Investing Update: Hedge Fund Buys & Holdings
What I'm buying, selling & watching
The Nasdaq set another record high on Friday, while the Dow’s string of 4 straight positive weeks came to an end. The S&P 500 had been down most of the week but rallied on Friday to finish the week flat.
Volatility continues to be nonexistent as this week saw the VIX hit the lowest level since November 2019.
Since 1990 the average S&P 500 gain to this point in the year is 4.5%. With a YTD return of about 12% this year is trending way ahead of the average year.
We continue to have stocks rising to new highs. They keep taking out their prior highs, signifying continued strength. This shows just that by the numbers from Grant Hawkridge.
73% of stocks are above their 2018 highest high
43% of stocks are above their 2021 highest high
62% of stocks are above their December 2023 highest high
34% of stocks are above their Q1 2024 highest high
The narrative that this bull market rally to new all-time highs has only been the Magnificent 7 stocks has been debunked. That previously was the case but now you can see by the numbers that the participation has widened beyond the Mag 7.
In 2023 the Mag 7 drove 60% of the S&P 500 returns. 2024 has seen that number fall to 47%. This is very bullish!
Market Recap
A Look At The Numbers
With the stock market at all-time highs I wanted to look at the metrics of if the S&P 500 is expensive relative to history and where sentiment readings fall.
According to Bank of America, right now the S&P 500 is expensive statistically relative to history in 19 of 20 metrics. This is a good chart to monitor and watch for valuation metric trend changes in the market.
I really liked this chart from Willie Delwiche which breaks down sentiment into an excellent summary and what each reading means. It’s showing a lot of optimism!
An Eye On Supercore Inflation
Here is that word again, supercore inflation. I bring it up again because it still remains a bit of a problem. I’ve been keeping my eye on this and it continues to trend higher. I’d like to see this come down and thought it would have by now, but it remains extremely stubborn led by the gains in auto insurance and hospital services.
A Reminder That Nobody Knows
Here is yet another reminder that even the smartest analysts and strategists on Wall Street have no idea what the market will do from year to year.
From John Authers at Bloomberg.
The S&P is already 9.8% higher than the average forecaster thought it would be seven months from now … More than two-thirds have raised their estimates and nobody has cut.
This is my favorite visual on the topic. Look at where the individual predictions were for 2024 in December of 2023. Now look at all the chasing and how far some have moved their targets. It’s such a tough job to predict the market. Nobody has any idea. It’s all just their best educated guesses.
Hedge Fund Buys & Holdings
Every quarter I like to take a look at what hedge fund activity is showing. I’m looking if there is there anything to learn or something that stands out. If there are shifts in or out of an area or sector, this is where you can identify those trends.
This shows the top 5 buys by hedge funds in Q1 2024.
Here are the top 5 holding of each of the hedge funds at the end of Q1. The top of the list continues to be Amazon, Alphabet, Microsoft, Meta, and Nvidia. Two names that have become noticeably absent are Tesla (0 top 5 holdings) and Apple (1 top 5 holding).
This is where hedge funds are invested from a sector position.
Semis continue to be an extremely popular spot for hedge funds.
But they’ve soured on growth software. This surprises me a bit as this now sits at multi-year lows.
The biggest short positions among hedge funds per Goldman Sachs are Tesla, Exxon, Chevron and Costco. Why Costco is on this list while continuing to hit new all-time highs is beyond me.
Moves I’ve Made
Lululemon This week I added again to my Lululemon position at $323 a share. I had a buy order in at the 52-week low price of $323. It filled and then proceeded to fall even farther. I guess you could say I got cut again trying to catch a falling knife.
Lulu has been the worst performer in the S&P 500 YTD down 40%. After six straight down days it finally finished flat and then was up to end the week. I feel this stock has now hit a trough level. It’s been repriced and has struggled but so has its main competitor Nike. It’s forward P/E now stands at 29 while the 10-year average is 43. This is the cheapest multiple on Lulu in 7 years.
Nvidia Update
A number of you have asked me about my Nvidia position. After another blowout earnings Wednesday where it announced a 10 for 1 stock split, it now sits at another new all-time high of $1,064. YTD it’s up 121%. In the past 2 years it’s up 527%.
I still haven’t sold any of my position. Not much of my view has changed from when I wrote about my plans with it back on May 31, 2023 in My Nvidia Plan Moving Forward. It has grown to be my largest holding and an outsized position of mine. But I’m fine with that. It’s not done going higher.
Here are some of the best charts I’ve seen on recapping their earnings and showing just how dominate of a streak Nvidia is on.
Upcoming Earnings & Data
The Coffee Table ☕
Michael Batnick had an excellent post called How Lies Spread. This was so on point. I loved how he ended it. “Attention is the most scarce resource in the world, and people will do whatever they can to procure it. The sad truth is that negativity is the fastest car on the attention highway.”
I liked Drew Dickson’s post called Fooled By Non-Randomness. It reminded me about how a lot of what we hear about stocks is what’s already happened and not about what’s likely to happen. Have to separate all the backward looking information versus the forward looking.
If you want a laugh, this is a 1 minute video I had seen in the past and a friend recently sent it to me. I remember how funny it was, but after watching it again numerous times, I found myself in tears from laughing yet again. You can watch the short video here.
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