Hedge Funds Buying Financial, Health Care Stocks

Hedge Fund Ownership Q4 2016_2.18

The 50 largest hedge funds are pouring their funds into financial and health care stocks according to research from Factset.

Overall, hedge funds decreased their equity exposure by 1% in the fourth quarter of 2016 . This marked a reversal from the third quarter, when equity exposure increased by 2.9%.

The Financial and Health Care sectors were the top purchases made by hedge funds. On the opposite end, the Consumer Staples and Information Technology groups were the largest aggregate sales of all sectors.

The top 50 hedge funds bought $3.5 billion worth of stock in the Financials group during the fourth quarter, which represented the largest aggregate purchase of all 11 classification sectors. Bank of America was the top buy in the group, with funds adding $1.5 billion worth of the bank’s stock. It was also the second largest purchase overall in Q4. Within the sector, the buys were widespread, with funds adding over $1 billion to each of the Diversified Financials, Insurance, and Banks industry groups. S&P Global and Marsh & McLennan were the largest hedge fund purchases in the Financials sector, after Bank of America.

The Health Care sector was the second largest aggregate purchase at the sector level. This was in stark contrast to Q2 and Q3, when the group represented the largest aggregate sale. During this streak, the Pharmaceuticals, Biotechnology, and Life Sciences industry group drove a majority of the outflows. This trend continued in the fourth quarter as hedge funds sold off $1.3 billion worth of stock in the group. However, the selloff in this group was outweighed by the $4.4 billion that was added to companies in the Health Care Equipment & Services industry group. Aetna led the inflows with $1.3 billion worth of stock being purchased by hedge funds. Aetna was the third largest aggregate purchase overall among the top 50 hedge funds. Additionally, hedge funds bought over $500 million worth of shares in UnitedHealth Group, Anthem, and Medtronic.

The top 50 hedge funds bought $1.7 billion worth of stock in NXP Semiconductors NV, which represented the largest purchase in Q4. Farallon Capital Management, OZ Management, Carlson Capital, CNH Partners, Soroban Capital Partners, and D.E. Shaw & Co were several of the funds that contributed to the inflows.

Facebook is the top holding of hedge funds, with 27 of the 50 largest hedge funds owning the social media giant in their portfolios.