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

Benzinga ·  May 25 00:20

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), 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.

SectorHedge Funds'
Net Weight
Russell 3000 WeightHedge Fund Net Tilt
Health Care15.8%12.0%+375 bp
Communication Services11.0%8.8%+226 bp
Industrials12.1%9.9%+222 bp
Materials4.8%2.7%+205 bp
Energy4.9%3.8%+109 bp
Consumer Discretionary11.9%10.8%+107 bp
Utilities2.8%2.1%+76 bp
Financials13.3%14.2%-98 bp
Real Estate1.5%2.6%-114 bp
Consumer Staples4.0%6.0%-196 bp
Information Technology17.9%27.0%-913 bp
Total100.0%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)

See Also: AI-Driven Rally Set To Expand To Power, Commodities, Utilities: 'It's Not Just About Nvidia Anymore'

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

Marvell Technology, Inc.Semiconductors
TD SYNNEX CorporationTechnology Distributors
Apple Inc.Technology Hardware Storage & Peripherals
AES CorporationIndependent 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.

CompanySectorSub-sector% of Equity Cap Owned by Hedge Funds
Bath & Body Works (NYSE:BBWI)Consumer DiscretionaryOther Specialty Retail27%
Hess Corp. (NYSE:HES)EnergyOil & Gas Exploration & Production16%
Ralph Lauren Corp. (NYSE:RL)Consumer DiscretionaryApparel Accessories & Luxury Goods15%
Expedia Group Inc. (NYSE:EXPE)Consumer DiscretionaryHotels, Resorts & Cruise Lines14%
Universal Health Svc. (NYSE:UHS)Health CareHealth Care Facilities14%
Western Digital (NASDAQ:WDC)Information TechnologyTechnology Hardware, Storage & Peripherals13%
NRG Energy Inc. (NYSE:NRG)UtilitiesElectric Utilities13%
Invesco Ltd. (NYSE:IVZ)FinancialsAsset Management & Custody Banks13%
Vistra Corp. (NYSE:VST)UtilitiesIndependent Power Producers & Energy Traders13%
Caesars Entertainment (NYSE:CZR)Consumer DiscretionaryCasinos & Gaming12%
Evergy Inc. (NASDAQ:EVRG)UtilitiesElectric Utilities12%
Catalent Inc. (NYSE:CTLT)Health CarePharmaceuticals11%
Juniper Networks (NYSE:JNPR)Information TechnologyCommunications Equipment11%
Dollar Tree Inc. (NYSE:DLTR)Consumer StaplesConsumer Staples Merchandise Retail11%
NiSource Inc. (NYSE:NI)UtilitiesMulti-Utilities10%
Incyte Corp. (NASDAQ:INCY)Health CareBiotechnology10%
Lamb Weston Holdings (NYSE:LW)Consumer StaplesPackaged Foods & Meats10%
Qorvo Inc. (NASDAQ:QRVO)Information TechnologySemiconductors10%
Synchrony Financial (NYSE:SYF)FinancialsConsumer Finance10%
Humana Inc. (NYSE:HUM)Health CareManaged Health Care10%

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

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