What Did Hedge Funds Buy In Q1?
Plus, the top performing hedge funds based on 3-year annualized returns
2022 has proved to be challenging for many hedge funds thus far, although several high-flying funds have still generated a 3 year annualized return of greater than 30%.
During Q1, institutional investors in aggregate reduced their 13F AUM as rising rates, high valuations, and geopolitical tensions created uncertainty in the markets. The drop off was the most steep since Q2 of 2020.
However, institutional investors were still net buyers during the quarter, despite a significant drop off compared to Q4.
It’s not difficult to see that institutional investors have switched to a cautious stance, with net buyers-net sellers declining in the largest quarterly drop since 2001. These investors are no longer chasing speculative stocks in a rising rate environment.
On the other hand, many funds have been busy buying up energy stocks, even the funds that chased high growth technology stocks in 2020-2021. These include David Tepper’s Appaloosa Management, Sahm Adrangi’s Kerrisdale Capital, Zach Schreiber’s PointState Capital, and many more.
With inflation rising at 40-year highs and global supply chain challenges, funds have flocked to energy and commodity names for protection. This is because commodities often increase in stride with inflation. As the demand for goods/services increases while supply remains constant, so do the prices of those good/services, which can turn increases the prices of the commodities used to create those goods/services. Also, as inflation goes higher, the value of a dollar loses its value, which causes goods/services to become more expensive in dollar terms.
Still, company insiders are buying in at the highest rate since March of 2020.
Here’s What Hedge Funds Are Buying
The top hedge fund buys were calculated using a list of the top 150 funds based on the WhaleScore. Here are the 150 funds that made the cut:
Here are the top buys from the 150 funds:
Liberty Broadband Class C (LBRDK)
Tesla (TSLA)
Alphabet Class C (GOOG)
Visa (V)
Amazon (AMZN)
Sea (SE)
Mastercard (MA)
Apple (APPL)
Uber (UBER)
ServiceNow (NOW)
Square (SQ)
Meta Platforms (FB, soon to be changed to META)
CrowdStrike (CRWD)
Microsoft (MSFT)
Shopify (SHOP)
Liberty Broadband leads the list, followed by Tesla and Google. Liberty operates as a communications holdings company that focuses on cable and broadband opportunities. The company owns 26% of Charter Communications (CHTR), which is the second largest cable operator in the U.S. and 100% of GCI and TruePosition, among other subsidiaries. GCI is Alaska’s largest communications provider based on revenue and serves the contiguous states as well. Furthermore, TruePosition is engaged in mobile location technology and public-safety-focused geolocation solutions.
AMD saw the largest percentage increase in 13F filer ownership during the quarter. Meanwhile, OXY was a popular energy name for investors to pick up, led by Warren Buffett’s purchases. The Berkshire Hathaway boss currently owns $143 million shares worth around $10 billion. OXY was also the S&P 500’s best performer during Q1.
The top ten holdings by value is unsurprisingly Apple, followed by other trillion dollar companies like Microsoft and Amazon. ETF provider Vanguard remains the largest shareholder in each of the top ten companies.
3-Year Returns - Honorable Mentions
*Based on long-only returns
Crosslink Capital - Seymour Kaufman
Top 3 Positions: PANW, WEAV, MELI
3-Year Performance: 144.78%
Annualized 3-Year Return: 34.77%
Number of Positions: 22
Average Holding Period: 11.45 quarters
Top 10 Holdings Concentration: 77.48%
13F AUM: $530.88 million
Lodge Hill Capital - Clinton Murray
Top 3 Positions: BLDR, ST, EMN
3-Year Performance: 142.72%
Annualized 3-Year Return: 34.39%
Number of Positions: 19
Average Holding Period: 2.89 quarters
Top 10 Holdings Concentration: 64.26%
13F AUM: $209.72 million
Bandera Partners - Gregory Bylinsky
Top 3 Positions: SGU, AMKR, TWTR
3-Year Performance: 132.78%
Annualized 3-Year Return: 32.53%
Number of Positions: 23
Average Holding Period: 15.00 quarters
Top 10 Holdings Concentration: 76.85%
13F AUM: $335.86 million
Without further ado, here are the top performing hedge funds based on 3-year returns.
3. BeaconLight Capital - Ed Bosek
3-Year Performance: 151.27%
Annualized 3-Year Return: 35.95%
Number of Positions: 38
Average Holding Period: 3.97 quarters
Top 10 Holdings Concentration: 61.74%
13F AUM: $316.13 million
After leaving a stint at Deutsche Bank, Ed Bosek joined Atticus Capital and eventually become a partner. By the end of 2007, Atticus's AUM soared to $22 billion, of which $13 billion was generated from performance. At the time, this made Atticus one of the largest hedge funds in the world. In 2009, Bosek decided to leave the hedge fund, explaining:
“When you’re managing $10, $15, or $20 billion in essentially one fund, it’s quite hard to be differentiated and create alpha. In addition, when you’re that big, it’s also difficult to be nimble and generate alpha on the short side which I believe is a critical component of managing capital through every market cycle.”
Atticus also shut down that same year and returned its capital to investors during December.
The reason behind the fund shutting down was because Tim Barakett, CEO and Founder of Atticus, wanted to spend more time with his family, pursue philanthropic opportunities, and establish his family office, TRB Advisors. The family office is still active today and has $182 million in AUM.
At 29 years old, Bosek launched BeaconLight Capital in 2010 with $50 million in initial capital. The fund engages in a “balanced portfolio” strategy and operates as a long/short fund. Out of BeaconLight’s top 5 current positions, 4 of them are put options, demonstrating the fund’s bearish stance.
“My investment philosophy translates extremely well to the short side because we employ the exact same process both long and short. A lot of investors’ approaches to evaluating companies don’t function well on the short side, so they need different long and short strategies. I have based our philosophy on conducting deep, fundamental research where we see things differently and can be proven right.”
Meanwhile, Bosek isn’t chasing a high AUM. The fund manager prefers to stay small and nimble, mentioning “We firmly believe that $2 billion of capital is the maximum size where we can still generate the type of alpha we’d like to create.”