After nearly a decade of underperformance, big investors like Bill Ackman, George Soros, Carl Icahn, David Tepper, Larry Robbins, Leon Cooperman, Daniel Loeb, David Einhorn and Stanley Druckenmiller have managed to beat the broad market index this year. The group, often known as hedge funds and one that shifts composition from time to time, gained 0.39% through April as measured by the HFRI Fund Weighted Composite Index against the loss of 0.38% for the S&P 500.
As the top holdings from the latest 13-F filing are out, we take a glimpse at the ideas and holdings of the hedge funds that led them to outperform in the first quarter. Investors mulling over investing like billionaires could consider the ETFs that resemble their ideas.
Technology Remains a Hot Spot
Hedge Fund “Hot Dogs," which are defined as stocks that capture the maximum hedge-fund dollars, centers around the technology, media and Internet sectors. Topping the list is FANG stocks, acronym for Facebook (FB), Amazon (AMZN - Free Report) , Netflix (NFLX - Free Report) and Alphabet (GOOGL), which lost their charm in March, slipping into deep correction territory (down more than 10% from its latest peak) (read: Should You Buy Beaten Down FANG ETFs Ahead of Q1 Earnings?).
The beaten down prices have encouraged big investors to buy more shares of these stocks given their compelling valuation and encouraging fundamentals. In particular, hedge funds owned $19.4 billion in FB, $12.2 billion in AMZN, $8.5 billion in NFLX and $18.9 billion in GOOGL. FANG-based ETFs, namely PowerShares NASDAQ Internet Portfolio (PNQI) and First Trust Dow Jones Internet Index Fund (FDN) could be a compelling choice for investors. PNQI with a Zacks ETF Rank #3 (Hold) has the largest 32.8% share in this group, followed by 28.2% in FDN, which has a Zacks ETF Rank #2 (Buy).
Meanwhile, Apple (AAPL - Free Report) remains the beloved stock of Warren Buffett’s Berkshire Hathaway as it purchased an additional 75 million shares in the iPhone maker in the first quarter, raising its stake to $44 billion or 5%. However, Bloomberg noted that institutional investors abandoned Apple at a rate not seen since 2008. As such, Apple dropped from the eighth position to the 18th on the list. In order to avoid single-stock risk, investors could look at iShares Dow Jones US Technology ETF (IYW), which has top 17.2% exposure in Apple and a Zacks ETF Rank #2 (read: Let Your Portfolio Mirror Buffett's With These ETF Strategies).
Software companies like Microsoft (MSFT - Free Report) , Adobe Systems (ADBE - Free Report) and Electronic Arts (EA - Free Report) also gained hedge funds’ love with investments of $16.4 billion, $6.6 billion and $5.5 billion, respectively. Visa (V - Free Report) and MasterCard (MA - Free Report) are also among the top 20 holdings with investments of $8.2 billion and $5.2 billion, respectively.
Combining the top 20 hedge fund holdings in the tech sector, iShares North American Tech ETF (IGM) looks like a perfect choice. The fund offers exposure to electronics, computer software and hardware, and informational technology companies and has a Zacks ETF Rank #2.
Risk aggressive investors’ could focus on BMO REX MicroSectors FANG+ Index 3X Leveraged ETN (FNGU) that could generate outsized gains in a short span. The note seeks to offer three times leveraged exposure to the NYSE FANG Index, which is an equal-dollar weighted index targeting the highly-traded growth stocks of the next-generation technology and tech-enabled companies in the technology and consumer discretionary sectors. The ETN is up 12.7% over the past one month (read: 5 Leveraged ETFs That Soared More Than 20% in April).
Healthcare Gains Love
Besides technology, healthcare is the second top choice of the hedge funds with bets on insurers like UnitedHealth Group (UNH - Free Report) and Anthem (ANTM). The move came due to the steep decline in their share prices after Jeff Bezos, Warren Buffett and Jamie Dimon announced a joint venture to curb medical costs. The pharmacy benefits managers Express Scripts and CVS Health Corp (CVS - Free Report) also became friends of hedge fund managers as their stock price tumbled on speculation that Amazon could enter that business.
