Jefferies revealed the latest hedge fund portfolio trends on Thursday, showing Amazon as the top net weight. As of August 31, Amazon comprises 10% of these portfolios, making it the largest single holding and the leading overweight position, exceeding its S&P 500 weight by 6.5%.

Meta closely follows, with hedge funds increasing its allocation to 8.8% of holdings, positioning it as another significant overweight stock.

Apple and Tesla Underweight

In contrast, Apple and Tesla hold notably lower weights. Apple makes up just 2.2% of the portfolio, lagging its S&P 500 weight by 4.7%. Tesla is even more underweight, with a net short position at -2.5%, falling 3.8% below the S&P 500 weight.

Increased Focus on "Sweet 16" Stocks

Hedge funds have heightened their exposure to the favored "Sweet 16" stocks, which now account for a record 49.7% of total holdings. This marks a substantial increase from 45.7% and reflects a 14.6% overweight, the highest on record in the Jefferies dataset.

Alongside Amazon and Meta, other high-net-weight stocks in hedge fund portfolios include Netflix and Microsoft, each at 7.8%, and Nvidia at 5.5%.

Sector Shifts: Cyclicals Gain, Secular Growth and Health Care Trimmed

Despite bolstering their "Sweet 16" allocations, hedge funds have reduced their exposure to Secular Growth by 1.8%, bringing it down to 61.5% of the portfolio. This adjustment highlights a preference for Cyclicals, which saw a 1.6% increase, while Bond Proxies remained heavily short at over 8%.

Health Care, a substantial component of Secular Growth, dropped to 15.7% from 21.4% as volatility weighed on the sector. The Technology sector also saw a reduction, down nearly 3%, now underweight by over 700 basis points compared to the S&P 500—its lowest level since April 2023.

In contrast, Communication Services increased by 1.8%, becoming the portfolio's largest overweight sector at 13.5%.

These trends underscore a strategic shift within hedge funds toward specific growth and cyclical stocks, while positioning within Technology and Health Care remains cautious amidst recent volatility.

(Sources: investing.com, reuters.com)