Hedge-Fund Bullishness Toward Stocks Matches Record High

Sunday, 24 Feb 2013 12:58 PM

By Dan Weil

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Hedge funds showed more enthusiasm for stocks in the fourth quarter than at any time since the first quarter of 2007, matching that period’s record high, according to a Goldman Sachs report. 

Hedge funds devoted 52 percent of the money they have in stocks to long positions last quarter, up from 48 percent in the third quarter, CNNMoney reports.

It’s likely no accident that both record quarters were ones in which stocks stood near historic highs. 

Editor's Note: Unthinkable Haunts Investors: Evidence for Imminent 90% Stock Market Drop. 

In terms of individual stocks, AIG took over for Apple as hedge funds’ most widely-held company as of Dec. 31, with the technology colossus falling to third. Google took second place. It was the first time in three years that Apple didn’t occupy the top spot.

AIG shares jumped 7.7 percent in the fourth quarter, while Google dropped 6.2 percent, and Apple plunged 20.2 percent. 

Hedge funds’ allocation to the SPDR Gold Shares exchange-traded fund decreased to the lowest level in four years. The ETF saw its value decline by 5.7 percent last quarter.

Whatever the accuracy of their stock picks, hedge funds haven’t produced a stellar performance recently. Hedge funds returned 8 percent last year, according to Goldman, far trailing the Standard & Poor’s 500 Index’s return of 16 percent.

Meanwhile, hedge funds have grown leery of the rallies in bond markets around the world.

In Italy, for example, "the market is so positive,” Gennaro Pucci, founder of hedge fund firm PVE Capital, tells Reuters. “Meanwhile, things are happening. There has been a lot of negative news from companies, problems are starting to come out.

Editor's Note: Unthinkable Haunts Investors: Evidence for Imminent 90% Stock Market Drop. 
 

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