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.

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
replaced Amazon
AMZN
as the top position in its “Hedge Fund VIP” list. The other top 10 positions are:

  • Amazon
  • Alphabet
  • Uber
    UBER
  • Netflix
    NFLX
  • Visa
    V
  • Apple
  • Meta Platforms
  • Mastercard
    MA
  • PayPal

Interestingly, Apple
AAPL
was also on Goldman’s list of the least-concentrated stocks from the third quarter. Six of the top 10 hedge fund positions are technology, and most of them were among the worst performers on the list.

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
sits at the intersection between technology and payment processing, and it was down 52% year to date.

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
, which is up 71% year to date, Energy Transfer, up 58%, and Ely Lily, which has gained 30% year to date. However, all three stocks were far down on the list.

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
joining Goldman Sachs’ High Concentration basket during the third quarter.

Paulson maintained his positions in International Tower Hill Mines, Agnico Eagle Mines
AEM
, NovaGold Resources, SSR Mining, and Seabridge Gold and reduced his positions in Barrick Gold, AngloGold Ashanti, and hydrocarbon company APA. He also cut his stake in oil tanker company OSG Overseas Shipholding Group
OSG
.

Third Point established new positions in Range Resources
RRC
and Comstock Resources and slashed its stakes in EQT, Antero Resources, and Ovintiv. George Soros also closed out his position in EQT, and David Tepper’s Appaloosa Management trimmed its stake in the hydrocarbon company.

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
and Liberty Media Series A while maintaining its positions in ViaSat
VSAT
and Liberty Global
LBTYA
. Finally, the fund exited Nexstar.

Viking Global established a new position in Rogers Communications and exited Walt Disney
DIS
, while Corvex Management maintained its stake in Liberty Media Series A.

Warren Buffett’s Berkshire Hathaway
BRK.B
boosted its stake in Paramount.

Healthcare and biotech

Healthcare, particularly biotech and insurance, were also major themes in 13F filings this time around.

Sponsored

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
while maintaining Cano Health and Ventyx Biosciences.

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
and dramatically boosted its stakes in Ginkgo Bioworks Holdings and McKesson
MCK
. The fund also exited health insurers Centene
CNC
and Elevance Health, Zentalis Pharmaceuticals, and biotech Procept Biorobotics.

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
and cut its positions in Hertz and Dupont. Nelson Peltz’s Trian Fund trimmed its stake in Ferguson.

Viking Global established new positions in Valvoline and Clorox
CLX
and increased its positions in General Electric
GE
and Dollar General
DG
.

Starboard Value exited Kohl’s, as did Appaloosa, while Berkshire Hathaway cut its stake in General Motors
GM
. Soros increased his stake in Caesars Entertainment
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
and the KWEB
KWEB
China Internet ETF.

Baupost maintained its position in Meta Platforms and exited Intel
INTC
and Grab. The fund also slashed its stakes in Alphabet, Amazon and Qorvo.

Viking Global established new positions in ZoomInfo Technologies, PayPal, Sea Ltd., Alibaba, and salesforce and boosted its stakes in Western Digital
WDC
, Micron Technology, Meta Platforms, Amazon, Take-Two Interactive, and Microsoft. The fund exited Coupa Software.

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
. The fund also trimmed its position in Uber.

Appaloosa maintained its positions in Alphabet and Uber and exited Micron Technology
MU
. The fund trimmed its stakes in Amazon, Microsoft and Alibaba.

Berkshire Hathaway established a new position in Taiwan Semiconductor Mfg. and decreased its stake in Activision Blizzard
ATVI
while maintaining its holdings in Apple.

Stanley Druckenmiller’s Duquesne took up new positions in Amazon, Sea Ltd., and Shopify and boosted its positions in Opendoor Technologies and Workday
WDAY
. The firm maintained its position in Coupang and trimmed Palantir Technologies
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
. He exited Roblox and trimmed his positions in Microsoft, Fiserv and GoDaddy
GDDY
.

Other standouts

Other stocks of note included PG&E, Occidental Petroleum
OXY
and T-Mobile.

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.

Sponsored

Leave a Reply

Your email address will not be published. Required fields are marked *