Major hedge funds have begun cutting their exposure to the Magnificent Seven tech giants, despite gaining on the bumper returns delivered by the iconic mega-tech companies in 2024 so far, a new analysis from Goldman Sachs shows.
Hedge funds continued to invest heavily in Magnificent Seven – Alphabet GOOG,
amazon amzn,
apple apple,
meta meta platforms,
microsoft MSFT,
nvidia out of stock,
And Tesla TSLA,
– After the accumulation of popular stocks in the first three quarters of 2023, an analysis of 722 funds shows.
This Magnificent Seven crowd saw the popular tech giants account for 13% of hedge funds' total long portfolios, with all companies except Tesla appearing on the hedge funds' list of the top 10 popular stocks.
However, these hedge funds have now begun to reduce their stakes in the Magnificent Seven, in a shift that has seen them become net sellers of massive technology companies – even as technology companies continue to deliver huge returns in 2024 so far. .
Together, the Magnificent Seven tech giants have returned +8% year-to-date, versus the +5% returns offered by the S&P 500 stock index SPX.
This strong performance from the Magnificent Seven saw Goldman Sach's hedge fund VIP list those most popular stocks among hedge funds that have returned +9% in 2024 so far, analysis of the funds' $2.6 billion in total equity positions shows.
Goldman Sachs noted that Magnificent Seven's returns were boosted by high levels of congestion and a record tendency toward momentum. However, the investment bank's report warns that there is now a risk of “violent unwinding if the market environment changes, as happened briefly over the last few weeks of 2023”.
The breakup has already placed Microsoft on Goldman Sachs' “shooting stars” list of those stocks that have seen the biggest decline in popularity with hedge funds, along with US semiconductor companies Texas Instruments TXN,
Marvell MRVL Technology,
And ON Semiconductor Corp ON,
Amazon.com was the only Magnificent Seven company to continue to be added to hedge funds' portfolios, in moves that saw it rise to the top spot on Goldman Sachs' hedge fund's VIP list.
Instead, hedge funds looked for gains in cyclical industries, as they sought to capitalize on a potential improvement in the global manufacturing sector, on the back of strong economic data from the United States.
This was witnessed by companies including industrial conglomerate General Electric GE,
And the Union Pacific Corporation UNP railway company,
Taking positions on Goldman Sach's hedge fund's high-profile list, which includes companies including Arrow Electronics ARW,
And the American packaging company PKG,
They are listed as rising stars.
