Hedge Funds, Retail Selling Offset By Institutional Buyers

Institutional investors snapped up shares in last week’s rally, according to equity strategists at Bank of America Merrill Lynch. The S&P 500 climbed 1.8%, marking its best week since last month.

Institutional investors buy the rally; hedge funds swap positions

BAML strategist Jill Carey Hall and her team report that last week marked the second week in which its clients were net buyers of U.S. stocks, grabbing up $1 billion worth of shares. The firm added that institutional investors were the only net buyers after three weeks of selling. Hedge funds swapped positions with them, becoming net sellers after buying stock for three weeks. (All graphs and charts in this article are courtesy BAML.)

Hedge Funds

The BAML team further said that private clients were “small net sellers” and that net buying was in both large and small cap stocks. Mid-cap stocks, which the firm sees as being the “most expensive size,” witnessed net sales.

Hedge Funds

They added that corporate buybacks fell compared to the week before but that the four-week average has hit its highest level since early February when buyback activity started to slow.

ETFs lead net buying

BAML reported that ETFs and single stocks in Healthcare, Tech and Financials led the way in net buying. The Financials and Tech sectors saw many companies release their earnings reports last week, so it should be no surprise that the rash of strong earnings reports triggered net buying. The Healthcare sector has bought the biggest number of positive surprises so far in the current earnings season, so again it makes sense that the sector would see higher net buying compared to others.

On the other side, the two Consumer sectors witnessed the biggest number of net sales last week, according to BAML. In fact, institutional investors joined hedge funds and private clients in selling off the two Consumer sectors.

The Financials and Tech sectors each have net buying trends of five weeks, which are currently the longest. At the opposite end are the Industrials and Energy sectors, which have net selling trends of four weeks apiece, the longest of all sectors.

Hedge Funds

The Utilities sector has seen the “most persistently positive” flows on a four-week average basis, however, according to BAML.

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About the Author

Michelle Jones
Michelle Jones was a television news producer for eight years. She produced the morning news programs for the NBC affiliates in Evansville, Indiana and Huntsville, Alabama and spent a short time at the CBS affiliate in Huntsville. She has experience as a writer and public relations expert for a wide variety of businesses. Michelle has been with ValueWalk since 2012 and is now our editor-in-chief. Email her at [email protected]

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