The 50 largest hedge funds increased their equity exposure by just over 1% in Q2 2013. Dell Inc. was the largest addition for the group of funds. While this was primarily due to Icahn Associates’ activity in the buyout target (Icahn’s purchases amounted to over 80% of the increased allocation in the stock), nearly 50% of the funds also purchased Dell in Q2. The largest of these buyers included Elliott Management, which purchased $278 million worth of the stock, and Farallon Capital Management ($181 million).
Excluding Dell, Thermo Fisher Scientific, a company providing laboratory products and services, analytical technologies and specialty diagnostics, received the highest net inflows from the funds. Five of the fifty funds purchased more than $200 million worth of the stock during the quarter, with Viking Global Investors leading the pack at $792 million in purchases. During the quarter, Thermo Fisher announced an agreement to acquire Life Technologies Corp., a biotechnology research services company, and later held a $2.5 billion stock offering to fund the cash deal. Simultaneously, the top 50 hedge funds liquidated $1.0 billion in Life Technologies over the quarter.
Apple was also noteworthy for receiving significant net inflows in Q2 ($1.4 billion, or 29% of its Q1 starting value) after three consecutive quarters of outflows. Three additional funds picked up the stock over the quarter, but D.E. Shaw & Co. was most bullish by adding 1.8 million shares. While Apple is now held by 46% of funds, Google (64%), AIG (52%), Citigroup (52%), and priceline.com (48%) are more widely held. In addition, the hedge funds have appeared to exhibit excellent timing with regards to the shifting sentiment in Apple over the past several quarters. Apple was down $6 from its 52-week low ($390.53) at the end of the quarter, and has since risen over 20%. Similarly, Apple was the largest sale of the top 50 hedge funds in Q1 and Q3 2012, which were both periods preceding quarterly declines in the stock’s price (-2.6% in Q2 2012 and -20.2% in Q4 2012).
The funds also significantly decreased their holding in Google—the most widely held stock of the funds—by selling $1.4 billion worth of its shares. However, the largest dollar-value decrease came from Procter & Gamble (-$1.7 billion). Pershing Square Capital Management sold the majority of this position during the quarter ($1.5 billion), but Procter & Gamble still comprises a significant weight within the fund’s equity portfolio (7.7%). Bill Ackman, Founder and Chief Executive of Pershing Square, had previously launched an effort to remove the company’s CEO, Bob McDonald, among other changes. The campaign succeeded when former president and CEO, A.G. Lafley, stepped into the role on May 23rd.
At the country-level, the top 50 hedge funds continued their home country bias by adding primarily to U.S. equities (90% of the top 50 funds are domiciled in the U.S.). U.S. equities comprised 86.3% of the aggregate portfolio at the end of Q2, which is up from 80.5% in Q1 2012. Stocks domiciled in China, on the other hand, received the largest decline in country exposure. This was primarily due to reductions in Baidu. The timing of this sale seems to have been poor, however, as the company’s ADR (Cl A) is up more than 40% since June 30th. Baidu’s stock rose rapidly following its July 15th announcement of an agreement to acquire 91 Wireless Websoft, a mobile game and application developer.