Amazon has been a major beneficiary of the Covid-19 chaos, and hedge funds have taken notice.
The fastest bear market in history saw a 30% plummet followed by a rapid 30% rebound. But there has been a large bifurcation in this rally. While many stocks remain significantly depressed on the year, tech has flourished. The Nasdaq is actually up year to date, and megacap tech, buoyed by stay-at-home orders and an inexorable trend of work-from-home (WFH) policy becoming the norm, has reaped much of these gains.
Amazon’s 32% return has outpaced all FAANG + Microsoft names save Netflix (39%), but more importantly, Amazon has transmuted its tech designation to that of the ultimate “essential” business. The coronavirus pandemic has exposed the fragility of many business models, but it’s managed to do the opposite for Amazon. When something is fragile, it suffers or breaks under stress or change; when something is antifragile, it actually gains from uncertainty and disruption.
Amazon has shown itself to be perhaps the ultimate antifragile business. Already a superior trillion-dollar enterprise during normal times, its delivery and Amazon Web Services businesses (think WFH) will benefit from the new paradigm that coronavirus has ushered in.
It appears hedge funds by and large agree. Amazon is the largest position as of the end of the first quarter for many top funds such as David Tepper’s Appaloosa, Alex Sacerdote’s Whale Rock and Stanley Druckenmiller’s family office. And of all the megacap tech names, it was the only one that saw an increase in shares held across both institutions and hedge funds, per 13F data from WhaleWisdom.
Of 13F-filing hedge funds ($100 million or more in assets under management), Amazon is held by 40% of them, and is a top-10 holding of 21%. This ranks second to only Microsoft, which is held by 43% of them and is a top-10 holding of 25%. However, Amazon's institutional and hedge fund share count holdings increased by 1.82% and 4.73%, respectively, as opposed to Microsoft’s mixed bag (-3.85% and +0.7%, respectively). Netflix was the only other FAANG member to see an increase in holdings across both institutions and hedge funds, albeit much more tepidly so than Amazon, with a +0.23%, and +0.93% increase, respectively.
Apple (-3.69%, +.39%) and Google (-3.45%, +.29%) saw surprisingly high institutional reductions in the first quarter, and Facebook was a wash between the two (-1.07%, +1.2%).
Amazon’s rocketing favorability can also be seen by its weighting increase across hedge funds. The table below shows the top-10 stocks by summed percentage holdings across 13F-filing hedge funds. This is a way to glean insight into the overall conviction hedge funds have across symbols that adjusts for portfolio size. That's because if only a handful of massive funds bought huge positions in Amazon, it would show in the aggregate stats as a major uptick in shares held, but wouldn’t speak to the breadth or weighting of the stock by all funds. Using this method, however, a $10 billion fund with 10% of its assets in Amazon ($1B) is measured the same as a $100 million fund with 10% of its portfolio in it ($10M).
Even by this metric, no one saw as big an uptick as Amazon. Microsoft still holds the total top honor, however, Amazon’s 57% increase in summed portfolio weighting outdistanced all others. At a 42% increase, Microsoft came in second for greater weighting, and somewhat curiously Allergan came in 3rd with a 40% rise. The increase across other FAANG names was muted, and Netflix doesn’t even make the list.
The smart money consensus is clear: Amazon is the ultimate all-weather company.
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