Bets on financials, pharma power US hedge funds' strong start to year

Leon Cooperman
Adam Jeffery | CNBC

Several big-name U.S. hedge fund investors in the fourth quarter moved significant parts of their portfolios into financial and pharmaceutical stocks that are expected to benefit under the Trump administration, helping to power the sector to its best January performance in four years.

Omega Advisors, run by Leon Cooperman and Steven Einhorn, increased its stake in insurance broker Fidelity & Guaranty Life by 343 percent compared with the quarter before, and added a new position in regional bank Renasant Corp., according to securities filings released Tuesday.

Both companies are up 16 percent or more since President Donald Trump's surprising November election victory, compared with a 9.6 percent gain in the broad Standard & Poor's 500.

Jana Partners, one of the largest U.S. activist investors, added six new health care companies to its portfolio, and increased its stake in 11 other companies in the sector by 50 percent or more, including biotechnology holdings such as Nuvasive and Acadia Pharmaceuticals. Shares of Acadia are up 72 percent since Election Day, while shares of Nuvasive are up 24 percent.

Appaloosa Asset Management, run by billionaire David Tepper, nearly tripled its stake in pharmaceutical company Allergan, to 15.8 percent of its portfolio, according to filings. Shares of the company are up 24.6 percent since the Nov. 8 election.

The winning bets come as equity hedge funds gained 2.1 percent in January, the strongest start to a calendar year for the industry since 2013, according to Hedge Fund Research. Total assets under management in the hedge fund industry reached $3.02 trillion at the end of the fourth quarter, the first time that hedge fund assets surpassed $3 trillion, the research firm said.

Trump's administration is expected to slash financial regulation, helping push the financial companies in the S&P 500 up 22.3 percent since Election Day. Pharmaceutical companies, meanwhile, have rallied on Trump's pledge to speed drug approvals.

The quarterly disclosures of manager stock holdings, in what are known as 13F filings with the U.S. Securities and Exchange Commission, are closely watched as investors look to divine what well-known hedge fund managers are buying and selling. However, the filings are backward looking and come out 45 days after the end of each quarter, meaning that funds could have added to or sold their positions since.

While the position information from the filings does not reflect January activity, fund managers have said they continued to play the same trends.

But not every hedge fund manager made savvy bets in the fourth quarter.

Tiger Global, known in part for taking concentrated positions in companies, sold all of its shares in Apple during the fourth quarter, a position that made up 5.8 percent of its portfolio the quarter before. Shares of the iPhone maker hit a record high Tuesday and are up 16.5 percent since the start of the year.

Warren Buffet's Berkshire Hathaway, meanwhile, more than tripled its position in the company over the same time, to 4.5 percent of its portfolio.

More 13F filings:

Icahn raises stakes in Herbalife, Hertz; cuts PayPal, Freeport-McMoran

Soros Fund Management buys new stakes in financials

Soros gets out of gold, Paulson cuts SPDR Gold shares

Buffett's Berkshire takes huge bite of Apple shares, boosts airline stakes

Warren Buffett joins CNBC's "Squawk Box" on Monday, February 27, to answer your questions following the release of his annual letter to Berkshire Hathaway shareholders. Post your questions on Twitter or Facebook using #Ask Warren.