Hedge Funds Bet on Tech Ahead of Unpredictable Fourth Quarter

17 Nov 2020, 06:32 PM IST

(Bloomberg) -- Hedge funds mostly stuck with the safety of technology stocks during the third quarter as they headed toward the uncertainty of this month’s U.S. election.

If they’re still holding on to those wagers, it will have paid off, as the Nasdaq has rallied 6.8% since September.

Coatue Management doubled the number of Tesla Inc. shares it owned in the three months ended Sept. 30, making the electric-vehicle maker its second-biggest publicly disclosed holding. The stock soared in late trading Monday after it was announced that Tesla will enter the S&P 500 next month.

Gabe Plotkin’s Melvin Capital Management bought an additional 2.5 million shares of online travel company Expedia Group Inc. Stephen Mandel’s Lone Pine Capital added stay-at-home play DocuSign Inc. and snapped up more shares of Shopify Inc., Facebook Inc., Microsoft Corp. and Netflix Inc.

There were also some notable cuts.

Dan Sundheim’s D1 Capital axed its stake in Netflix by 89% in the third quarter, selling more than 951,000 shares. That’s surprising given Sundheim has long held bullish views of the online-streaming service and last year said the stock could reach $1,000. The move has proved prescient so far: Netflix has dropped 4.2% in the fourth quarter, closing Monday at $479.10.

Amazon, Zoom

Lone Pine slashed holdings in Amazon.com Inc. and Zoom Video Communications Inc. and pared its stake in Salesforce.com Inc. Fellow Tiger-cubs Maverick, Viking and Tiger also trimmed their Salesforce holdings. David Tepper’s Appaloosa Management, Viking and D1 either reduced or liquidated their Amazon stakes.

It’s unclear whether funds that trimmed some tech stock exposures did so because they’ve soured on the investments or if its part of a portfolio exposure plan to manage risk associated with soaring stocks.

Here are the Key Takeaways from hedge funds’ third-quarter 13F filings. For the full live blog, click here.

Maverick Capital Ltd. boosted its exposure to tech by more than 9% in the third quarter. Like many Tiger Cubs, it tends to favor the technology sector, and in the last quarter upped its stake in semiconductor equipment company LAM Research Corp. and business-payments company FleetCor Technologies Inc. Even though it sold some Facebook Inc. shares, the tech giant is still Maverick’s biggest U.S. long holding.
Berkshire Hathaway Inc. continued its trend of pulling back on certain financial bets in the quarter, cutting its Wells Fargo stake and JPMorgan Chase & Co. bet. The company also trimmed holdings in PNC and M&T Bank.
Saudi Arabia’s sovereign wealth fund retrenched from its big jump into U.S.-traded stocks battered by the pandemic. The Riyadh-based Public Investment Fund cut its U.S. holdings to $7.0 billion from $10.1 billion during the third quarter, mainly by selling stakes in exchange-traded funds that track the real estate and materials sectors. That left a $2.7 billion stake in Uber Technologies Inc. as its largest U.S. traded holding.
Eric Mandelblatt’s Soroban Capital Partners LP made a big bet on fellow hedge fund manager Bill Ackman, buying a 5.7% stake in his Pershing Square Tontine Holdings SPAC worth $257 million as well as some warrants.