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Big investors shed tech stocks as markets tumbled last quarter

[NEW YORK] Bets on Big Tech became, in Wall Street parlance, crowded last year.

The belief that shares of the world's tech giants - Alibaba, Alphabet, Amazon, Apple, Baidu, Facebook, Netflix and Tencent - would continue to rise became universally popular among some of the biggest names in investing.

Last quarter, sentiment reversed, and those same investors dumped their shares.

Investment firms run by George Soros and David Tepper unloaded their shares of Apple during the fourth quarter, according to filings Thursday with the Securities and Exchange Commission. The hedge fund Jana Partners also reduced its stake in the iPhone maker last quarter.

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Even Berkshire Hathaway, which has spent the past three years gobbling up shares of Apple, cut back its holdings in the company.

And Apple was not the only tech titan that big investors were selling last quarter.

Jana, along with Third Point, sold all its shares in Alibaba, the Chinese e-commerce giant. Third Point exited its position in Netflix. Leon Cooperman's firm, Omega Advisors, sold its stake in Facebook and reduced its holdings in Alphabet. And Tiger Global Management decreased its holdings in Amazon.

The filings are the latest evidence of how quickly investors soured on Big Tech late last year as the industry's woes mounted. A stream of revelations about privacy lapses and security issues had raised the specter of increased regulation on both sides of the Atlantic. But of more immediate concern for investors late last year was whether these companies could continue to grow amid a slowing global economy and an escalating trade war between China and the United States.

Over the final three months of last year, tech shares dropped 13 to 30 per cent, erasing more than US$1 trillion in market value. By comparison, the S&P 500 fell 14 per cent.

The selling signaled a swift shift in sentiment among big hedge funds. Many of these fund managers had struggled to beat the broader market in recent years. So as tech stocks soared and drove much of the broader market's gains, hedge funds crammed their portfolios with their shares.

The selling caught the hedge fund industry off guard, and their losses mounted during the fourth-quarter tumult in the stock market.

So far this year, shares of the tech companies have recovered, but most have not fared as well as the S&P 500.

Earnings for the final three months of 2018 were better than investors feared, but they did not inspire confidence that Big Tech would weather a global economic slowdown well, particularly in China.

Whether investors will pile back into tech stocks will probably depend on the outcome of trade talks between China and the United States. Until then, many investors may stay on the sidelines.

NYT