The year-end 2019 SEC 13F filings can give investors insight into where some of the world's top investors are putting their money. And a review of these disclosures turns up some clear investing trends.
A number of factors affect such a review, the most notable being hedge funds and asset managers are required to disclose only their long positions.
So we can't see their hedging, short-stock or short-option positions. For example, if a fund has a stock position and offsetting covered-call options, we can't see the calls.
In addition, these investors are required to file these disclosures only once a quarter, within 45 days after a quarter ends.
So these snapshot filings are less actionable if we're tracking managers that trade a lot, more actionable when we're following Warren Buffett-type managers who tend to invest longer term.
Still and all, to get an idea of where the premier hedge funds are allocating assets, we used 13F aggregator WhaleWisdom to analyze filings from Appaloosa Management, Baupost Group, Berkshire Hathaway (BRK.A) - Get Report, Bridgewater Associates, Greenlight Capital, Lone Pine Capital, Pershing Square, Soros Fund Management, Third Point and Tiger Global Management.
We confined the analysis to the top 5 buys and sells, and top 5 largest holdings of each fund for the quarter ended Dec. 31.
First, no one is terribly fond of energy stocks. Not a single fund has an oil or gas stock in its top 5 holdings.
Only three funds transacted substantially in any energy stocks, and the activity was mixed: Berkshire added to its Occidental Petroleum (OXY) - Get Report and Suncor Energy (SU) - Get Report positions and pared its stake in Phillips 66 (PSX) - Get Report.
Appaloosa added to Energy Transfer LP (ET) - Get Report while cutting its SPDR S&P Oil & Gas E&P (XOP) - Get Report ETF holding; and Soros trimmed its position in long Energy Select Sector SPDR (XLE) - Get Report ETF puts. (Long puts is a bearish position.)
Financials/banks are also largely eschewed.
Berkshire is the only firm in the study with any real conviction in the sector. It has roughly 30% of its portfolio in Wells Fargo (WFC) - Get Report, Bank of America (BAC) - Get Report and American Express (AXP) - Get Report. It reduced, however, its positions in Wells Fargo, Goldman Sachs (GS) - Get Report and Bank of New York Mellon BNY in the quarter.
Besides Berkshire, only Greenlight Capital has a financial firm - Brighthouse (BHF) - Get Report - in its top 5. The only other major buys in the sector were by Third Point in TD Ameritrade (AMTD) - Get Report and by Bridgewater in JP Morgan, Bank of America, Wells Fargo and Citi (C) - Get Report. Baupost Group reduced its long position in Synchrony Financial (SYF) - Get Report and Greenlight sold Voya Financial (VOYA) - Get Report.
Bridgewater’s main holdings stand in contrast to all other portfolios. While each fund's top 5 include solely single-company stocks, Bridgewater’s top 5 are all macroeconomic-oriented, market-tracking ETFs: (SPY) - Get Report ETF, (VWO) - Get Report ETF, (IVV) - Get Report ETF, (GLD) - Get Report ETF, and (EWZ) - Get Report ETF.
Ray Dalio, Bridgewater's founder and chairman, is well-known for strong opinions surrounding economic cycles, interest rates, and macroeconomic predictions. His portfolio managers appear to adopt a similar approach to their investments.
On which sector do the most prominent managers agree? Technology.
Every fund except Pershing Square and Greenlight either had a tech stock in its top buys or has one in its top 5 positions. Appaloosa is the most bullish on the sector, with all 5 of its largest holdings consisting of tech investments: Google (GOOG) - Get Report, Facebook (FB) - Get Report, Amazon (AMZN) - Get Report, Alibaba (BABA) - Get Report and Micron (MU) - Get Report).
Only five tech symbols make repeat appearances as either major buys/sells or primary positions.
Amazon and Alibaba are top 5 holdings for both Appaloosa and Lone Pine, with Amazon being a buy at Third Point and a sell for Lone Pine.
Google is a top 5 position for both Appaloosa and Soros Fund, though Appaloosa reduced its stake in the search giant.
Facebook is a core stock for Tiger Global and Appaloosa and a buy for Lone Pine. The last one? Relatively small PayPal (PYPL) - Get Report was a buy at both Tiger and Lone Pine and a sell at Third Point.
The only fund to have any major involvement with Apple is Berkshire, which is its largest single holding at 30% of its portfolio. Microsoft is a top position for only Tiger Global, and they sold part of the position during the quarter, as did Third Point.
Some additional interesting tech purchases in the quarter: Uber (UBER) - Get Report (Tiger), Hewlett-Packard Enterprise (HPE) - Get Report (Baupost), high-flying Shopify (SHOP) - Get Report (Lone Pine), and ebay (EBAY) - Get Report (bought by Baupost, sold by Soros).
Also worth mentioning: David Einhorn and Greenlight are known to have a sizable short position in Tesla, given numerous public spats with CEO Elon Musk.
But due to the limitations of 13F filings, we can't see its scope and any activity in the symbol if the firm is still net short. It would be interesting to know whether the firm bought the stock in the quarter to cover its short position, given the jump in Tesla's share price this year.
The broad conclusions from this activity: Energy, which as a sector has had lagging returns during this decade-long U.S. economic expansion, remains out of favor. Financials are conviction holdings of no one save Berkshire in this low-interest-rate environment.
And tech is the one sector most everyone can agree on, with Amazon, Google, Alibaba, and Facebook showing up as top buys and core positions at several managers.