These are the top 5 stocks owned by Hedge Funds

© Reuters. These are the top 5 stocks owned by Hedge Funds

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In a recent note from Wednesday, strategists at Jefferies said that hedge funds entered 2024 with a more cautious approach, reducing their overall risk exposure to below the long-term average at 166%.

Specifically, these funds have adjusted their investments toward the so-called Secular Growth sectors as they move into 2024, yet they remain overweight (OW) by 7% in these areas, which account for half of their portfolio.

Despite decreasing their stake in Secular Growth, investors have increased their investments in what Jefferies refers to as the ‘Sweet 16’ (akin to the ‘Magnificent 7’), with their allocation in these specific stocks reaching 36%, the highest since July, and standing 3.3% overweight compared to the S&P 500.

“The big cut in Secular Growth’s weight took place in Health Care, as the group was trimmed by over 10% from the previous month, but was OW by 4%. Comm Services was trimmed once again, with the weight now at 12.2% vs. its recent peak of 19.0%,” analysts said in the note.

The tech sector saw its weight in hedge fund portfolios increase to 25.4% from 19.7% just a month prior. However, even with this increase, the sector is still underweight (UW) by more than 3% relative to the S&P 500.

The investments from Secular Growth were mainly shifted to Cyclicals, increasing their weight in the latter to 47%. There was also a notable move from the Industrials to Discretionary sectors, with the former now being UW and Discretionary OW.

Further, funds transitioned from a net short to a net long position in Energy for the first time since September 2022.

As for individual stocks, the hedge funds’ top 5 holdings are Microsoft (NASDAQ:MSFT), with a net weight of 8.7%, while Amazon (NASDAQ:AMZN) sits close behind at 7.2%.

“Half of Hedge Fund holdings are in the “Most Popular Longs” portfolio, and it saw modest turnover: Across our “Most Popular Long” portfolio, we see that these names represent half of the Hedge Fund assets with MSFT and AMZN combined representing 16%,” analysts highlighted.

Meta Platforms (NASDAQ:META) is the third highest-owned stock with a net weight of 4.9%, followed by Nvidia (NASDAQ:NVDA) and Alphabet (NASDAQ:GOOGL) at 4.1% and 3.7%, respectively.