Source: Jin10 Data
The fund holdings of Nvidia and its position ratios largely determine the winners and losers of this quarter.
Which funds made a lot of money holding Nvidia stocks and who missed out on this opportunity? Let's take a look at the winners and losers of this investment competition.
Artificial intelligence chip manufacturer$NVIDIA (NVDA.US)$Its market cap exceeded $3 trillion in the second quarter. As microchips are made of silicon, it may seem that nvidia's entire market cap is built on sand. But nothing is more confident in artificial intelligence than Wall Street. Over the past three months, nvidia's stocks have surged by 37%, and nearly 200% over the past year.
Now the problem facing fund managers is whether this is a bubble. Considering Nvidia's market value of $3 trillion, which exceeds Sweden's net assets of $2.3 trillion (all assets minus all liabilities), Sweden is a country with a population of 10.5 million. It is almost equivalent to the domestic GDP of $3.1 trillion in Africa in 2023. Nvidia has 29,600 employees, and the value of each employee now exceeds $100 million.
Most funds that avoid or underweight nvidia and other artificial intelligence-related stocks have underperformed over the past quarter, while those that overweight these stocks have performed well. Therefore, the ProFunds Semiconductor UltraSector fund was the best performing mutual fund this quarter, rising by 31% and 108% overall in 2024. The best performing exchange-traded fund of the quarter was Direxion Daily NVDA Bull 2X Shares(NVDU.US), which rose by 69% and over 300% in 2024. Perhaps more attractive than Fidelity OTC is the $76 billion Vanguard Primecap fund, which reopened to new investors this quarter after being closed for 20 years. Morningstar classifies it as a large-cap hybrid fund, although it is more like a growth fund. The fund only holds a 1.8% weight in nvidia, but has performed well recently because it holds a 12.7% weight in other stocks. Eli Lilly and Co has surged due to its diabetes drug Ozempic, which people are buying for weight loss purposes.$Direxion Daily NVDA Bull 2X Shares (NVDU.US)$(Direxion Daily 2X Long NVDA ETF), which rose by 69% this quarter and over 300% in 2024.
Anyone who believes that this hot performance can continue indefinitely may need to examine their mentality.
According to Morningstar data, Vanguard Wellington, a balanced fund worth $111 billion, established a position in Nvidia for the first time in March this year. Although it only accounts for 1.5%, it is one of the top ten holdings, which is a big position for this highly diversified fund. This is also historical.
Daniel Pozen is the manager of the fund's stock arbitrage, and he consciously changed the fund's previous value-oriented strategy. Nothing is more representative of growth than Nvidia, and Pozen admits in the fund's annual report in November 2023 that Nvidia's absence "obstructs relative returns." The fund's performance this year and this quarter is better than its peers, in part because of this transformation.
T. Rowe Price Capital Appreciation Fund, managed by the best balanced fund manager David Giroux, has begun to reduce its holdings of Nvidia stocks, reducing them by 26% in the first quarter of 2024. In the latest annual report letter of the fund in December, Giroux pointed out: "Although we currently hold Nvidia, the range of potential outcomes is quite large, and it is not the best risk-adjusted way to play artificial intelligence from now on." He is worried that competitors will reduce Nvidia's profit margin. The fund's latest disclosed Nvidia weight is 1.9%. So far, the Capital Appreciation Fund is still ahead of its peers, up 7.1%, while moderately allocated funds have risen 6.6%, but lagging behind the Vanguard Wellington Fund's 8.2%.
The most diversified stock funds affected by the AI boom are large growth funds, which averaged 4.9% in the quarter and rose 17.6% to date in 2024. The best-performing mutual fund in this category this quarter is the HCM Tactical Growth, which has risen 11.6%, but its high fee rate of up to 2.63% and its frequent use of ETFs such as ProShares Ultra QQQ to leverage make it too risky for most investors and too expensive.
What is more interesting is the Fidelity OTC Fund with a size of $32 billion, which has a return rate of 10.4% in the previous quarter. Its Nvidia weight increased from 8.7% on April 30 to 10.8% on May 31. This is higher than the weight of the "thorn in the eye" of every active growth fund manager-the $285 billion Invesco QQQ trust fund-it holds 7.9% of Nvidia shares. The Fidelity OTC is one of the few large growth funds that can compete with the Nasdaq 100 ETF in the long run. It has achieved victory this year, with an increase of 24.9%, while the Nasdaq 100 ETF has only risen 17.3%. However, fidelity still lags behind QQQ's surreal 10-year annualized return of 18.7%, with a return rate of only 17.9%.
Perhaps more attractive than Fidelity OTC is the $76 billion Vanguard Primecap fund, which reopened to new investors this quarter after being closed for 20 years. Morningstar classifies it as a large-cap hybrid fund, although it is more like a growth fund. The fund only holds a 1.8% weight in nvidia, but has performed well recently because it holds a 12.7% weight in other stocks.$Eli Lilly and Co (LLY.US)$Eli Lilly and Co has surged due to its diabetes drug Ozempic, which people are buying for weight loss purposes.
Like Fidelity OTC, Vanguard Primecap has been a consistently top-performing fund over the long term, but it has been unable to keep up with the returns of the QQQ ETF. According to Morningstar data, Primecap experienced $3.5 billion in outflows over the past year. If you're a fan of Nvidia, QQQ might be enough investment for you, as are other inexpensive growth ETFs like the iShares Russell Top 200 Growth, which has a 11.9% stake in Nvidia, or the more diversified Vanguard Growth, which has a 10.6% stake in Nvidia. Alternatively, you can also buy the stock directly.
A common saying among Wall Street professionals is never to fall in love with a stock. In the history of mutual funds, many fund managers have bet heavily on a single stock, only to lose everything. Perhaps the most famous is Robert Goldfarb of the Sequoia Fund, who held a large position in Valeant Pharmaceuticals, which subsequently collapsed.
Perhaps investors shouldn't let Nvidia be their nightmare. Other categories of funds have also performed well: Indian stock funds rose 9.3% this quarter; metals rose 6.2%; even utilities funds rose 3.5%. For stocks like Nvidia, it's hard to find a better diversified investment tool than a utility fund.
Editor / jayden