As such, waves of mergers and acquisitions have been heating up in the healthcare space that could change the landscape of healthcare business. This is especially true given that health insurers are trying to consolidate with pharmacy benefits managers to streamline and cut costs in the drug supply chain (read: Cigna to Buy Express Scripts: Healthcare ETFs in Focus).
iShares U.S. Healthcare Providers ETF (IHF) and SPDR S&P Health Care Services ETF (XHS) could well mimic this hedge funds strategy. IHF provides exposure to companies that provide health insurance, diagnostics and specialized treatment, while XHS targets health care distributors, health care facilities, health care services and managed health care. IHF has a Zacks ETF Rank #1 (Strong Buy) and XHS has a Zacks ETF Rank #2.
Small Caps Regain Fervor
With small-cap stocks on a tear lately, as evident by the Russell 2000 Index’s new records, many might want to invest like billionaires in this space too. Although the hedge fund’s small-cap space is dominated by the health care sector, the top two stocks, Green Brick Partners Inc. (GRBK) and Mammoth Energy Services Inc. (TUSK), based on ownership value as a percentage of market cap does not belong to healthcare.
The next are the three health-care companies, namely Genomic Health , Zogenix (ZGNX) and Retrophin (RTRX), which showed that hedge funds had a 48% or greater ownership of the stock as a percentage of market cap. In particular, hedge funds added exposure to small-cap biotech companies like PTC Therapeutics (PTCT), Pacira Pharmaceuticals (PCRX), Strongbridge Biopharma (SBBP), and Corium International (CORI) in the first quarter (read: 5 Market-Beating Small-Cap ETFs Trading at New Highs).
Given this, small-cap ETFs focused on the healthcare sector look intriguing. PowerShares S&P SmallCap Healthcare Fund (PSCH) and ALPS Medical Breakthroughs ETF (SBIO) are the biggest gainers in the healthcare as well as small-cap space, rising about 27% and 14%, respectively. PSCH has a Zacks ETF Rank #2 while SBIO has a Zacks ETF Rank #3.
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
After nearly a decade of underperformance, big investors like Bill Ackman, George Soros, Carl Icahn, David Tepper, Larry Robbins, Leon Cooperman, Daniel Loeb, David Einhorn and Stanley Druckenmiller have managed to beat the broad market index this year. The group, often known as hedge funds and one that shifts composition from time to time, gained 0.39% through April as measured by the HFRI Fund Weighted Composite Index against the loss of 0.38% for the S&P 500.
As the top holdings from the latest 13-F filing are out, we take a glimpse at the ideas and holdings of the hedge funds that led them to outperform in the first quarter. Investors mulling over investing like billionaires could consider the ETFs that resemble their ideas.
Technology Remains a Hot Spot
Hedge Fund “Hot Dogs," which are defined as stocks that capture the maximum hedge-fund dollars, centers around the technology, media and Internet sectors. Topping the list is FANG stocks, acronym for Facebook (FB), Amazon (AMZN - Free Report) , Netflix (NFLX - Free Report) and Alphabet (GOOGL), which lost their charm in March, slipping into deep correction territory (down more than 10% from its latest peak) (read: Should You Buy Beaten Down FANG ETFs Ahead of Q1 Earnings?).
The beaten down prices have encouraged big investors to buy more shares of these stocks given their compelling valuation and encouraging fundamentals. In particular, hedge funds owned $19.4 billion in FB, $12.2 billion in AMZN, $8.5 billion in NFLX and $18.9 billion in GOOGL. FANG-based ETFs, namely PowerShares NASDAQ Internet Portfolio (PNQI) and First Trust Dow Jones Internet Index Fund (FDN) could be a compelling choice for investors. PNQI with a Zacks ETF Rank #3 (Hold) has the largest 32.8% share in this group, followed by 28.2% in FDN, which has a Zacks ETF Rank #2 (Buy).
Meanwhile, Apple (AAPL - Free Report) remains the beloved stock of Warren Buffett’s Berkshire Hathaway as it purchased an additional 75 million shares in the iPhone maker in the first quarter, raising its stake to $44 billion or 5%. However, Bloomberg noted that institutional investors abandoned Apple at a rate not seen since 2008. As such, Apple dropped from the eighth position to the 18th on the list. In order to avoid single-stock risk, investors could look at iShares Dow Jones US Technology ETF (IYW), which has top 17.2% exposure in Apple and a Zacks ETF Rank #2 (read: Let Your Portfolio Mirror Buffett's With These ETF Strategies).
