Ackman, Hedge Fund Peers Veer Toward Tech, Find Opportunity in Troubled Banks

(Investopedia) - Hedge fund managers and high-profile investors, led by Bill Ackman's $1.1 billion stake in Google parent Alphabet Inc., veered toward beaten-down technology stocks that sank in 2022 in the first quarter as the Federal Reserve raised interest rates.

Quarterly ownership filings with the Securities and Exchange Commission also reveal that banks stocks hammered by the failure of three regional lenders found favor with some investors, including Scion Capital Management's Michael Burry of "The Big Short" fame.

At the same time, many reduced positions in energy companies and other value-oriented stocks that outperformed last year as inflation surged and the economy cooled.

Value stocks, generally sought for their relatively cheap valuations, consistent dividends and cash flow, held up fairly well as the broader stock market plunged in 2022. The S&P 500 Value Index fell 7.4% last year, compared with the S&P 500's 19.4% drop.

Growth stocks, including tech companies that command higher valuations because of their promising cash-flow trajectories struggled a year ago. The S&P 500 Growth Index lost 30% of its value,

This year, however, the script has flipped. The S&P 500 Growth has rebounded 10.5%, whereas the S&P 500 Value has gained just 3.3% as inflation moderates and investors anticipate an end to the Fed's rate-hike campaign.

Here's a closer look at some of the changes that key hedge fund managers and other investors made to their portfolios in the first quarter:

  • Scion Capital Management—Burry's hedge fund bought positions in struggling regional banks PacWest Bancorp. (PACW) and Western Alliance (WAL). It also bought stakes in banking giants Well Fargo (WFC) and Capital One (COF). Within technology, it bought a position in Zoom Video (ZM) while increasing its exposure to Chinese internet retailers Alibaba Group (BABA) and (JD). The firm sold its stakes in software company Black Knight (BKI) and casino operator MGM Resorts (MGM).12
  • Pershing Square Capital Management—Ackman's fund bought about 8 million Alphabet Class C Alphabet shares (GOOG) and 2.18 million Class A Alphabet shares (GOOGL) valued at about $1.1 billion. Pershing trimmed positions in Hilton Worldwide Holdings (HLT) and Chipotle Mexican Grill (CMG).34
  • Duquesne Family Office LLC—Stanley Druckenmiller's firm bought stakes in Google parent Alphabet Inc., Amazon (AMZN), Alibaba, Microsoft Corp. (MSFT) and Taiwan Semiconductor (TSM) while increasing its position in chipmaker Nvidia Corp. (NVDA). The firm sold its stakes in AT&T (T), Caterpillar Inc. (CAT) and Occidental Petroleum (OXY) and cut its position in energy giant Chevron by 77% (CVX).56
  • Carl Icahn—The takeover specialist increased his cash exposure in the first quarter, trimming his stake in household product maker Newell Brands (NWL) and slashing 94% of his position in equipment rental supplier Herc Holdings (HRI). He raised his position in Southwest Gas Holdings (SWX) by 59%.78
  • Third Point LLC—Dan Loeb's hedge fund took a $493 million stake in Alphabet, a $226 million stake in HCA Healthcare (HCA) and a $160 million stake in Salesforce Inc. (CRM). The firm also raised its stake in DuPont (DD) by a third. It cut its stake in UnitedHealth Group (UNH) by half and sold its positions in Walt Disney Inc. (DIS) an cybersecurity provider SentinelOne (S).910
  • Appaloosa Management—The firm co-founded by manager David Tepper, also now owner of the NFL's Carolina Panthers, bought an $80 million position in FedEx (FDX). The company also bought stakes in Nvidia and Tesla (TSLA). In addition, it increased its position in Uber Technologies (UBER) almost fivefold. It also added to positions in Meta Platforms (META), Amazon, and Microsoft. The firm trimmed its position in Constellation Energy Corp (CEG) by 13%.1112

By Lyle Niedens


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