Hedge funds are aggressively investing in commodity-sensitive stocks, ramping up their acquisitions to the fastest rate seen in five months, according to a report by MarketWatch citing data from the prime brokerage division at Goldman Sachs.
In the week ending 4 July, hedge funds upped their purchases of US energy and materials stocks for the third consecutive week following a six-week period of net selling.
The report cites data from Goldman Sachs as indicating that hedge funds are making substantial long bets in sub-sectors including oil, gas and consumable fuels, energy equipment and services, containers and packaging, and mining and metals, representing a notable reversal from their previous selling trend.
Energy stocks have seen a rally in 2024, driven by a rebound in oil and gas prices amid stronger-than-expected global economic growth and heightened tensions in the Middle East, with the S&P 500 Energy Sector Index advancing by 8% year-to-date.
In April, Bloomberg reported that hedge funds were selling energy stocks to capitalise on the rally’s peak, anticipating a short-term pullback. Instead, they invested in crude oil call options to benefit from potential price surges due to escalating conflicts between Israel and Hezbollah.
Metals prices have also surged in 2024, fuelled by expectations of increased demand from the global energy transition and advancements in artificial intelligence technologies, with the S&P 500 Metals & Mining Industry Index up 7% year-to-date, on the back of 19% and 15% gains one the prices of copper and gold, respectively.
Hedge funds have also shifted to become net buyers of international stocks for the first time in three weeks, investing in European and Asian companies while pulling out of Chinese businesses. According to Goldman Sachs’ analysis, industrials, financials, and energy companies were the most purchased global stocks, while communication services, information technology, and utilities stocks were the most sold.
