Big hedge funds dump China stocks, Apple as market tumbles

People ride an escalator past the World Financial Centre in Shanghai. (Bloomberg pic)

NEW YORK: Prominent hedge fund managers sold out of Chinese technology stocks and dumped Silicon Valley majors such as Apple and Facebook while global stock markets cratered during the fourth quarter, according to securities filings released on Thursday.

Activist hedge fund Jana Partners sold out of its position in major Chinese e-commerce company Alibaba Group Holding and reduced its stake in Apple by approximately 175,000 shares, slicing its position in the company by 63%.

Warren Buffett’s Berkshire Hathaway shrank its Apple stake to 249.6 million shares from 252.5 million in the fourth quarter.

Buffett’s assistant Debbie Bosanek said in an email to Reuters: “One of the managers other than Warren had a position in Apple and sold part of it in order to make an unrelated purchase. None of the shares under Warren’s direction have ever been sold.”

Third Point sold all of its shares of Alibaba and in streaming company Netflix, while reducing its stake in payments company Visa by approximately 200,000 shares, or about 11% of its prior position.

Omega Advisors, run by billionaire Leon Cooperman, sold all of its approximately 88,000 shares of Facebook and reduced its stake in Google-parent Alphabet by approximately a third by selling approximately 47,600 shares.

The moves came during a volatile fourth quarter in which fears of slowing economic growth pushed the US benchmark index S&P 500 to the brink of a bear market while stock indexes in China and Germany finished the year down 20% or more.

Since then, shares have rebounded sharply on a broad global rally powered by hopes of a new trade deal between the United States and China and the Federal Reserve’s decision to slow its pace of US interest rate hikes.

Alibaba is up nearly 23% since the start of January, while Netflix is up nearly 34% over the same time. Those gains helped power the average hedge fund in January to the largest monthly gain since September 2010, according to Hedge Fund Research.

“While investor optimism dominated in January, significant macroeconomic uncertainty still exists, increasing the likelihood that recent trends toward elevated realised volatility will remain and continue to drive industry performance,” said Kenneth J. Heinz, president of HFR.

Quarterly disclosures of hedge fund managers’ stock holdings in 13F filings with the US Securities and Exchange Commission are one of the few public ways of tracking what hedge fund managers are selling and buying.

But relying on the filings to develop an investment strategy comes with some risk because the disclosures are made 45 days after the end of each quarter and may not reflect current positions.

Along with the sell-off among technology stocks, hedge fund managers added new positions in companies ranging from Mastercard to Salesforce.Com.

Jana Partners added a new position in by buying approximately 115,000 shares, while Third Point increased its stake in the company by 135% by adding another 675,000 shares. Shares of the company are up 16.6% since the start of the year.

Tiger Global added a new position in information technology infrastructure management company Solarwinds.

Shares of the US$5.7 billion market cap company are up 35% for the year. Omega Advisors, meanwhile, doubled its stake in CVS Health by buying approximately 401,000 shares. Shares of the company are up 3.7% for the year to date.