I’m always curious about what the hedge fund masters of the universe are up to – or more specifically what they are buying! My sense is that there are two popular myths about hedgies. The first is that they are very technical, staffed with quants and super-powered by massive computers. For the systematic crew, that’s true – less so for the rest. The second myth is that these managers are always playing both sides of a deal – with an emphasis on the short side. This is also not true of most hedgies I’ve run into. They certainly do run short positions but for most of the time the portfolios have a long, bull bias. In fact, I would go so far as to say that most hedge fund managers look and feel a bit like most fund managers – they buy conviction stocks where they’ve done their research, with the occasional short position when they especially dislike a stock. The only difference is that most hedgies are probably much more activist, sometimes even confrontational.
So, what have they been buying in the last year? Personal-finance website WalletHub last week released its Q4 2018 Hedge Fund Report, which examines over 400 hedge funds’ biggest holdings, buying and selling activity. The timing is good, not least because most hedge fund managers – and absolute fund managers for that matter – had a lousy 2018, losing 5.7% on average. The first big bunch of numbers is the billionaires biggest sales:
• Warren Buffett JPMorgan Chase & Co. (JPM) Oracle Corp. (ORCL)
• George Soros Philip Morris International, Inc. (PM) Tribune Media Co. (TRCO)
• Carl Icahn Diamondback Energy, Inc. (FANG) VMware, Inc. (VMW)
• David Tepper The Allstate Corp. (ALL) Micron Technology, Inc. (MU)
• John Paulson Red Hat, Inc. (RHT) AT&T, Inc. (T)
Next up, there’s the sector mix of ‘buys’. The first chart below shows the sector mix of their purchases and what’s immediately obvious is that these managers collectively don’t stray too far from the benchmark – which I think rather defeats the whole purpose of investing in hedge funds. In terms of overweights these billionaire managers are long, Technology, Services, healthcare, materials (slightly) and underweight/short, consumer goods, utilities, and conglomerates. This is pretty much the investment positioning any long portfolio manager on US equities would take!
And what of the individual managers and their big buys? I’ll let the excellent wallet Hub infographic below do all the explaining…