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Industry Analysis

Q2 2020 Filings Insights

As markets recovered from COVID-19, hedge funds jockeyed around recovering industries. Also, an examination of hedge fund sentiment towards big tech.

Michael Bellucci
Eric Zybko
Client Data Analyst

After the free fall at the end of Q1, markets steadily recovered throughout Q2 and mostly offset the damage caused by COVID-19. Since the low point on March 23rd (ending a 30% drop), the S&P index recovered 27% by June 30th, and has surpassed the pre-Covid high as of yesterday. Using August 14 SEC filings for Q2, we’ll analyze some of the hedge fund community's top holdings, as well as industry behavior around the sectors most affected by the pandemic.

Top 20 Names in The Hedge Fund Universe

The list of commonly held names within the Novus Hedge Fund Universe (HFU) saw only minor shuffling.


Figure 1: Top 20 Names in the HFU, compared to previous quarter

The top 4 names were the exact same as last quarter: Apple, Microsoft, Amazon and Facebook, respectively. PayPal jumped from spot 24 in Q1 to spot 12 in Q2, UnitedHealth moved from 26 to 19, and Moody’s rose to 17 from 22. (Allergen was acquired by AbbVie.)

Hedge Funds and Tech

Four prominent tech CEOs (from four of the top six companies in Figure 1) testified virtually before the United States antitrust subcommittee in late July regarding their market power and influence.

Facebook (FB)

It’s perhaps unsurprising that Facebook, often at the center of debate and scrutiny nowadays, saw largely inconsistent investor behavior during Q2 2020. Both Citadel Investment Group and Melvin Capital Management downsized their stakes in Facebook, 2.3m to 1.9m shares and 1.6m to 425k, respectively. Conversely, Two Sigma Investments increased its ownership from 54k to 696k, Renaissance Technologies upsized from 939k to nearly 1.2m, and D.E. Shaw increased shares owned from 416k to 2.3m.  

Apple (AAPL)

Apple saw several large investors downsize ownership in Q2. Most notably, Citadel decreased share count from 6m to 1.7m. Similarly, Point72 decreased stake from 251k to 62k, and Renaissance made a full exit, originally owning 979k. With Apple’s stock price steadily rising throughout Q2 from $254 to $364, it’s possible investors believe they are a bit overvalued and poised for a drop. The stock price as of 8/18 is $462, so investors who exited missed out on potential gains.

Amazon (AMZN)

Amazon stock had a meteoric rise throughout Q2 and into Q3—beginning Q2 at $1,949 and closing Q2 at $2,758. As of 8/18, the stock had risen to $3,312. Despite this, there is some conflicting investor sentiment reflected in Q2 filings. Many reaffirmed their faith in the tech giant, with D.E. Shaw increasing its ownership from 222k to 626k; similarly, Citadel purchased more stock and now owns 327k as opposed to the 98k from last quarter. Renaissance Technologies, however, sold all of its 192k shares, and Melvin Capital downsized from 473l to 311k. Berkshire Hathaway maintained its ownership at 533k shares. Clearly, some think Amazon is destined for a setback, while others seem to think it will continue its upward trajectory.

Alphabet (GOOGL)

Similar to the other tech giants, we didn't see a consensus emerge towards Alphabet when it comes to investors. The stock price rose to $1,397 by 6/30 after beginning the quarter at $1,102; the price is up to $1,555 as of 8/18. Yet, some investors are downsizing their ownership. Citadel decreased its share quantity from 434k to 222k, Renaissance Technologies decreased similarly from 278k to 163k, and D.E. Shaw decreased from 360k to 294k. Point72  increased from 2k up to 47k.

Restaurants Move Into Recovery

With restrictions slowly being lifted nationwide, restaurants went from offering strictly curbside pickup to allowing outdoor seating and limited capacity service. As a result, we can see recovery begin within the industry, but less-than-consistent investor reactions again.

Restaurant Brands International (QSR)

In Q2, D.E. Shaw increased its stake in QSR from 2.9m shares to 5.7m shares; similarly, Meritage Group LP increased its shares owned from 4.8m to 9.3m. Conversely, Pershing Square decreased its stake from 31m to 25m shares, and Two Sigma decreased its ownership from 1.5m to 56k shares. Owners of QSR were rewarded as the share price began the quarter at $36.70 and ended at $56.63. The stock price has remained fair steady throughout Q3 thus far.  

Figure 2: Daily pricing for QRS

YUM! Brands (YUM)

YUM! Brands saw more of a consensus, with Two Sigma, D.E. Shaw, Citadel, and Millennium Management all drastically increasing their stake over the course of Q2. Specifically, Two Sigma increased share count form 104k to 900k, D.E. Shaw increased share count from 436k to 1.8m, Citadel increased share count from 1.3m to 3.3m, and Millennium Management increased share count from 690k to 2.1m. This proved to be a wise decision, as the stock price began the quarter at $67.65 and climbed all the way up to $86 by the end of Q2, and $92.65 as of filings date in mid-August.

Figure 3: Daily pricing for YUM

Real Estate Signals Still Mixed

Covid-19 brought the real estate market to its knees, particularly in urban hotbeds such as New York City. While large real estate development companies have begun to recover from the freefall, it has still be an extremely gradual and lagged recovery.  

CBRE Group Inc (CBRE)

CBRE stock price grew from $35.74 on the first day of the quarter to $45.22 on 6/30, and it has remained around $45 through mid-August. There was some fluctuation throughout the quarter, however, as the price fell back to $34 in mid-May, but peaked at $56 in early June as urban communities began to open back up. There is certainly conflicting investor behavior on CBRE, as Renaissance hiked up its stake from 237k shares to 673k, but Citadel closed out its 166k shares. As CBRE is one of the leaders in commercial real estate in New York, it’s interesting to see such different investor outlooks on the prospects of the real estate industry.

Figure 4: Daily pricing for CBRE

Howard Hughes Corp (HHC)

In Q2, Renaissance increased stake in Howard Hughes from 193k to 328k, and Point72 entered HHC with a share count of 48k. Conversely, Citadel decreased its share quantity from 73k to 58k. Stock price rose over the course of Q2 from $46 on 4/1 to $51 on 6/30, and has now risen to $57 by mid-August. While this is trending in the right direction, HHC used to trade above $100, exemplifying the gradual recovery of this industry, and just how far it fell to begin with.

Figure 5: Daily pricing for HHC

Vaccine Chasers

Pfizer (PFE)

D.E. Shaw doubled down on its investment in Pfizer, increasing its ownership from 11m shares to almost 18m. Similarly, Two Sigma increased stake from 3.8m to 7.2m over the course of Q2. Clearly, these two have faith that Pfizer will be the pharmaceutical company to create a functioning vaccine. Other investors, however, do not share the same sentiment. Point72 downsized from 2.6m to 752k, and Renaissance fully exited its 2.6m shares.

Johnson & Johnson (JNJ)

D.E. Shaw (a strong supporter of Pfizer, as mentioned above) further decreased its stake in J&J from 5.3m to 4.6m. Interestingly enough, over the last two quarters D.E. Shaw has steadily decreased its stake in J&J while simultaneously increasing its stake in Pfizer – a clear signal of where their confidence lies. Point72, while downsizing Pfizer, increased its stake in J&J, from 92k to 173k.

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