Hedge funds beef up tech holdings
Hedge funds have fallen back in love with technology giants after spending the final months of last year cutting back on these stocks.
Just days before earnings land from the likes of Apple Inc. and Amazon.com Inc., professional investors turned more upbeat the industry. On Tuesday, the cohort made its largest net buying in a month, according to data compiled by Goldman Sachs Group Inc.’s prime brokerage. As a result, their net exposure in tech megacaps jumped at one of the fastest paces in recent years.
Their renewed interest reflects confidence in the earnings power of a group whose resilience has been underlined during the Covid-19 pandemic. The big five—Facebook Inc., Apple, Amazon, Microsoft Corp. and Google’s parent
Alphabet Inc.—are expected to report faster profit growth than the rest of the market for a 12th straight quarter, analyst estimates compiled by Bloomberg Intelligence show.
“Just because we’re coming out of a Covid-related economic freeze, that doesn’t mean the trend of digitization, software, automation is going away,” said Giorgio Caputo, senior fund manager at J O Hambro Capital Management. “Many of those larger-cap software and internet companies are very well positioned—advertising is continuing to move online, firms continue to move to the cloud.”
Hedge funds tracked by Goldman Sachs have boosted exposure to tech megacaps, with their long/short ratio in the group climbing to 20.5% from a low of 14% reached earlier this month. While the tilt trails peak levels seen last year, it flies in the face of the more widely held notion that the tech giants won’t be able to sustain their robust gains as the recovery broadens out.
Those turning more cautious on tech include Sean Darby of Jefferies and Savita Subramanian at Bank of America Corp. In a survey this month, the bank’s money managers said they’ve reduced tech allocation to a two-year low while pouring money into banks, smallcaps and energy shares—companies seen benefiting the most from an economic rebound.