Pharmaceuticals company, Actavis plc (NYSE:ACT) came from behind in the historical back and forth between Apple Inc. (NASDAQ:AAPL) and Google Inc (NASDAQ:GOOG), and became the top hedge fund holding in the second quarter, according to Goldman Sachs’ quarterly hedge fund trend monitor.
The quarterly report publishes a list of the 50 stocks that appear most frequently in the top ten holdings of hedge funds. After underperforming the return on S&P 500 in 1Q2014, the VIP list was back up by 266 bps YTD as of August 18.
Hedge funds: Healthcare jumps up in ranks
Technology names have held the top spots for some time now, a trend which finally ended in the last quarter. Actavis jumped from the No.13th spot in Q1’s top 50 list to No.1 this quarter. Hedge fund holdings in Actavis shot up from 18% of equity cap at the end of March quarter to 37% at the end of June. Those who made sizeable additions to their ownership in the biotech company were Jana Partners, Corvex Management and Cooperman’s Omega Advisors. Actavis is Dan Loeb’s third largest holding according to 13 filings, however, he made no change in the previous quarter. Tiger cubs Lone Pine Capital, Blue Ridge Capital and Viking Global all also have positions in Actavis that increased slightly over the past quarter. According to the Goldman report, 67 hedge funds held the pharmaceuticals company in their top ten holdings at the end of second quarter.
Actavis and Allergan are among the most concentrated names
Hedge funds also sunk their money into another biotech company, Allergan, in the last quarter. Allergan was nowhere in the VIP list before and is now the fifth most held company with 41 hedge funds holding it in their top ten positions in the second quarter. 25% of Allergan’s equity cap is owned by hedge funds, and it also features with Actavis in the list of companies with the most concentrated hedge fund ownership.
Hedge funds who were beefing up their holdings in Allergan, Inc. (NYSE:AGN) in the past quarter were Bill Ackman’s Pershing Square, Paulson & Co, Perry Corp, York Capital and Eton Park. Bill Ackman and Valeant Pharmaceuticals Intl Inc (NYSE:VRX) (TSE:VRX) mounted a hostile bid to takeover Allergan in April, but Allergan has continued to fight to get shareholder support to stay solo.
Portfolio turnover is waning
In addition, Goldman Sachs noted that hedge fund position turnover declined in the second quarter to a record low of 28%. Only 10 new stocks entered the VIP list, compared to a historical average of 17 stocks since 2001. The practice of making big changes to the portfolio has waned over the past three years, however, the healthcare sector received a lot of attention in the past quarter as hedge funds increased their weighting.
Other firms in the top ten list are Apple Inc. (NASDAQ:AAPL), Facebook Inc (NASDAQ:FB), American Airlines Group Inc (NASDAQ:AAL) and Allergan. While Apple and American Airlines have maintained their stardom over the past two quarters, Facebook has risen up the ranks. As opposed to Q1, when 30 hedge funds held the social networking company in their top ten holdings, 43 funds had it in the top ten in Q2.
Google slips, Facebook rises up
Google Inc (NASDAQ:GOOG) (NSADAQ:GOOGL) was dethroned from its top spot and dropped to the mid-20s in the VIP list at the end of Q2. Hedge fund ownership declined from 58 funds holding it in the top ten of their portfolio to just 23 funds. Blue Ridge Capital, Third Point and Soros Fund sold their entire positions in the search engine in the past quarter.
New entrants into the top 50 list were Williams Companies, Inc. (NYSE:WMB), coming in at No.13, Ally Financial Inc (NYSE:ALLY) at No.20, Air Products & Chemicals, Inc. (NYSE:APD), Dollar General Corp. (NYSE:DG), DirecTV (NASDAQ:DTV), Mastercard Inc (NYSE:MA) and Monsanto Company (NYSE:MON).