Hedge Funds Bought Financial, Health Care Stocks in Q4

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Hedge funds sliced 1% from their exposure to equities in the fourth quarter of 2016, a sharp change from the 2.9% increase in equities investments in the third quarter. Buyers were most interested in financial and health care stocks, although the stock attracting the most hedge fund attention was a tech stock.

NXP Semiconductors N.V. (NASDAQ: NXPI) saw $1.67 billion in new equity investment from the top 50 hedge funds during the fourth quarter. Bank of America Corp. (NYSE: BAC) received $1.46 billion in new investment, and Aetna Inc. (NYSE: AET) received $1.33 billion in new investment. The proposed acquisition of NXP by Qualcomm probably had a lot to do with the Dutch company’s attractiveness.

Procter & Gamble Co. (NYSE: PG) was the most sought after stock in the third quarter, when hedge funds bought $8.9 billion in new investment. In the fourth quarter, the hedgies sold $5.77 billion in P&G stock. Other big sales from the top 50 funds included $3.07 billion in Amazon.com Inc. (NASDAQ: AMZN) and $1.98 billion in Apple Inc. (NASDAQ: AAPL) stock.

In another quarter-over-quarter reversal, health care stocks, heavily sold in the third quarter, made a comeback in the fourth quarter. Third-quarter sales of $1.98 billion in health care equities turned around and the top 50 funds added $4.4 billion in the health care equipment and services industry group. The pharmaceuticals, biotech and life sciences group saw fourth-quarter sales of $1.3 billion however.

The stock that is most widely held among the top 50 funds is Facebook Inc. (NASDAQ: FB), which is included in 27 of the top funds’ portfolios.

Arch Coal Inc. (NYSE: ARCH) emerged from bankruptcy in October and the stock was among the more heavily bought small-cap stocks during the fourth quarter. The top 50 hedge funds added $2.8 billion in small-cap stocks during the quarter, $2.6 billion in large-cap stocks and $8.6 billion in mega-caps.

U.S. hedge funds account for nearly 89% of the top 50 funds, and U.S. equities accounted for $6.33 billion in withdrawals from the top 50 funds in the fourth quarter. Countries with the largest additions were the United Kingdom ($765 million) and Italy ($600 million).