The stock market professionals are counting on Amazon, Nvidia and Co. to pick up again despite the slump a few months ago.
Hedge funds have expanded their bets on the very big US tech companies and, according to an analysis by the investment bank Goldman Sachs, have acted as decisively as they did before the start of the corona pandemic. Hedge funds also increased their exposure to consumer discretionary makers, bank analysts said in a report. At the same time, hedge funds reduced their positions in energy and commodities. “Given the uncertain market environment and weak yields of late, hedge funds have reduced leverage, refocused on growth stocks and increased portfolio concentration,” the Goldman team said. The weighting of the 10 largest portfolio positions increased to 70 percent by the end of June, the highest since the first quarter of 2020.
Amazon has ousted Microsoft as the most popular long position – those bets on a rising price, for which a fund usually buys shares of the company. On the stock exchange, the world’s largest online retailer rose 26 percent in the current quarter. Microsoft shares, on the other hand, only rose by eight percent. According to the report, the hedge funds have also increased their bets on graphics card specialist Nvidia, Apple, electric car maker Tesla and team software developer Atlassian.
The Goldman study analyzed the holdings of hedge funds with stock positions totaling $2.4 trillion. The average fund is up four percent since early July, cutting year-to-date losses to nine percent. Within the tech sector, hedge funds increased their exposure to application software, where they are overweight. However, positioning in hardware and semiconductors, which are underweight, also increased.
With the Fed’s turn to the so-called hawk position – meaning the increase in key interest rates by the US Federal Reserve in order to curb inflation – one of the indices for tech stocks with particularly large market capitalization fell eleven percent in the first quarter, only to drop another 25 percent over the next three months. In the current quarter, however, things went up again by ten percent. Boost came on bets that signs of an economic slowdown will prompt the Federal Reserve to become less aggressive in tightening monetary policy. With a view to the forthcoming Fed symposium in Jackson Hole, however, the recent optimism has faded. Opinion is divided in the stock market as to whether the nearly 13 percent surge in the Nasdaq 100 technology index in July was anything more than a flash in the pan.