Where Are Hedge Funds Moving Capital

New York (HedgeCo.Net) Given the performance of the healthcare sector and in particular the biotech sub-sector, it shouldn’t come as a big surprise that the sector was the number one sector for attracting new investments from hedge funds. In our own mid-quarter report card two weeks ago we pointed out how the healthcare sector led the way in terms of performance in the first quarter. The Healthcare Select Sector SPDR was the leading sector ETF and the HedgeCoVest Biotech Long-only model returned 22.93% in the first quarter to lead all models on the HedgeCoVest platform.

In the latest quarterly report from S&P Capital IQ, the healthcare sector was number one in attracting money from hedge funds as well. According the report, the sector drew in almost $4.8 billion during the quarter which three times the amount the second place sector attracted. The industrial sector attracted $1.475 billion.
In terms of the percentages of the portfolios, the Healthcare sector is also number one with total of 21%. The Information Technology and Consumer Discretionary sectors are the second highest percentage of the portfolios, each representing 20% of the portfolios. After those three sectors, there is a drop-off to the fourth most represented sector in the portfolios and that would be the Industrial sector.

Looking at the individual stocks where hedge funds were buying and selling, there was a first. According to the report it is the first time that the most added stock was also the most sold stock. Valeant Pharmaceuticals (NYSE: VRX) saw an increase of $3.7 billion in buys, but it saw $1.36 billion in sells. The report breaks the buys and sells into three categories—one includes increases in value and new positions, the second is for existing positions and the third is for new positions. Valeant took the top spot in increases and new positions as well as the new position category. The top stock in the adding to existing positions category was Actavis plc (NYSE: ACT). In other words, the top stock in all three categories was from the healthcare sector.

Looking at the selling side of the report, Valeant was tops in the decreases and sold out category as well as the decreases in existing positions category. In terms of the sold out category, the top stock was Alibaba (NYSE: BABA). Two stocks that were in the top five of at least one sell category from the same sector were Dollar General (NYSE: DG) and Dollar Tree (Nasdaq: DLTR).

Rick Pendergraft
Research Analyst

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