Avoiding Risk: Hedge Funds Are Freaked Out, and Dumping Stocks

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(List compiled by Andrew Dominguez. Data sourced from Finviz and Fidelity.)

Big money managers have pulled out of stock markets this summer, choosing to sit on their cash and wait for the markets to stabilize instead.

"I find the current situation much more baffling and much less predictable than I did at the time of the height of the financial crisis… The markets are inherently unstable. There is no immediate collapse, nor no immediate solution," billionaire investor George Soros told an audience at a conference last April.

One of Soros’ funds, Quantum Endowment Fund, has decided to leave only 25% of its $25.5B in the markets. The decision to pull out of stocks, bonds, and currencies came in mid-June after the hedge fund had lost 6% in the first half of the year, according to Saijel Kishan and Katherine Burton of Bloomberg.

Kishan and Burton add that Quantum Endowment Fund and Moore Capital, two of the numerous hedge funds that have increased their cash allocation, invest based on macroeconomic trends. This strategy, according to their report, has been the worst performing strategy this year.

To be sure, the global macroeconomic climate is quite confusing at the moment. 

In Europe, there is the sovereign debt debacle that has resulted in the downgrade of Greek, Irish, and Portuguese government bonds to junk status and prompted concerns regarding the safety of the banking sector that is highly exposed to Greek bonds.

In Asia, Japan is continuing to recover from the devastating tsunami and the subsequent energy shortage and nuclear radiation concerns. Meanwhile, China is making a concerted effort to rein in inflation, which should simultaneously slow economic activity.

And in the US, politicians have yet to reach a decision on the debt ceiling and the federal budget, which has prompted rating agencies to review the government’s pristine credit rating.

Here is a list of S&P 500 companies that hedge fund managers have dumped the most during the current quarter. Are you as worried about these stocks as smart money seems to be?

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List sorted by net shares sold by institutional investors as a percentage of the share float.

1. Covidien PLC (COV): Medical Instruments & Supplies industry with a market cap of $25.79B. In the current quarter, institutional investors have sold 202.3M shares (net), which represents 41.16% of the 491.49M share float. Share prices are down 1.23% on the quarter.

2. Urban Outfitters Inc. (URBN): Apparel Stores industry with a market cap of $5.05B. In the current quarter, institutional investors have sold 13.9M shares (net), which represents 11.60% of the 119.82M share float. Share prices are up 3.98% on the quarter.

3. Akamai Technologies Inc. (AKAM): Internet Information Providers industry with a market cap of $5.46B. In the current quarter, institutional investors have sold 17.9M shares (net), which represents 9.87% of the 181.36M share float. Share prices are down 26.40% on the quarter.

4. FirstEnergy Corp. (FE): Electric Utilities industry with a market cap of $18.02B. In the current quarter, institutional investors have sold 37.1M shares (net), which represents 8.90% of the 416.84M share float. Share prices are up 14.54% on the quarter.

5. Airgas Inc. (ARG): Industrial Equipment Wholesale industry with a market cap of $5.48B. In the current quarter, institutional investors have sold 5.4M shares (net), which represents 8.18% of the 66.01M share float. Share prices are up 5.50% on the quarter.

6. PulteGroup, Inc. (PHM): Residential Construction industry with a market cap of $2.75B. In the current quarter, institutional investors have sold 26.3M shares (net), which represents 7.82% of the 336.30M share float. Share prices are down 8.42% on the quarter.

7. Cablevision Systems Corporation (CVC): CATV Systems industry with a market cap of $7.55B. In the current quarter, institutional investors have sold 15.7M shares (net), which represents 6.95% of the 225.86M share float. Share prices are up 14.19% on the quarter.

8. Marriott International, Inc. (MAR): Lodging industry with a market cap of $12.34B. In the current quarter, institutional investors have sold 20.9M shares (net), which represents 6.69% of the 312.29M share float. Share prices are down 1.24% on the quarter.

9. Kohl's Corp. (KSS): Department Stores industry with a market cap of $15.9B. In the current quarter, institutional investors have sold 17.4M shares (net), which represents 6.62% of the 263.03M share float. Share prices are up 8.18% on the quarter.

10. Ford Motor Co. (F): Major Auto Manufacturers industry with a market cap of $49.72B. In the current quarter, institutional investors have sold 212.0M shares (net), which represents 6.22% of the 3.41B share float. Share prices are down 10.47% on the quarter.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Investing Ideas , Stocks


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