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Hedge Funds Are Buying These Stocks

Hedge funds took profits in large cap consumer discretionary stocks in the fourth quarter of 2011 and put more money to work in the tech sector, which has been the top performer so far this year.


A new report from Credit Suisseanalysts shows that the top 50 hedge funds raised their portfolio exposure to the S&P 500 technology stocks to 27 percent in the fourth quarter from 24 percent a quarter before.

At the same time, the hedge funds significantly decreased their exposure to consumer discretionary stocks, which had the largest weight in the first three quarters of 2011.

“They probably see tech stocks as more attractive, whereas macro factors and concerns about consumer spending are not in favor of consumer discretionary stocks,” says Credit Suisse’s Pankaj Patel, who led the study.

Hedge fund exposure to the S&P 500 consumer discretionary stocks fell to 16.8 percent from 20.8 percent over the same time period.

Meanwhile, allocations to energy grew, although big hedge funds still remain underweight the sector.

Industrials and consumer staples were tied for the largest underweight.

The top three S&P 500 stock holdings of big hedge funds are: El Paso , Motorola Solutions and Apple .

In mid- and small-cap stocks, the top hedge funds took a different tact. Here they increased exposure to consumer discretionary throughout the fourth quarter.

Among the top holdings: Lamar Advertising , Williams Sonoma , NVR , Fossil , Carter , Live Nation Entertainment , and Coinstar .

In mid-caps, top hedge funds increased their holding in the industrials sector, and in small caps, allocations to health care increased the most.

The financial sector was the most underweighted sector in both indexes, although hedge funds upped their mid-cap financials exposure, according to the report.

And while allocation to the information technology increased in large and small caps, the sector saw the largest weight decline in mid-caps.

Credit Suisse analysts also put together a list of the firms where the top 50 hedge funds own significant portions. They include:

Top Hedge Fund Owned Stocks

Company Name
Percent Owned
Number of Positions
SK Telecom Telecom 48% 10
AutoNation Consumer Disc. 37% 9
Charter Communications Consumer Disc. 34% 12
LyondellBasell Industries Materials 34% 15
Liberty Global Consumer Disc. 26% 8
Source: Credit Suisse Quantitative Equity Research

Top Hedge Fund Owned Stocks

Company Name
Percent Owned
Number of Positions
Sears Hldgs Consumer Disc. 43% 10
Yandex Info Tech. 41% 7
Gabriel Res Materials 29% 3
CVR Energy Energy 26% 12
Lamar Advertising Consumer Disc. 25% 8
Source: Credit Suisse Quantitative Equity Research

Top Hedge Fund Owned Stocks

Company Name
Percent Owned
Number of Positions
Federal Mogul Consumer Disc. 77% 7
Noranda Alum Materials 68% 9
Metals USA Materials 68% 7
Einstein Noah Consumer Disc. 65% 3
American Railcar Industrials 56% 4
Source: Credit Suisse Quantitative Equity Research

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