Concerns about inflation and higher for longer interest rates have markets on edge. After a great first quarter, volatility has returned to stocks. This has hedge fund managers scrambling to adjust their portfolios. In fact, hedge funds are selling stocks at the fastest pace in three months and increasing their short bets as they batten down the hatches and prepare for a selloff. With the timing of interest rate cuts from the U.S. Federal Reserve pushed out to the autumn, the so called “smart money” is now getting defensive.
According to investment bank Goldman Sachs’ (NYSE:GS) prime brokerage data, hedge funds are offloading stocks at the fastest pace since mid-January of this year. Data from Bank of America (NYSE:BAC) shows that the selling has been broad-based, involving both foreign and domestic stocks, as well as shares of small-, mid- and large-cap companies. The rapid selling comes as the blue-chip Dow Jones Industrial Average
declined 2.3% from April 8-12, its worst weekly performance in more than a year.
Here are three stocks hedge funds are dumping now: April 2024.
Nvidia (NVDA)
It should probably come as no surprise that hedge funds are pulling back from the artificial intelligence (AI) trade after a huge run over the past 18 months. Many of the stocks that hedge fund managers are trimming their positions in or dumping altogether are closely tied to AI. One in particular is microchip and semiconductor company Nvidia (NASDAQ:NVDA). Up 233% in the last 12 months, including an 83% gain so far in 2024, it’s understandable that hedge funds would take some profits in NVDA stock.
David Tepper, the owner of the Carolina Panthers NFL football team and hedge fund Appaloosa Management has reduced his position in NVDA stock by almost 23%, though he has not completely sold his shares. Similarly, Chase Coleman, who runs the hedge fund Tiger Global Management and is a venture capitalist, has reduced his position in Nvidia by about 13%. Both Tepper and Coleman appear to be taking profits as the market grows increasingly volatile.
Microsoft (MSFT)
Despite its close association with OpenAI and the role it’s playing in AI, hedge funds have been offloading shares of Microsoft (NASDAQ:MSFT) in recent weeks. Hedge fund manager Jim Simons at Renaissance Technologies completely dumped his shares in Microsoft, while New York Mets owner Steven Cohen of hedge fund Point72 Asset Management has sold about three-quarters (75%) of his stake in the technology giant. The sales come as MSFT stock hovers near an all-time high with a $3 trillion market cap.
Over the past 12 months, Microsoft’s stock has increased 46% and it is now the world’s largest publicly traded company by market capitalization. Hedge fund managers seem to think that’s reason enough to sell out of the stock or reduce their stake at its peak. However, Microsoft continues to have a lot going for it, achieving big growth from both AI and its Azure cloud-computing unit. And despite being close to a record high, the company tends to be a reliable blue-chip name among technology stocks.
Alphabet (GOOG/GOOGL)
Shares of Alphabet (NASDAQ:GOOG/NASDAQ:GOOGL) have been on the rebound lately and are currently trading at an all-time high. Hedge funds seem to be taking advantage of this fact to sell their positions in GOOGL stock. Hedge fund manager Paul Tudor Jones of Tudor Investments has sold his entire stake in Alphabet. Also noteworthy is that the Bill & Melinda Gates Foundation sold its entire position in the tech giant. The foundation had owned some 14,000 shares of Alphabet before selling it all.
Like the other names in this list, Alphabet is viewed as a leader in AI, and its stock has gained 47% in the past 12 months. The company endured some misfires with its various AI products in recent months, but investors appear to have turned bullish on GOOGL stock on news that Apple (NASDAQ:AAPL) is considering adding the company’s Gemini AI technology to future iPhones. That news seems to have also swayed at least one hedge fund manager. Jim Simons at Renaissance Technologies used the money from his sale of MSFT stock to expand his Alphabet position.
On the date of publication, Joel Baglole held long positions in NVDA, MSFT, AAPL and GOOGL. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.