Recent bearishness among hedge funds has been surging as bets are placed that stocks will continue to decline in value. The S&P 500 is down 12% from its 2011 bull market high in April. According to BarclayHedge’s monthly survey, negative sentiment among hedge funds jumped to 42%, the highest level in a year. “Hedge fund managers have reversed their stance on U.S. equities,” stated the report on the survey conducted toward the end of August.
With all this volatility, where have Hedge Funds been positioning themselves? Stock positions collected and analyzed by streetofwalls.com show that hedge funds have been piling into Technology and Energy stocks while dumping positions in Healthcare.
With the high profile IPOs of Pandora (NYSE:P) and LinkedIn (NYSE:LNKD) (and postponed Groupon), technology stocks have been a favorite among hedge fund managers. Valuations have exploded in the wake of what some call “the internet bubble 2.0.” Hedge Fund managers were seen piling into Google (NASDAQ:GOOG), Youku.com (NYSE:YOKU), and Expedia (NASDAQ:EXPE).
On the flip side, Healthcare stocks have been crushed under intense scrutiny from Obama’s Healthcare Package and recently-announced Medicare cuts. In early August, an agency of the federal government decided to trim Medicare funding by 11%, sending some healthcare stocks down as much as 50% in a single day.
There were a handful of popular new positions put on during the quarter. Mosaic (NYSE:MOS) was found in 25% of the hedge funds in our universe. Mosaic’s largest shareholder, the Cargill family with over 60% ownership, decided to sell shares for estate planning reasons. There was a significant discount during the secondary offering and Third Point along with Appaloosa, Paulson, Perry, and Viking Capital all took advantage of this catalyst. Other “crowded” new positions include GOOG, YOKU, Southern Union (NYSE:SUG), and BP (NYSE:BP), all of which were found in 15% or more of the hedge funds in the coverage universe.
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Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.