Hedge Funds Sell Big Tech, Tesla Remains Net Short: Jefferies By Investing.com

Investing.com – Hedge funds recently made changes to their stock portfolios, with significant reductions in exposure to Big Tech stocks, while Tesla (NASDAQ: ) remains a prominent net short, according to Jefferies.

Analysts at Jefferies indicate that hedge funds have reduced their positions in major growth-oriented sectors and reallocated their attention to proxies and bond cyclicals.

Hedge funds have reduced their exposure to secular growth sectors, particularly Big Tech.

Jefferies reports that for the second consecutive month, the weighting of sectors such as information technology and communications services, which is home to many Big Tech names, fell.

“Hedge funds have reduced their exposure to Secular Growth, and Cyclicals now make up a larger portion of the portfolio at 49.6% versus 47.7%,” the analysts said.

This trend marks a shift in investor sentiment as hedge funds increasingly favor cyclicals and proxy bonds.

Several big names in the technology field saw reduced allocations. Amazon (NASDAQ: ) and Microsoft (NASDAQ: ) saw their hedge fund weightings cut by more than 2.5%.

While these companies still represent significant holdings in hedge fund portfolios, their reduced weighting indicates a broader bearish sentiment toward the sector.

Netflix (NASDAQ:

Interestingly, while Apple (NASDAQ: ) saw a slight increase in weighting, it remains underweight relative to its benchmark, , suggesting that hedge funds are still cautious about fully committing to the stock.

Cutting back on big tech exposure aligns with broader market concerns about high valuations, regulatory pressures and slowing growth.

Tesla continues to be one of the few big names in tech that hedge funds are shorting.

“Short weighting in TSLA has declined but is still net short by 0.7%, while AAPL saw more interest, but is still significantly UW relative to the S&P 500,” the analysts said.

Jefferies notes that despite Tesla’s dominant market presence, hedge funds are skeptical of its near-term growth prospects and valuation.

The electric vehicle maker faces competitive pressures and macroeconomic headwinds, further solidifying its status as a target for short sellers.

Hedge funds’ overall exposure to equities saw a reduction. Long exposure fell from 240% to 159% in the past month, marking the lowest risk exposure since September 2023.

At the same time, short exposure also fell from -140% to -59%, reflecting a more cautious market attitude.

Hedge funds shifted their portfolios to bond proxies, which saw their weighting rise to 2.7%, a shift from a net short position in previous months.

The reduction in secular growth positions, combined with increased exposure to bond proxies, indicates that hedge funds are positioning themselves defensively, perhaps in anticipation of potential economic downturns or market corrections.

Bond proxies, typically characterized by their lower volatility and stable returns, have become a more attractive option amid uncertain market conditions.