly what you expect from the smart money in the industry — or a way to justify the outsized fees that funds charge their customers.
Below we look through the wave of hedge fund data that was disclosed in filings for the fourth quarter. It gives a glimpse into some of the biggest and most secretive managers.
Keep in mind, the public filings don’t show non-U.S. traded securities or wagers against stocks, nor do they show the price at which a fund bought or sold a security.
The chart below gives you the big picture.
It plots about 250 U.S. stocks, combining in each dot two measures: the change in the value of hedge fund positions and the performance of the equity in the first half of the first quarter of this year. Scroll over the dot for Tesla, a popular stock with hedge funds such as Viking Global and Whale Rock.
The shares rose 74% in the fourth quarter and have continued to surge amid a host of positive news around its deliveries and China plant as well as two quarters of blowout earnings.
PG&E was one of the less popular stocks as the embattled California power giant struggles to emerge from bankruptcy court. BlueMountain, which was acquired last year by Assured Guaranty, and Paulson & Co. exited their positions.
Most of the FAANGs — Facebook, Amazon, Apple, Netflix and Google parent Alphabet — continued to see gains in the fourth quarter after a robust start to the year. Shares of Apple and Netflix jumped the most of the group in the quarter, while Amazon and Alphabet only rose single digits.
Meanwhile, Apple saw its biggest one-year percentage gain in a decade — and the largest annual advance among the FAANGs — amid improved China demand, growth in its service business and strong sales expectations for wearable products. Marshall Wace and Caxton trimmed their positions in Apple.
D1 Capital, Maverick and Lone Pine all increased their holdings in video-streaming giant Netflix, while Coatue and Viking reduced their stakes. Alphabet was a new buy in the quarter for Tiger Global and D1, while Maverick decreased its position.
Hedge funds often move in packs, pushing into or out of the same stocks at around the same time. The chart above displays the most and least popular stocks by the number of firms that bought or sold them in the fourth quarter. Software company Bill.com and Tesla were among the hedge fund darlings, while Fox, Visa and Microsoft were less favored.