Citigroup is out with a new report on the top holdings of the 50 largest hedge funds and a surprising name came in as number one…. Priceline.com Inc (NASDAQ:PCLN). Google maintained its leadership position being the most-widely held stock amongst the top-50 actively managed US mutual funds at the end of 1Q13 grabbing a listing on a total of 20 top-ten lists while Microsoft and Gilead added the greatest number of holdings according to a new report from Tobias M Levkovich of CitiGroup. He also states that Priceline.com Inc (NASDAQ:PCLN) and AIG took first place amongst hedge fund holdings, followed by News Corp and Google in second (this is in contrast to both BAML and AIG which have AIG at the top and Priceline lower down the list). Interestingly, Priceline is not among the top 30 holdings of the largest 50 mutual funds. Further details below (we will have the full report up shortly).
Priceline.com Inc (NASDAQ:PCLN) top hedge fund holding
In terms of individual stocks, Google Inc (NASDAQ:GOOG) remained the most widely held stock amongst the largest 50 mutual funds in 1Q13. In the first quarter, Google gained one holding and appreciated 12.3%, outperforming the S&P 500 by a healthy 230bps. Microsoft Corporation (NASDAQ:MSFT) and Gilead Sciences, Inc. (NASDAQ:GILD) each added five holdings, the most of any other names on the list.
Perhaps most interesting, a greater number of holdings were concentrated amongst only a few names in 1Q13 when compared to previous quarters, reflecting a consensus in top holdings between the largest mutual funds. Meanwhile, Priceline.com Inc (NASDAQ:PCLN) and American International Group Inc (NYSE:AIG) tied for first place amongst hedge funds and appeared on 11 top-ten lists, followed by News Corp (NASDAQ:NWSA) (NASDAQ:NWS), Google Inc (NASDAQ:GOOG) and Apple Inc. (NASDAQ:AAPL) also tied for the second slot. Virgin Media Inc. (NASDAQ:VMED) (+33.3%) was the biggest mover and appeared on the top-ten list amongst hedge funds for the first time.
Moving away from PriceLine and to performance
Overall, the portfolio of top holdings for mutual funds (+9.4%) underperformed the S&P 500, albeit by just 60 bps due to an overweight posture for IT names. Compared to mutual fund top holdings, the portfolio for hedge funds rose 12.4% and outperformed the S&P 500 by over 200 bps in 1Q, likely due to a stronger preference for Consumer Discretionary stocks.
At mutual funds, 40% of the most widely held stocks gained representation amongst top holdings and roughly 40% of stocks fell off the list. Portfolio weightings of the top-ten holdings for the largest 50 equity mutual funds remained biased towards the Information Technology and Health Care sectors but stepped up meaningfully for Industrials (up 7%). An even greater shift in allocation was evident amongst hedge funds, with over 50% of stocks gaining representation amongst top holdings and 25% of the most held stocks losing representation largely due to a move from Tech (down 10%) to Industrials and Health Care (both climbing 10%).
Hedge Fund Beta
Beta modestly increased thereafter and peaked in 1Q11 reflecting a more risk-on environment and an 11.7% rise for US equities in 2010. Not surprisingly, the recent volatility in market performance has contributed to a shift in portfolio weighting and a willingness to add beta. While less history for top hedge fund holdings is available, a similar trend can be discerned. The current beta of top mutual fund holdings of 1.02 is in-line with its average since 3Q05 of 0.98; this compares to a beta of 1.10 for hedge funds versus a long-term average of 1.08. However, hedge fund leverage and/or short positioning is not captured in the beta analysis of the Top 10 Holdings; thus, hedge fund exposure could be more defensive or aggressive based on those other facts. Given hedge fund performance so far in 2013, a somewhat defensive posture appears more evident.