Apple and Actavis continued to be favorite positions of hedge funds, while Microsoft remained mutual funds’ favorite position during the first quarter. Looking more broadly, hedge funds were especially interested in the Energy and Consumer Staples sectors, while mutual funds preferred Consumer Discretionary and Industrial stocks, according to the latest data from Citi.
Microsoft underperforms S&P 500
Citi analyst Tobias Levkovich released his latest Top Ten list for the first quarter. He reports that this is the fourth consecutive quarter in which Microsoft was the top position at mutual funds. This is particularly interesting because the software giant underperformed the S&P 500 during the first quarter, lagging behind the index by 12.9%.
Here’s a look at the top 25 holdings among mutual funds according to Citi’s data (All charts/ graphs in this article are courtesy Citi.):
JPMorgan made the greatest leap in terms of mutual fund holdings.
Apple rises in Citi’s list
Microsoft was also a favorite position among hedge funds during the first quarter, although Apple and Actavis were tied for the top spot. Apple landed in the top spot after gaining the most in holdings among hedge funds during the first quarter.
Here’s a look at the top 25 positions among hedge funds during the first quarter.
As you can see, there were some key differences and similarities between the top hedge fund and mutual fund positions during the first quarter.
Rising interest in four sectors among funds
Mutual funds are becoming more interested in the Industrials and Consumer Discretionary sectors, according to the data. In the top 50 biggest actively managed mutual funds, the Consumer Discretionary sector climbed six positions quarter over quarter to land at 18.2% of the top holdings. The Information Tech sector fell from 21.2% in the previous quarter to 16.2% of the top holdings during the first quarter.
Citi also learned that hedge funds are increasingly becoming interested in Consumer Staples and Energy stocks. Unlike mutual funds, hedge funds remained interested in Information Tech holdings, which made up 17.2% of the top 10 equity positions. In spite of this preference, however, the IT sector fell 4 points in hedge fund holdings quarter over quarter.
The firm also noted that the Healthcare sector also saw a decline in hedge fund holdings, as it fell four spots to 16% of the top 10 equity holdings among the top 50 hedge funds.
When comparing companies to their market capitalizations, Citi found that IT and Healthcare are the most owned compared to their market caps. At mutual funds, Amazon was the most over-represented, with Gilead Sciences in second place, while at hedge funds, Actavis and Gilead were the top two compared to market cap.
Hedge funds outperform the S&P 500
Further, Citi reports that for the first time in two years, the Equity Hedge Fund Index outperformed the S&P 500. Last year the S&P gained 11.4%, compared to the hedge fund index’s 1.4% increase.
The trend reversed in the first quarter, however, with the hedge fund index climbing 2.2%, beating the S&P 500’s 0.04% increase during the quarter.
It looks like there will be another reversal in the current quarter, however, as Citi reports that the S&P 500 is again outperforming the Equity Hedge Fund Index, this time by 100 basis points. Interestingly, hedge funds reversed their positioning on the S&P 500 during the first quarter, quickly snapping up stocks in the index.