Software companies like Microsoft (MSFT - Free Report) , Adobe Systems (ADBE - Free Report) and Electronic Arts (EA - Free Report) also gained hedge funds’ love with investments of $16.4 billion, $6.6 billion and $5.5 billion, respectively. Visa (V - Free Report) and MasterCard (MA - Free Report) are also among the top 20 holdings with investments of $8.2 billion and $5.2 billion, respectively.
Combining the top 20 hedge fund holdings in the tech sector, iShares North American Tech ETF (IGM) looks like a perfect choice. The fund offers exposure to electronics, computer software and hardware, and informational technology companies and has a Zacks ETF Rank #2.
Risk aggressive investors’ could focus on BMO REX MicroSectors FANG+ Index 3X Leveraged ETN (FNGU) that could generate outsized gains in a short span. The note seeks to offer three times leveraged exposure to the NYSE FANG Index, which is an equal-dollar weighted index targeting the highly-traded growth stocks of the next-generation technology and tech-enabled companies in the technology and consumer discretionary sectors. The ETN is up 12.7% over the past one month (read: 5 Leveraged ETFs That Soared More Than 20% in April).
Healthcare Gains Love
Besides technology, healthcare is the second top choice of the hedge funds with bets on insurers like UnitedHealth Group (UNH - Free Report) and Anthem (ANTM). The move came due to the steep decline in their share prices after Jeff Bezos, Warren Buffett and Jamie Dimon announced a joint venture to curb medical costs. The pharmacy benefits managers Express Scripts and CVS Health Corp (CVS - Free Report) also became friends of hedge fund managers as their stock price tumbled on speculation that Amazon could enter that business.
As such, waves of mergers and acquisitions have been heating up in the healthcare space that could change the landscape of healthcare business. This is especially true given that health insurers are trying to consolidate with pharmacy benefits managers to streamline and cut costs in the drug supply chain (read: Cigna to Buy Express Scripts: Healthcare ETFs in Focus).
iShares U.S. Healthcare Providers ETF (IHF) and SPDR S&P Health Care Services ETF (XHS) could well mimic this hedge funds strategy. IHF provides exposure to companies that provide health insurance, diagnostics and specialized treatment, while XHS targets health care distributors, health care facilities, health care services and managed health care. IHF has a Zacks ETF Rank #1 (Strong Buy) and XHS has a Zacks ETF Rank #2.
Small Caps Regain Fervor
With small-cap stocks on a tear lately, as evident by the Russell 2000 Index’s new records, many might want to invest like billionaires in this space too. Although the hedge fund’s small-cap space is dominated by the health care sector, the top two stocks, Green Brick Partners Inc. (GRBK) and Mammoth Energy Services Inc. (TUSK), based on ownership value as a percentage of market cap does not belong to healthcare.
The next are the three health-care companies, namely Genomic Health , Zogenix (ZGNX) and Retrophin (RTRX), which showed that hedge funds had a 48% or greater ownership of the stock as a percentage of market cap. In particular, hedge funds added exposure to small-cap biotech companies like PTC Therapeutics (PTCT), Pacira Pharmaceuticals (PCRX), Strongbridge Biopharma (SBBP), and Corium International (CORI) in the first quarter (read: 5 Market-Beating Small-Cap ETFs Trading at New Highs).
Given this, small-cap ETFs focused on the healthcare sector look intriguing. PowerShares S&P SmallCap Healthcare Fund (PSCH) and ALPS Medical Breakthroughs ETF (SBIO) are the biggest gainers in the healthcare as well as small-cap space, rising about 27% and 14%, respectively. PSCH has a Zacks ETF Rank #2 while SBIO has a Zacks ETF Rank #3.
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
Get the latest research report on AMZN - FREE
Get the latest research report on AAPL - FREE
Get the latest research report on MSFT - FREE
Get the latest research report on MA - FREE
Get the latest research report on V - FREE
Get the latest research report on UNH - FREE
Get the latest research report on NFLX - FREE
Get the latest research report on CVS - FREE
Get the latest research report on ADBE - FREE
Get the latest research report on EA - FREE