From social media giant Facebook to memory chipmaker Micron Technology it’s been a tough few months for tech stocks which have been at the front of the US stock market’s recent collapse and it is expected that the shedding is not over yet.
During the third quarter of the year, among a list of companies Facebook and Micron that had the biggest declines in hedge fund ownership as Goldman Sachs identified. Strategists led by Ben Snider and David Kostin wrote in a note to clients ‘over the next three to 12 months such falling giants have historically continued to trail the market’.
From the one in February one feature that has set the recent market retreat apart, is a violent unwinding of popular positions. As fears built over global trade, corporate profits and interest rates hedge fund managers have cut back risk by moving to industries that offer dividends and stable income like health-care while taking profits on winners such as technology.
The Goldman strategists wrote ‘strong signals for future stock performance are of changes in popularity with hedge fund investors.’ The performance of popular stocks, portfolio leverage and hedge fund returns have entered a vicious downward cycle.
After an excellent start to the year, funds started losing the momentum. Facebook and Marriott International former market favorites saw a number of holders cashing out while Micron and NXP Semiconductors suffered similar fates. Over the next quarter, a Goldman basket of hedge-fund falling giants has underperformed peers by 60 basis points since 2002. On the other side those stocks, have tended to outperform by a similar amount, that saw the largest boost in hedge fund ownership.
The largest bump in hedge fund ownership was seen by software company ServiceNow followed by CenterPoint Energy and Monster Beverage. Express Scripts Holding, Medtronic, Becton, Dickinson and Co. Defensive were among the health-care companies that saw increased fund ownership along with names like Sysco, United Technologies and Southern were also boosted.
Meanwhile, for the first time since the 2008 global financial crisis, money managers raised holdings in utilities above their market representation.
This website is a service of Kalkine Media Pty. Ltd. A.C.N. 629 651 672. The website has been prepared for informational purposes only and is not intended to be used as a complete source of information on any particular company. Kalkine Media does not in any way endorse or recommend individuals, products or services that may be discussed on this site. Our publications are NOT a solicitation or recommendation to buy, sell or hold. We are neither licensed nor qualified to provide investment advice.