Activist investors have gotten more and more interested in healthcare stocks over the last year or so, and hedge funds in general have taken note. Overall, hedge funds are shifting away from information technology stocks and toward healthcare stocks, which made up the lion’s share of hedge fund buying for the second quarter in a row, according to analysis from S&P Capital IQ. (All graphs/ charts in this article are courtesy S&P Capital IQ.)
Hedge funds buy $7.2 billion in healthcare stocks
During the second quarter, net buying of healthcare stocks by hedge funds rose to $7.2 billion from the first quarter’s $4.8 billion. The healthcare sector made up 26% of the holdings for the ten biggest hedge funds, according to S&P Capital.
Numerous news headlines have trumpeted major concerns about inflation, which has been at 40-year highs. But how should investors handle inflation as it pertains to their portfolios? At the Morningstar Investment Conference on Monday, Kevin Dreyer, co-CIO of Gabelli Funds, outlined some guidelines for investing in the age of inflation. Historic inflation Dreyer started by Read More
One of the top hedge fund buyers during the second quarter was Baxter International, which Dan Loeb’s Third Point has been targeting. The stock made up approximately 18% of the hedge fund’s portfolio. Third Point grabbed up $1.9 billion worth of Baxter stock during the second quarter.
Valeant also a top pick
S&P Capital also found that Valeant Pharmaceuticals was popular among hedge funds during the second quarter with $1.7 billion worth of buys by hedge funds. In the previous quarter, the stock was both a top buy and a top sell among hedge funds. The vast majority of that came from Paulson & Co., which snapped up $1.5 billion worth of Valeant shares. Next was Viking Global Investors, which purchased $124 million worth of the drug maker’s stock. Of course Valeant has been an activist stock for some time as Bill Ackman was involved with the company during its attempt to take over Allergan.
Hedge funds bought up $1 billion worth of AbbVie shares and $805 million worth of Allergan shares, another activist favorite over the last year or so. They also bought $628 million worth of Humana shares, $651.1 million worth of Perrigo stock, $483 million worth of Laboratory Corp. shares, $402 million worth of Cigna shares, and $353 million worth of Aetna stock.
Perrigo, Laboratory Corp., Cigna, and Aetna were among the top new hedge fund positions in healthcare during the second quarter.
Hedge funds dump IT stocks
S&P Capital reports that the most sold-off sector among hedge funds during the second quarter was the information sector with a significant increase in net sales. Funds sold $3.1 billion worth of IT shares, compared to the $942 million in the previous quarter when the sector as also the most sold-off among hedge funds. Baidu was the most-hated stock among hedge funds during the second quarter, netting $1.3 billion worth of share sales. Lone Pine dumped its entire stake in the Chinese company.
Interestingly, Apple also fell out of favor with hedge funds, as they sold $875 million worth of shares during the second quarter. Micron, a previous activist hotbed, was also sold off heavily during the quarter to the tune of $831 million. Hedge funds sold $644 million worth of Alibaba shares, $434 million worth of eBay stock (another past activist target), and $354 million worth of Adobe shares.
Other notable moves among hedge funds
Following healthcare, the consumer discretionary was in second place in total overall buys among hedge funds at $2.4 billion. However, many of the stocks in that sector were among some of the most sold-off. Interestingly, Netflix ranked highly in both the top bought and top sold in the sector, with $1.4 billion worth of shares bought, making it the second-most bought in the sector, and $823 million worth of shares sold.
Amazon was also popular with $1.3 million shares purchased. Hedge funds dumped $751 million worth of Time Warner shares and $690 million worth of 21st Century Fox stock. Here are the full lists of the top buys and sells among hedge funds during the second quarter.