S&P Global Intelligence: Hedge Funds Flock To Consumer Staples

May 17 2017 | 6:52pm ET

Hedge funds broadly exited financials and information tech stocks in favor consumer staples companies in the first quarter, bringing their level of exposure to the sector to unprecedented levels, according to the latest edition of the S&P Global Market Intelligence Hedge Fund Tracker.

The quarterly report is an analysis of SEC 13F filings made by pure-play hedge funds, and is designed to provide insights into hedge fund investments in specific stocks and sectors as well as the changes managers are making. 

S&P’s research showed that total equity AUM among the top hedge funds rose to $159 billion in the first quarter, $6 billion higher than Q4’s $153 billion. Meanwhile, the total number of equity positions held increased from 424 in Q4 to 427 in Q1.

Key highlights from the report:

  • The consumer staples sector was the biggest net buy for the top pure play hedge funds, with $3.4 billion in new purchases made during the quarter. Currently, 15% of top fund equity holdings are concentrated in the sector, up from the previous high of around 6% reached in 2013.
  • Procter & Gamble Company is Biggest Single Buy: Hedge funds bought 30.3 million shares of Procter & Gamble stock in Q1, for a total investment of $2.7 billion. Other stocks receiving attention from hedge fund buyers were Praxair ($1.4 billion), Marriott ($1.4 billion), Constellation Brands ($859 million), and Formula One Group ($765.3 million).
  • Hedge Funds Exit Microsoft, Amazon: The information technology and financial sectors saw the largest volume of hedge fund selling in Q1, with Microsoft ($1.6 billion), Amazon ($1.6 billion), and Autodesk ($912 million). Other significant sell-offs were noted in Safran ($898 million) and Charter Communications ($732 million).
  • Financials was the second most sold-off sectors this quarter, at a total of $1.5 billion, with Bank of America being the top sell at $726 million.

"The volume of hedge fund buying in the consumer staples sector this past quarter was the highest level of buying activity we've seen in that sector since we began tracking this data," said Pavle Sabic, Head of Market Development, S&P Global Market Intelligence, in a statement. "This momentum is clearly a signal that hedge funds, as a group, are seeing upside potential in consumer staples; it will be telling to see how those moves evolve over the remainder of the year."

S&P’s 13F analysis determines the top ten largest hedge funds based on reported equity assets, further isolates the universe to pure-play hedge funds that focus on stock picks, and then hones the group further to isolate which hedge funds that overweight their biggest investments by capping the number of stocks held at 100.

S&P Global Market Intelligence was formed in February 2016 through the merger and rebranding of S&P’s Capital IQ and SNL divisions. The company is a unit of S&P Global and is a well-known provider of financial and industry data, research, news and analytics to investment professionals, government agencies, corporations, and universities worldwide.

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