NVIDIA Outpaces Microsoft, Dumped by Hedge Fund
For Findlay Park Partners LLP, which has outperformed 86% of its peers this year, tech stocks—especially those that have driven the market up—no longer look appealing. According to a client report, the $11.3 billion fund fully exited its $NVIDIA Corp(NVDA)$ position in Q3. At one point, Nvidia accounted for 5% of the fund’s total holdings.
The report also noted that by the end of September, the fund had reduced its $Microsoft(MSFT)$ position from 4.8% in August to 3%, marking a significant shift. Microsoft had been the fund's largest holding for most of the last decade.
Looking at broader data, analysts expect earnings growth for the “Mag 7” stocks to slow from 36% in Q2 to 18% in Q3. Simon Pryke, CEO of Findlay Park, commented:
“To some extent, these companies have validated their strong performance, but growth expectations are now more moderate, while valuations still suggest strong growth ahead. One of these assumptions is definitely wrong.”
Findlay Park operates under the European UCITS framework, designed to protect retail investors, and primarily invests in U.S. markets. The fund returned about 29% over the past year, compared to an industry average of 16%, with lower volatility. In 2023, it outperformed 90% of its peers.
The fund focuses on stocks closely tied to the U.S. domestic market and supply chain. Simon Pryke noted they have never held $Tesla Motors(TSLA)$ or $Apple(AAPL)$ . In their client report, they revealed that their exposure to the “Mag 7” is just 4.8%, while the benchmark weight is over 28%.
Investment head Rose Vangerven shared that around 40% of the portfolio consists of companies with market caps between $5 billion and $50 billion. Pryke added that they prefer B2B businesses, which tend to be “light on assets, with recurring revenue and strong free cash flow generation.”
While U.S. stocks have soared this year, especially tech, there’s been a shift. In the first half of the year, the gains were concentrated in a handful of big tech names. But as recession fears eased and doubts arose about the payoff from massive AI investments, the rally broadened to smaller-cap stocks in Q3.
Still, the tech sector remains optimistic. Analysts predict the S&P 500 Information Technology Index, which includes giants like Nvidia, Apple, and Microsoft, could rise another 14% over the next 12 months, hitting around 4,962 points.
In a striking turn of events, Nvidia has reclaimed its position as the world’s second-largest company, with a market capitalization soaring to approximately $3.19 trillion, surpassing Microsoft's $3.07 trillion.
Nvidia’s overtaking of Microsoft represents a significant milestone in the tech industry, emphasizing the growing importance of AI in driving innovation. As Nvidia navigates both opportunities and challenges, the competition among these tech giants will be interesting to watch as it will influence the future of technology.
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