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Novus Monthly Industry Report

State of the Industry: June 2019

Neha Bhardwaj Research Associate

Stocks experienced their best monthly return in June since 1938. Hedge funds found alpha in Healthcare, bringing YTD performance to 18.20%.

View the companion report for this summary: Novus State of the Industry report.

After a rough May, stocks experienced their best monthly return in June since 1938, likely due to the Federal Reserve’s plans to cut interest rates. The S&P 500 was up 6.99%, and the Russell 2000 was up 7.07%. Hedge funds had a good month as well, with returns of 6.37%, bringing YTD performance to 18.20%. This is a slight lead on the S&P’s 18.49%, despite slightly underperforming the S&P this month.

venBio Select Advisor LLC and Appaloosa Management, L.P. led managers with implied returns of 16.96% and 16.93% respectively, the best simulated performance observed in months. Altimeter Capital Management, LLC, Serengeti Asset Management LP, and EcoR1 Capital, LLC followed with double-digit returns for June.

All sectors experienced positive returns this month, with the Hedge Fund Universe’s largest alpha contributions year to date coming from Real Estate and Healthcare. The greatest losses year to date were Consumer Staples and Consumer Discretionary.

With regards to individual securities, Apple took the lead as a winning pick for hedge funds with a MTD alpha of 7.89%, largely a result of resumed trade talks between the United States and China, a move likely to take political pressure off of the tech company. Allergan claimed its position as the second highest generator of alpha for the month of June, followed by newcomers PG&E Corp, Altaba, and Caesars Entertainment Corporation. PG&E’s successes come from recent plans for official recognition by bondholders, while Allergan’s recent acquisition by AbbVie has created speculation among analysts.

The 4Cs experienced varied performance, with Concentration outperforming the rest at 12.84%. The Concentration index has pulled ahead of Conviction and now leads the pack at 27.92% YTD.

The month of June served as a breath of fresh air after May’s market downturn. Although some see warning signs of a domestic economic slowdown, most market indicators show reasons for optimism.

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