What is the reputed smart money up to lately? We explore the 25 most popular blue-chip stocks among the hedge fund crowd.
Hedge funds as a group have a poor long-term track record,
but there's still something irresistible about knowing what the putative smart
money has been up to.
Besides, you've got to give them credit where credit is due.
Hedge funds as a group might not be generating positive returns in 2022, but
hey, at least they're beating the broader market.
Hedging strategies by definition limit upside when stocks
are rising, which helps explain the industry's years of underperformance during
the bull market. By the same token, however, hedging strategies limit downside
when everything is selling off. And goodness knows investors have seen plenty
of red on their screens so far this year.
Case in point: the Eurekahedge Hedge Fund Index delivered a
total return (price appreciation plus dividends) of -1.6% year-to-date through
Jan. 31. That compares with the S&P 500's total return of -5.2% over the
same span.
We won't know how hedge funds have adapted to current market
turmoil until the next batch of regulatory filings come out in May, but we do
know how they were positioned heading into 2022.
Surprise, surprise: Hedge funds were heavily invested in
most of the market's biggest and bluest of blue-chip stocks.
Indeed, components of the Dow Jones Industrial Average are
heavily over-represented when it comes to hedge funds' favorite stock picks.
Fully 13 of the Dow's 30 names rank among the stocks most widely held by hedge
funds.
That's partly a function of Dow stocks' massive market
capitalizations and attendant liquidity, which creates ample room for
institutional investors to build or sell large positions. Big-name blue-chip
stocks also carry a lower level of reputational risk for professional money
managers. (It's a lot easier to justify holding a large position in a Dow stock
than a no-name small-cap if restive clients start grumbling about their
returns.)
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