- Wednesday, October 16, 2024
Top hedge funds have begun to cut their exposure to the Magnificent Seven tech giants, as per new analysis from Goldman Sachs. Despite benefiting from the high returns offered by these popular mega-cap tech companies in 2024, hedge funds have started to pull back.
Continued Heavy Investment in the Magnificent Seven
Initially heavily invested in tech giants including Alphabet GOOG, Amazon AMZN, Apple AAPL, Meta Platforms META, Microsoft MSFT, Nvidia NVDA, and Tesla TSLA, hedge funds had piled into these stocks in 2023. However, recent analysis shows that they have begun to reduce their stakes.
Shifting Trends
The popular tech giants made up 13% of hedge funds' aggregate long portfolios, with all companies except Tesla being among the top 10 most popular stocks for these funds. Despite their consistent returns, hedge funds have now turned into net sellers of these mega-cap tech firms.
Impressive Returns
The combined performance of the Magnificent Seven has yielded a +8% return so far in 2024, surpassing the +5% returns seen in the S&P 500 stock index. Goldman Sachs' Hedge Fund VIP list, which highlights the most popular stocks among hedge funds, has seen returns of +9% in 2024 based on analysis of funds with gross equity positions totaling $2.6 billion.
Goldman Sachs Report Highlights
Goldman Sachs highlighted that the Magnificent Seven have experienced increased returns due to high levels of crowding and a significant focus on momentum. However, the investment bank cautions about the possibility of a "violent unwind" if market conditions shift, as seen in the final weeks of 2023.
Changing Fortunes
The recent unwinding has led to Microsoft being included in Goldman Sachs' "Falling Stars" list, alongside U.S. semiconductor giants like Texas Instruments, Marvell Technology, and ON Semiconductor Corp. On the other hand, Amazon.com stood out as the only Magnificent Seven company that hedge funds continued to add to their portfolios, leading to its top position on Goldman Sachs' Hedge Fund VIP list.
Shifting Focus
Hedge funds have shown a shift towards cyclical industries, aiming to capitalize on a potential upswing in global manufacturing following robust U.S. economic data. Companies like General Electric and Union Pacific Corporation have made it to Goldman Sachs' Hedge Fund VIP list, while Arrow Electronics and Packaging Corp of America are emerging as rising stars in the eyes of investors.
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