Beware Trading Based On 13F Data, Which Reveals A Preference For Tech

There’s no denying that the market has been particularly turbulent in recent months as inflation soars. Market watchers are debating whether inflation has peaked, which will impact which stocks ride the wave and which sink.

The 13F filings from Q4 are in

As a result, individual investors may be watching the smart money even more closely as they try to choose stocks wisely despite the extreme volatility. Hedge funds and other institutional investors have filed their quarterly 13Fs with the Securities and Exchange Commission, providing a trail of breadcrumbs for individual investors to follow.

An overhead analysis of hedge fund trades during the fourth quarter shows that tech stocks received a boost from the smart money, as institutional investors boosted their tech holdings by about 1% in aggregate. However, things have changed so rapidly that it may no longer be wise to stock up on tech.

Among the biggest gainers in tech during the fourth quarter were Nokia, VMware and Clarivate. Meanwhile, hedge funds slashed their communications holdings by about 1%, with Meta Platforms, Charter Communications and Comcast leading the decline.

Despite the broad-based selloff that has swept through tech temporarily at different times over the last several months, hedge funds widely rotated into tech during the fourth quarter, shunning communications in the process. However, rising interest rates threaten both tech and communications this year.

Rivian Automotive

A review of the fourth-quarter 13F filings also reveals one standout stock. During the fourth quarter, there was quite a bit of activity in electric vehicle manufacturer Rivian Automotive. Rivian has trended steadily lower since its peak in mid-November and is down more than 34% over the last six months. Year to date, the automaker’s stock is down more than 35%.

The latest 13F filings suggest that several major institutional investors decided to buy the dip in Rivian stock. Among the well-known investors who established positions in Rivian during the fourth quarter was George Soros, who disclosed a position of almost 20 million shares in the electric pickup maker.

Phillipe Laffont’s Coatue Management established a new position in Rivian, along with Lee Ainslie’s Maverick Capital, Dan Loeb’s Third Point, Andreas Halvorsen’s Viking Global, and Chase Coleman’s Tiger Global.

Movements in tech in Q4

Soros also established a position in Peloton Interactive, while Tiger Global added to its stake. On the other hand, Coatue and Viking Global cut back on the exercise tech company. Baupost Group bought Fiserv, Grab Holdings, and NortonLifeLock and added to Qorvo but exited eBay and cut its stake in Facebook parent Meta Platforms, Alphabet, and Intel.

Coatue exited 3D Systems, Robinhood Markets and Nuance Communications. It boosted its stakes in Tesla, Microsoft, NVIDIA, and Amazon but cut back on Door Dash, Twilio, and Snowflake. Maverick Capital added to its positions in Amazon, Activision Blizzard, and NVIDIA but cut its stakes in Coupang and Adobe Systems. Leon Cooperman’s Omega Advisors exited Alibaba and Meta Platforms, while Soros Fund Management added to its stake in Uber but cut back on Amazon and Alphabet.

Tiger Global added to its stakes in Snowflake but went against the push toward tech by slashing its positions in Microsoft, Roblox and Amazon. David Einhorn’s Greenlight Capital established a new position in Intel but slashed its stakes in GoPro and Twitter, while Glenview Capital established new positions in Activision Blizzard, Alibaba and Amazon and added to its Uber stake. It exited Meta Platforms and slashed its stake in Fiserv.

Third Point established a new position in Grab Holdings and boosted its stake in Dell while maintaining its positions in Microsoft and Alphabet. The fund exited DiDi Global, Intel, Meta Platforms, and Activision Blizzard. Paul Singer’s Elliott Management maintained its position in Twitter. ValueAct boosted its stake in Fiserv, while Jeffrey Smith’s Starboard Value established a new position in GoDaddy and exited Box Inc.

Viking Global established new positions in Twilio and Take-Two Interactive and added to its stakes in Uber and Meta Platforms. It also bucked the tech uptrend by exiting Snowflake. Warren Buffett’s Berkshire Hathaway, which has long avoided tech under his leadership, established a new position in Activision Blizzard and maintained its positions in Apple, Microsoft and Amazon. The firm exited Sirius XM Holdings.

David Tepper’s Appaloosa exited Twitter, Alibaba, and Qualcomm and cut back on Uber. Corvex Management maintained its positions in Microsoft and Alphabet but exited Activision Blizzard. Stanley Druckenmiller’s Duquesne established a new position in Snap Inc and increased its stakes in Coupang, Carvana, and Microsoft while exiting Meta Platforms and cutting back on Amazon and Alphabet.

Tiger Global established a new position in Grab Holdings and boosted its stakes in JD.com, Carvana, Snowflake, and Door Dash while maintaining its positions in Meta Platforms, Alibaba, and Netflix. The fund cut back on Roblox, Microsoft, and Uber. Baupost Group established new positions in Grab Holdings and Fiserv, boosted its stake in Qorvo, and exited eBay. It also cut back on Intel and Meta Platforms.

Soros cut back on Activision Blizzard, exited Coupang, and boosted its stake in Uber.

Communications

Coatue bucked the trend against communications by establishing a new position in Discovery Communications. Greenlight Capital also established a new position in Discovery Communications. Third Point also went against the trend in communications by establishing a new position in Comcast, while Viking Global boosted its Comcast and T-Mobile stakes.

Nelson Peltz’s Trian Fund maintained its position in Comcast.

Berkshire Hathaway cut back on Charter Communications, while Appaloosa, Duquesne, and Corvex cut back on T-Mobile. Elliott Management maintained its position in AT&T.

Payments and financials

Coatue and Corvex established new positions in Visa and Mastercard, while Maverick Capital boosted its stakes in both credit card companies but exited Blackstone. Appaloosa exited Visa, while Corvex Management established new positions in Visa and Mastercard. Berkshire Hathaway cut back on Visa and Mastercard and maintained its positions in Bank of America, Bank of New York Mellon, and US Bancorp.

Greenlight established a new position in Global Payments as Glenview Capital added to its stake in the company. Glenview also exited Visa, while Corvex maintained its position in JPMorgan. ValueAct maintained its position in Citigroup, and Viking Global established a new position in American International Group. Soros cut back on JPMorgan. Tiger Global boosted its Square stake.

Other notable activity

Other key exits include PG&E by Baupost. Appaloosa also slashed its stake in PG&E alongside Third Point, which also cut back on Walt Disney alongside Corvex. Coatue established a new position in Pfizer, while Omega boosted its stake in General Motors alongside Soros.

Appaloosa established a new position in GM. Third Point established new positions in Hertz and Expedia while Duquesne maintained its positions in Airbnb and Booking Holdings and exited Penn National Gaming. Duquesne also cut back on Expedia. Viking Global established a new position in Zillow and boosted its General Electric stake. Soros added to its stake in Caesars Entertainment.

What about the current quarter?

While many individual investors are making their decisions based on this week’s 13F filings, which show stock movements during the fourth quarter, it’s important to look forward rather than backward. It’s no secret that interest rates are moving higher in 2022, but the question is how quickly the Fed will raise them. However, when rates do rise, they will be damaging to tech companies that carry heavy loads of debt.

The tech-heavy Nasdaq Composite entered correction territory in January and has continued to struggle. Unprofitable tech names that became the poster children of the pandemic bull market will face serious issues when debt is no longer cheap. And as inflation rages, investors will naturally seek out companies with strong brands and the pricing power to pass their higher costs along to customers.