The momentum-chasing hedgies are hating on tech stocks, according to new data from Goldman Sachs analysts on a fresh round of 13F filings.
“The latest filings show hedge funds positioning for a different equity market environment than the one that has characterized most of the last several years. Funds continued to rotate away from growth stocks and are now more tilted to value than they have been since 2011. At the sector level, hedge funds slashed positions in tech in favor of energy and financials,” said Goldman Sachs strategist Ben Snider.
Goldman analyzed 788 hedge funds with $2.6 trillion of gross equity positions.
The cooling sentiment on tech stocks comes as the space has lost considerable momentum amid fears of rising interest rates. Investors have fretted the higher cost of capital will pressure richly valued companies in growth mode such as tech, raising the specter of larger losses.
The tech heavy Nasdaq Composite is down about 15% in 2022, by far the worst-performing of the major indices. As for the closely watched FAANG complex [Facebook parent company Meta, Amazon, Netflix, Google], all of its components are down for the year — led by a 40% plunge in Meta after a brutal profit outlook earlier this month.
Other 2022 tech stock disasters are littered about, too.
Salesforce is down 22% on the year, and is the worst-performing component of the Dow Jones Industrial Average. Microsoft has shed 14% of its market value this year. Roku has crashed 47% following a terrible profit outlook a week ago.
“A confluence of performance headwinds have propelled the great positioning rotation. Sharply falling growth stock valuations, declining hedge fund leverage, retail selling, worsening equity market liquidity, and the underperformance of popular hedge fund long positions have created a vicious cycle in recent months,” Snider points out.
Despite the steep sell-offs in top tech names that worked so well in 2021, hedge funds are not entirely cutting bait with the sector.
Goldman found that Microsoft maintained its position as the most popular hedge fund long position. Apple replaced Salesforce among the top five. Overall, Microsoft, Amazon, Google, Meta and Apple were the top five hedge fund “VIPs” in the most recent quarter.
Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.
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