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Hedge funds earlier this year pushed into technology and communication services stocks to chase bets on secular growth, with Amazon (AMZN) showing up as a popular stock choice, according to an update from Jefferies.
Hedge funds as of the end of February added 3% to the secular growth cohort, after meaningfully lowering the weight in January, Jefferies said in a note published Friday on hedge fund holdings.
The tilt toward secular growth was prominently on display in Jefferies’ “Sweet 16” list of popular stocks, with the cohort’s weight rising to its highest level ever, at 42%.
“Relative to the [S&P 500] (SP500), the OW hit 9% which is also a new high. We saw the biggest boost happen to Amazon (AMZN), and this stock along with Microsoft (MSFT) was each over 10% of the total portfolio,” strategist Steven DeSanctis said. Meanwhile, the net short position in Tesla (TSLA) increased, while it decreased marginally in Apple (AAPL).
Hedge funds’ centering more on secular growth came at the expense of cyclicals, with that group trimmed by a reduction in discretionary shares and an increase in net short positions on energy.
Jefferies found it “very interesting” that the net short position in Energy increased in February, considering “strong” flows in energy ETF flows, running at the +1 standard deviation line.
Overall, Jefferies found that as of February, hedge funds were keeping their risk profile high.
“Looking at hedge fund positioning as of February 29, Hedge Funds made little change to their risk exposure, with the long position barely moving and now stands at 221%,” Jefferies’ DeSanctis said.
“This is still above the long-term average of 183%. The short book was at -121%, bringing the long-short ratio moving to 1.8,” DeSanctis added.
Among some growth ETFs to watch:
- iShares MSCI USA Quality ETF (QUAL)
- Schwab U.S. Large-Cap Growth ETF (SCHG)
- Vanguard International Dividend Appreciation ETF (VIGI)
And cyclical ETFs:
