While hedge fund managers withdrew from economically sensitive stocks this month, they also began piling up investments in growth stocks. This successful tactic helped them beat the return of the S&P 500.

According to Jefferies data, hedge funds actively increased their holdings in growth stocks in July, with an increase rate of 12.8%. This is the rate of increase in holdings in this type of stock since April 2020. Meanwhile, the Wall Street firm said that after being optimistic about cyclical stocks since July last year, the industry has now reduced its risk appetite to reduce its holdings.

Jefferies equity strategist Steven DeSanctis said in a note: “Hedge funds in particular have lost interest in the financial sector, while interest in healthcare, information technology, and communication services has increased. The performance of these stocks in July is already moving in the direction of hedge fund positioning.”

Jefferies reviewed the 13F report for long-term portfolios and the most popular stocks held by hedge funds for their so-called Uber Crowded portfolios. A basket of 20 stocks rose 5.2% this month, surpassing the 2.9% return of the S&P 500 index.

Among hedge funds and mutual funds, the top four most popular technology blue-chip stocks are all —Amazons(AMZN),Facebook(FB), Alphabet (GOOG) andMicrosoft(MSFT).

GoogleParent company Alphabet ushered in an upward week this week. In the financial report released by the tech giant, the company's advertising revenue surged 69%. Last quarter earnings announced by Facebook this week also exceeded expectations, but warned that future growth would slow sharply.

Investors also cheered on Microsoft's massive earnings data earlier this week. The big tech company also gave an optimistic revenue forecast.

Jefferies said,Nike(NKE),Activision Blizzard(ATVI) and Lam Research (LRCX) were newly added to the list this month, whileMorgan Stanley(MS), Discovery (DFS), and LPL Financial Holdings (LPLA) were removed. (Chinese Investment Network)