TOPLINE
As the market rebounds from its lows in late March and investors bet on a coronavirus vaccine, both hedge funds and mutual funds are overweight in healthcare stocks but they don’t agree on the prospects of beaten-down sectors like financials and energy, the latest Hedge Fund Trend Monitor and Mutual Fundamentals reports from Goldman Sachs show.
Hedge funds and mutual funds both piled into healthcare stocks, but took opposite positions on … [+]
Mark Lennihan/ASSOCIATED PRESS
KEY FACTS
Both hedge funds and mutual funds have been steadily buying up health care stocks at record levels, primarily investing in biotech companies and pharmaceuticals; with the market still rebounding from its crisis-level low in late March, healthcare stocks have soared as investors bet on a coronavirus vaccine.
Hedge funds and mutual funds disagree on key areas, however: Energy and Financials, the two-worst performing sectors so far this year. Hedge funds were overweight on energy stocks in the first quarter as mutual funds trimmed their holdings in those sectors; mutual funds are mostly overweight in the financial sector while the opposite held true for hedge funds.
There are 13 stocks that are “shared favorites” among both hedge funds and mutual funds: Adobe, Bank of America, Bristol-Myers Squibb, Citigroup, Crown Holdings, Comcast, Salesforce, Google parent Alphabet, Mastercard, ServiceNow, PayPal, UnitedHealth Group and Visa.
Among the big tech “FAAMG” companies, only Google parent Alphabet is a shared favorite, Goldman’s research showed; Amazon, Microsoft and Facebook are some of the most popular stocks for hedge funds, but they’re among the 10 most underweight positions for large-cap mutual funds.
There is also some divergence on the current market outlook: While hedge funds carried more leverage into the bear market and made riskier investments, mutual funds grew their cash piles. Cash as a share of assets rose from 2.1% in December to 2.7% in March—the highest allocation since November 2018, according to Goldman’s research.
Hedge funds and mutual funds are also split on an age-old investing debate: growth vs. value stocks. With growth stocks continuing to outperform this year, hedge funds have shifted away from value stocks, the latest data shows, whereas mutual funds are still more likely to be overweight in value over growth stocks.
Key background
With Wall Street growing more optimistic about a successful reopening of the economy and a potential coronavirus vaccine, the S&P 500 on Tuesday broke above the 3,000 level for the first time since early March. The S&P 500 is now up over 34% from its coronavirus crisis-level low on March 23.
Tangent
The analysis from Goldman Sachs covers 822 hedge funds with a total of $1.8 trillion in equity holdings and 561 mutual funds with $2.2 trillion of assets under management.
Further reading
Dow Surges 600 Points As Investors Bet On A Coronavirus Vaccine Breakthrough (Forbes)
These 10 States Have The Highest Record Unemployment Rates (Forbes)
Buy These Stay-At-Home Stocks For The Coronavirus Economy, Market Experts Say (Forbes)
Why A Private Equity Firm Backed By Bernard Arnault Is Putting $400 Million Into Norwegian Cruise Line
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