Hedge funds are moving to the health care sector

26.08.2019 / 03:00

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Due to the on-going trade war, hedge funds are beginning to abandon the affected tech and semiconductor sectors, focusing on defensive health care.

The "smart money" continues its rotation cycle from tech to health, so far a total of 835 funds and $ 2.1 trillion in money have done the maneuver. According to the SEC, for Q2, the HC sector is the most favored of funds, as they already have solid exposure, with an average of around 18%.

During the first half of 2019, the downturn provided an excellent opportunity for funds to take long positions. Institutions have reduced their positions in semiconductor stocks and others that are vulnerable to the US-China trade conflict. The blow to the health care stock in the first half was due to initiatives such as Medicare for All that were gaining momentum, endangering the sector as well as insurers.

The top choices for hedge funds currently include pharmaceutical companies such as Allergan, insurers Centene, Humana, WellCare Health Plans and Walgreens. Only Centene and Walgreens are currently offering a good discount, and for the past 6 months, they have been down 25% each.

In this case, hedge funds ignore the risk of health care regulations that frightened investors earlier. They focus on pharmaceutical companies and Managed Care stocks - the highest-risk industries in particular.

Currently, the IT sector is the least sought after by hedge funds. The funds continue to land their positions in companies with exposure to China, semi-equities, as well as Chinese internet shares listed in the US.

Chip and motherboard makers are also victims of the trade war. Mostly after earlier this year, the US blacklisted Huawei.

Source: CNBC

Photo: Flickr

Trader Martin Nikolov

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Hedge funds are moving to the health care sector

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