Investing Update: Hedge Fund Buys & Holdings
What I'm buying, selling & watching
It’s starting to look like AI has started another bull market. The S&P 500 is now up 10% YTD and the Nasdaq is up 25% YTD.
The below chart shows just how far of an outlier the Nasdaq has performed versus the other major indexes so far in 2023.
Coming into the year and up until recently the consensus was that earnings were going to be the problem. They had to fall hard everyone said. This past quarter over 80% of companies beat earnings and they’ve come in at -2% vs Q1 2022, which is better than the expected 7% drop going into earnings season. Every sector has beaten earnings except utilities.
This furthers the case that the October low seems to be in and safe. As the stock market goes higher the odds that we revisit the October low becomes high unlikely. Minus a black swan event of course.
As Ryan Detrick points out below, the market has now gone 7 months without a new 52-week low. Once we go 7 months without a new low, the market is higher a year later 87% of the time.
Now as good as this year has been, we’re really only just getting back to where things were two years ago. That’s how fast and quick the market dropped last year.
The big question is where does the market go from here? Is the AI story enough to lead the market to new highs? Or will the market go back down due to all the worries that have dominated the news headlines surrounding the economy?
Mega-Cap Tech Outperformance Continues
Last week I wrote a post called The Reliance on Mega-Cap Tech Stocks. This week there was some more data that came out to show just how strong the mega-cap tech outperformance has been versus the rest of stocks.
This is a good chart showing the S&P 500 with the mega caps and then without. Quite a difference in performance.
This year has been the strongest start to a year for the FAANG names going back to 2015 and it really isn’t even close.
The percentage of stocks outperforming the S&P 500 index is at the lowest number since 2000. A few big names really are pulling the entire market along with it.
Basically if you took out the seven big names of Apple AAPL 0.00%↑, Amazon AMZN 0.00%↑, Microsoft MSFT 0.00%↑, Meta META 0.00%↑, Alphabet GOOGL 0.00%↑, Tesla TSLA 0.00%↑, and Nvidia NVDA 0.00%↑, the other 493 names of the S&P 500 are only up 1% YTD.
EPS Improving For Only 10 of the 500 S&P Stocks
Warren Pies makes a great point how EPS estimates have improved for the top 10 S&P 500 stocks but not the bottom 490. That’s 2% of S&P 500 stocks. This raises questions into if the S&P 500 can sustain these gains without wider participation and how much higher can the S&P 500 go in this current narrowed leadership environment.
AI Related Stocks Surging
If you mention the word AI in your conference calls it seems to instantly boost your stock price. A reason why most of the big gainers this year are the mega-cap tech stocks.
They’re now monitoring and counting the number of times AI is mentioned during earnings calls. It wasn’t very long ago that monitored word was the metaverse. Before that it was Web3, cryptocurrencies and bitcoin. Will AI follow a similar path of those and fizzle away in time? Or is this going to be as big as everyone seems to think?
Hedge Fund Buys & Holdings
did the work on reviewing the 13F filings for some of the biggest hedge funds and put this together on what those hedge funds bought during Q1 2023. 
Here are the top 5 holdings for those same hedge funds at the end of March 2023.
As you can see above there is a very heavy weighting towards technology stocks. Now you have to wonder are hedge funds feeling FOMO and rushing deeper into mega-cap tech stocks? From Bloomberg, “Hedge funds have boosted their tech holdings to 15.5% of their overall single-stock net exposure, up from 9.7% at the start of the year.”
MAGMA is Microsoft, Apple, Google, Meta and Amazon.
My Nvidia Position
I’ve received a lot of praise this week for my call on one of my favorite stocks, Nvidia. It’s been one of my biggest positions and I did have it as a favorite stock for 2023. Investing Update: 3 Stocks For 2023. It skyrocketed Thursday after reporting earnings, gaining 25% and it’s the leading stock in the S&P 500 by a wide margin this year. YTD it’s now already up 172%. From the 52-week low it’s up 255%. This has spurred questions as to whether I’m going to sell it, trim it or buy more. I’m going to document my thought process and what I’m doing with it in my post Wednesday 5/31, which will be free for all subscribers. Watch for it.
The Coffee Table ☕
Callie Cox hits on a subject that isn’t talked about enough, your investing timeframe in Seeing the market through your own lens. Everyone has a different timeframe. Your timeline is different from mine, which is different from Callie’s. We could buy the same stock on the same day but our investment thesis could all be different. How long you intend to hold it, why you bought it could all differ. People need to remember this when they see clips on TV of who’s buying what.
The go to for anything housing related is
. He had another informative post called Two Key Housing Themes: Low Inventory and Few Distressed Sales. I found it interesting to see that 65% of all outstanding mortgages have an interest rate under 4%. It’s no wonder the housing market is frozen as interest rates are now knocking on the door to 8%.One of the newer bourbons that I’ve heard about is Blue Run Reflection 1. I was fortunate to come across a bottle of this at a small-town liquor store. It’s quite rare as they only produced 200 barrels of this. It drinks very smooth and mellow. It has a long and sweet finish but with almost zero burn at the end. This is a very unique and good bourbon.
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Disclaimer: This is not investment advice. You should not treat any opinion expressed as a specific inducement to make a particular purchase, investment or follow a particular strategy, but only as an expression of an opinion. Do your own research.