Investing Update: What Hedge Funds Are Doing
What I'm buying, selling & watching
This week saw two of the largest retailers report earnings. Walmart reported on Tuesday and the results were ugly. It had its worst day since the 1987 crash. Not to be outdone, Target reported earnings on Wednesday and the stock fell even more than Walmart did and also had its worst day since 1987.
The results of Target and Walmart combined with Amazon’s miss on earnings a few weeks earlier really called into question upcoming retail sales and the state of the consumer. Margin compressions combined with increasing inventories driven by inflation and higher wages is hurting even the largest companies.
These fears drove the market Wednesday to have the worst day since June 2020. The S&P 500 now stands down 18.6% YTD and the Nasdaq down 28.2% YTD. That makes it seven straight down weeks for the Nasdaq.
We’re really starting to experience one of those long drawn out bear markets. It’s just a continuous grind lower with small bounces that fail to materialize into anything.
Our outlook looks rather bleak until there is some data point or number that comes in to turn sentiment. It seems like it has been bad news after bad news for an extended period of time. On the bright side, when things get to this point where everything is this negative and bearish, you’re usually nearing a bottom or turnaround territory. That time will come when everyone least expects it. But it will come, it always does.
Cash On The Sidelines
The results of the Bank of America Global Portfolio Managers Survey were released. What came out from it made for a lot of headlines this week. The amount of cash that is being held on the sidelines reached the highest levels since 9/11.
The red circles below illustrate the periods with high levels of cash. Don’t you think those red circle periods turned out to be good buying opportunities? They all did and we’re in one of those red circles right now.
That same survey also shows what sectors managers are bullish and bearish on.
Investing Is Hard
They say just buy high quality companies. Those aren’t as risky as growth stocks. Or buy what you know and use. All are good recommendations but the truth is during market selloffs and bear markets like we’re experiencing right now, everything gets pounded. With any stock comes risk.
Three stocks that you’d think would fall into the “safe” category would be Apple, Walmart and Costco. It was the case until the bears came for them all this week. Apple is now down 25%, Walmart down 26% and Costco down 32% from their all-time highs. Here are other notable companies and how far they’ve fallen from their recent all-time highs.
What Hedge Funds Are Doing
The 13F filings were released for the end of Q1 2022. These are quarterly reports filed by any institutional investment manager with at least $100 million in assets under management. Here is a breakdown of the Top 5 buys by hedge funds for Q1 2022.
Here are the Top 5 holdings of hedge funds at the end of Q1 2022.
A Question Answered
I’ve received a number of questions regarding I-bonds the past few months. So I’ve provided some more information and resources for you.
I originally brought these up in my Investing Update on October 22, 2021. Constructed to be a hedge against inflation I-bonds are one of the most talked about investments right now.
Starting this month they’re now paying a 9.62% interest rate. That rate is set until November when it resets. Every six months the interest rate resets. This article provides a nice overview and things to consider with investing in I-bonds.
Marketplace: What are I-bonds and should you invest in them?
There are some ways to buy more than only $10,000 in I-bonds. This article expands on ways to take advantage by buying more than just $10,000 worth.
CNBC: How to buy more than $10,000 in I-bonds
It’s best to ask any specific I-bond questions to a financial adviser as everyone’s situation is different.
What I’m Watching
I have not made any buys or sells in anything other than my automatic contributions to my retirement accounts which buys shares in the S&P 500 index. I’m fully invested at this time. I’ve deployed all the cash I had waiting to deploy over the past few weeks as I’ve discussed in my recent Investing Updates. We’re still in the same price ranges where I made my last buys. If we take the next leg down I will start to get active again on the buy side.
Two levels that need to hold are 31,000 on the DOW and 3,860 on the S&P 500. So far these levels have seen bounces. If we go below these levels, we’re in for another leg lower and the fall 2020 levels are in play.
Many companies have sold off in reaction to what I view as short term temporary noise. A continued fall lower is just creating some more tremendous gains to be made over the long term.
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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.