By Andrew Birstingl, FactSet

The 50 largest hedge funds increased their equity exposure by 2.9% in Q3 2016. This marked a turnaround from Q2, when equity exposure decreased by 1.3%. Seven out of the 11 GICS sectors experienced aggregate purchases during the quarter, with the Consumer Staples and Information Technology sectors leading the inflows. Seven of the top 10 purchases at the company level came from these two sectors.

The third quarter was the second consecutive quarter in which the Consumer Staples group was the largest aggregate purchase among the top 50 hedge funds. On the opposite end, the Health Care group was the largest aggregate sale by hedge funds for the second straight quarter.

Procter & Gamble is Top Purchase in Q3

The top 50 hedge funds bought $12.2 billion worth of stock in the Consumer Staples group during the third quarter, which represented the largest aggregate purchase of all 11 GICS sectors. Within the sector, the Household and Personal Products industry group saw the bulk of the inflows. Hedge funds bought $11.4 billion worth of shares in this industry group, which represented the largest aggregate purchase of a GICS industry group. Procter & Gamble and Coty were two of the favorites in the group during Q3.

The top 50 hedge funds bought $8.9 billion worth of shares in the multinational consumer goods company P&G, making it the top purchase in the third quarter. Hedge funds also added $1.6 billion worth of shares to the beauty products manufacturer Coty, which was the third largest purchase overall. Millennium Management was the primary driver of the inflows into these two stocks. It is interesting to note that Procter & Gamble became the fourth largest holding in the top 50 hedge fund portfolio, yet the stock was held by only 11 funds at the end of Q3. P&G’s stock is up 5.3% year-to-date, while Coty’s stock is down nearly 29% year-to-date.

The Food and Staples Retailing industry group also contributed to the purchases within the Consumer Staples sector. The top 50 hedge funds added $1.4 billion to this industry group, with Costco and Wal-Mart leading the way in terms of purchases. The Food and Staples Retailing group was the fifth largest purchase by hedge funds at the industry group level.

Hedge Funds Buy Information Technology

During the third quarter, the Information Technology sector was the second largest aggregate purchase at the sector level. The top 50 hedge funds bought $6.3 billion worth of shares in the sector, with Apple and Alphabet being two of the favorites. Hedge funds purchased $2.1 billion worth of Apple stock, making it the second largest purchase overall. Interestingly, Apple was the second largest sale by hedge funds in the second quarter. Third Point, D.E. Shaw & Co, Tiger Global, and Coatue Management all contributed to the purchases.

The iPhone maker was the top buy during Q3 for Third Point and D.E. Shaw & Co.  At the end of the quarter, 23 of the top 50 hedge funds held a position in Apple. Apple’s stock is up 1.8% year-to-date. Hedge funds also bought $1.4 billion worth of shares in Alphabet (Class A), making it the fourth largest purchase overall. They added $1.4 billion worth of stock in Alibaba and $1.2 billion worth of stock in eBay as well. Both made the top 10 list of companies ranked by largest purchases by the top 50 hedge funds during Q3.

Health Care Sector is Largest Aggregate Sale for Second Consecutive Quarter

Hedge funds removed $2 billion worth of stock from the Health Care sector during the quarter, more than any other group. This marked the second consecutive quarter that the Health Care sector was the largest aggregate sale. Similar to Q2, the Pharmaceuticals, Biotechnology, and Life Sciences industry group was the primary driver of these outflows. Hedge funds sold off $2.1 billion worth of shares in this industry group during Q3. Pharmaceuticals, Biotechnology, and Life Sciences is down over 5% year-to-date and is one of the worst-performing industry groups this year.

Allergan was the largest aggregate sale overall in the third quarter, with the top 50 hedge funds removing $1.8 billion worth of shares from the pharmaceutical company. Allergan was the top sale of both Icahn Associates and Third Point during Q3. However, this selloff is not uncommon for Allergan. In Q2, the company was the third largest aggregate sale by the top 50 hedge funds. Allergan’s stock is down over 37% year-to-date. Funds also sold large positions in Israel-based pharma company Teva Pharmaceutical Industries and animal health firm Zoetis.

Facebook is Most Widely Held Stock, but also Fourth Largest Sale

At the end of Q3, 24 hedge funds had a position in Facebook, making it the most widely held stock among the top 50 hedge funds.  This was a decline from the 25 hedge funds that held the stock at the end of Q2.  Microsoft had been the most widely stock for two consecutive quarters.

Facebook was also the fifth largest holding by the hedge fund portfolio.  Despite being the most widely held stock, Facebook was the fourth largest sale in the third quarter, with the top 50 hedge funds removing $1.4 billion from the social network.  Facebook’s stock is up 12% year-to-date.

Read more in Hedge Fund Ownership Quarterly

Download the full report for more, including:

  • Sector-Level and Company-Level Weighting Relative to S&P 500
  • Top 50 Holdings: Top 50 Hedge Funds
  • Three-Month Largest Holding Value Changes
  • Country Breakdown: Top 50 Hedge Funds
  • Sector Breakdown: Top 50 Hedge Funds versus S&P 500
  • Sector Movement: Top 50 Hedge Funds versus S&P 500
  • Industry Group Movement: Top 50 Hedge Funds
  • Cap Group Breakdown: Top 50 Hedge Funds