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Hedge Funds Tweak Portfolios In Q1: Marvell, TD Synnex, AES Get More Love As Focus Shifts To AI

Published 24/05/2024, 17:19
© Reuters.  Hedge Funds Tweak Portfolios In Q1: Marvell, TD Synnex, AES Get More Love As Focus Shifts To AI

Benzinga - by Piero Cingari, Benzinga Staff Writer.

Hedge funds made strategic adjustments to their portfolios throughout the first quarter of 2024.

Firms are looking for high-return opportunities beyond the mega-cap tech giants preferring to focus on cyclical sectors and artificial intelligence (AI)-related infrastructure stocks.

Except for Apple Inc (NASDAQ:AAPL), positions in several ‘Magnificent Seven’ stocks — Alphabet Inc (NASDAQ:GOOGL), Amazon.com Inc (NASDAQ:AMZN), Nvidia Corp (NASDAQ:NVDA), Microsoft Corp (NYSE:MSFT), and Meta Platforms Inc (NASDAQ:META) — were trimmed from hedge funds.

Still, the strong performance of the so-called ‘Magnificent 7′ tech stocks maintained their weight at 13% of hedge fund long portfolios, according to the latest Goldman Sachs’ Hedge Fund Monitor report.

Cyclical Sectors In parallel, hedge funds expanded their investments in cyclical sectors, elevating the exposure to Financials.

Information Technology remained the largest net sector weight at the start of Q2 2024. It accounts for 18% of total net exposure. However, it also registered the largest underweight relative to the Russell 3000, with a -913 basis points (bp) difference. Health Care was the largest overweight sector, with a +375 bp difference.

Sector Hedge Funds’

Net Weight Russell 3000 Weight Hedge Fund Net Tilt

Health Care 15.8% 12.0% +375 bp
Communication Services 11.0% 8.8% +226 bp
Industrials 12.1% 9.9% +222 bp
Materials 4.8% 2.7% +205 bp
Energy 4.9% 3.8% +109 bp
Consumer Discretionary 11.9% 10.8% +107 bp
Utilities 2.8% 2.1% +76 bp
Financials 13.3% 14.2% -98 bp
Real Estate 1.5% 2.6% -114 bp
Consumer Staples 4.0% 6.0% -196 bp
Information Technology 17.9% 27.0% -913 bp
Total 100.0% 100.0% 0 bp

There was also a notable rotation towards utilities, reflecting a broader AI investment focus.

In particular, hedge funds have shown a keen interest in Phase 2 Infrastructure stocks within the AI sector. Among the companies that have seen the largest increase in hedge fund popularity, are:

  • Marvell Technology Inc. (NASDAQ:MRVL)
  • TD Synnex Corporation (NYSE:SNX)
  • AES Corporation (NYSE:AES)
  • Littelfuse Inc. (NASDAQ:LFUS)

Most Popular Hedge Funds’ Increase In AI Universe During Q1 2024

Name Subsector
Marvell Technology, Inc. Semiconductors
TD SYNNEX Corporation Technology Distributors
Apple Inc. Technology Hardware Storage & Peripherals
AES Corporation Independent Power Producers & Energy Traders
Littelfuse, Inc. Electronic Components
Adobe Inc. (NASDAQ:ADBE) Application Software
Freeport-McMoRan, Inc. (NYSE:FCX) Copper
Walgreens Boots Alliance, Inc. (NYSE:WBA) Drug Retail
Nextracker Inc. Class A (NASDAQ:NXT) Electrical Components & Equipment
First American Financial Corporation (NYSE:FAF) Property & Casualty Insurance

Most Concentrated Hedge Fund Holdings In The S&P 500 The Goldman Sachs’ Hedge Fund Monitor asserts that portfolio concentration among hedge funds remains particularly elevated.

The typical hedge fund maintains 70% of its long portfolio in the top 10 positions. This trend remained extremely elevated in Q1 2024.

The following table details the top 20 most concentrated hedge fund holdings within the S&P 500, highlighting where hedge funds are investing their capital.

Company Sector Sub-sector % of Equity Cap Owned by Hedge Funds
Bath & Body Works (NYSE:BBWI) Consumer Discretionary Other Specialty Retail 27%
Hess Corp. (NYSE:HES) Energy Oil & Gas Exploration & Production 16%
Ralph Lauren Corp. (NYSE:RL) Consumer Discretionary Apparel Accessories & Luxury Goods 15%
Expedia Group Inc. (NYSE:EXPE) Consumer Discretionary Hotels, Resorts & Cruise Lines 14%
Universal Health Svc. (NYSE:UHS) Health Care Health Care Facilities 14%
Western Digital (NASDAQ:WDC) Information Technology Technology Hardware, Storage & Peripherals 13%
NRG Energy Inc. (NYSE:NRG) Utilities Electric Utilities 13%
Invesco Ltd. (NYSE:IVZ) Financials Asset Management & Custody Banks 13%
Vistra Corp. (NYSE:VST) Utilities Independent Power Producers & Energy Traders 13%
Caesars Entertainment (NYSE:CZR) Consumer Discretionary Casinos & Gaming 12%
Evergy Inc. (NASDAQ:EVRG) Utilities Electric Utilities 12%
Catalent Inc. (NYSE:CTLT) Health Care Pharmaceuticals 11%
Juniper Networks (NYSE:JNPR) Information Technology Communications Equipment 11%
Dollar Tree Inc. (NYSE:DLTR) Consumer Staples Consumer Staples Merchandise Retail 11%
NiSource Inc. (NYSE:NI) Utilities Multi-Utilities 10%
Incyte Corp. (NASDAQ:INCY) Health Care Biotechnology 10%
Lamb Weston Holdings (NYSE:LW) Consumer Staples Packaged Foods & Meats 10%
Qorvo Inc. (NASDAQ:QRVO) Information Technology Semiconductors 10%
Synchrony Financial (NYSE:SYF) Financials Consumer Finance 10%
Humana Inc. (NYSE:HUM) Health Care Managed Health Care 10%

Now Read: Inflation Stresses Retail Traders As Fed Cuts Look Unlikely, Crypto Doubts Increase: Survey

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© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

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