The 50 largest hedge funds decreased their equity exposure by 1.3% in Q2 2016. This marked an improvement from Q1 when equity exposure declined almost 7%. Four out of 10 GICS sectors experienced aggregate purchases, with the Consumer Staples sector leading the inflows. On the opposite end, the Health Care and Financials groups saw the largest aggregate sales during the quarter.
Funds Add $2.3 Billion to Food & Staples Retailing
The top 50 hedge funds bought $1.3 billion worth of stock in the Consumer Staples group during Q2, which represented the largest aggregate purchase of all 10 sectors. Within the sector, the Food & Staples Retailing industry group saw $2.3 billion worth of purchases in Q2 (Industry group value exceeds sector value because the other industry groups saw aggregate sales). Hedge funds bought over $1 billion worth of stock in CVS Health, which was the sixth largest purchase at the company level. Several of the contributors to this buying included D.E. Shaw & Co., Renaissance Technologies, Millennium Management, and Two Sigma Investments. The top 50 hedge funds also added capital to Kroger and Wal-Mart.
Hedge Funds Sell Financials and Health Care
Hedge funds removed $5.5 billion worth of stock from the Health Care sector during the quarter, more than any other sector. The majority of these sales came from the Pharmaceuticals, Biotechnology, and Life Sciences industry group. Two of the big sales in this group were Allergan and Pfizer. Keep in mind that Pfizer walked away from its massive planned acquisition of Allergan in April after the Obama administration threatened the tax inversion deal.
Hedge funds removed $1.5 billion worth of stock from Allergan, which represented the third largest sale during the quarter. The stock of the pharma company was down nearly 14% in the second quarter. D.E. Shaw & Co. reduced its position in Allergan by over 80%, Viking Global Investors cut its stake by 60%, and Paulson shed 27% of its position. Contrary to these funds, Carl Icahn’s Icahn Associates Holding took a new 1% stake in Allergan in Q2, which amounted to $786 million. Unlike the stock of Allergan, Pfizer’s stock soared in Q2, increasing in value by 19%. With that said, the top 50 hedge funds still sold over $900 million worth of stock in Pfizer making it the sixth largest sale in Q2. Funds also removed nearly $1 billion from animal health firm, Zoetis, which was driven by Pershing Square’s 50% reduction of its stake in the company.
Related: Hedge Funds Shuffle IT Holdings in Q1
The Financials sector was the second largest aggregate sale by the top 50 hedge funds in Q2 (-$3.4 billion). The Real Estate and Insurance industry groups took the biggest hits. Funds sold $1.8 billion worth of stock in the Real Estate group, with Crown Castle International, Equinix, and American Capital Agency leading the selloff. The Insurance industry group saw $1.6 billion in sales, with the primary contributors to the selloff including Fidelity National Financial, Willis Towers Watson, Chubb Limited, and Prudential Financial.
Netflix and Apple are Top Sales in Q2
Netflix and Apple were the two largest sales during the quarter. The top 50 hedge funds removed $2 billion worth of Netflix stock, more than any other company in Q2. The selling was led by Viking Global Investors, which reduced its stake by 22%, and Tiger Global, which exited its 4.2% ownership stake worth $1.6 billion. Netflix stock declined 10.5% during Q2, but is up 4.1% since the end of the quarter.
Apple was the second largest sale during the quarter, after being the top sale in Q1. The top 50 hedge funds reduced their position in the iPhone maker by 40%, which equated to $1.8 billion being removed from the stock. Tiger Global, Greenlight Capital, and Adage Capital each cut their stake in Apple during Q2. The stock of Apple declined 12.3% during the second quarter, but is up 13.5% since the end of Q2.
Microsoft is Most Widely Held Stock for Second Consecutive Quarter
At the end of Q2, 26 hedge funds had a position in Microsoft, making it the most widely held stock by the top 50 hedge funds for the second consecutive quarter. This was an increase from the 25 funds that owned the stock at the end of Q1. Facebook and Allergan were two other widely held stocks by hedge funds, with 25 out of the top 50 hedge funds holding a position in each of these stocks.
Read more in Hedge Fund Ownership Quarterly
- Sector-Level and Company-Level Weighting Relative to S&P 500
- Top 50 Holdings: Top 50 Hedge Funds
- Three-Month Largest Holding Value Changes
- Country Breakdown: Top 50 Hedge Funds
- Sector Breakdown: Top 50 Hedge Funds versus S&P 500
- Sector Movement: Top 50 Hedge Funds versus S&P 500
- Industry Group Movement: Top 50 Hedge Funds
- Cap Group Breakdown: Top 50 Hedge Funds
Update: This article has been updated to reflect an amended filing by Omni Partners LLP. A clerical error in the original 13-F filed by Omni Partners led to it being incorrectly included in the list of top 50 hedge funds. In this corrected version, Farallon Capital Management has replaced Omni Partners in the top 50 and several other data items have been updated from the original report.
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