In This Article:
In the final months of 2024, hedge funds prepared for the dramatic economic and geopolitical changes expected post-election.
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That meant reducing their net holdings of all Magnificent 7 stocks except for one, focusing on President Trump's policies, and moving into sectors “offering opportunities for stock-pickers,” according to a recent report from Goldman Sachs based on data collected from 13-F filings of 695 hedge funds as of Feb. 14, 2025.
Reducing exposure to the Magnificent 7
The Magnificent 7 stocks include Alphabet (GOOG), Amazon (AMZN), Apple (AAPL), Meta Platforms (META), Microsoft (MSFT), Nvidia (NVDA) and Tesla (TSLA). The term is often used to reference this group of mega-cap technology stocks that supercharged the U.S. stock market’s gains in recent years. From March 31, 2020, to December 31, 2024, the Bloomberg Magnificent 7 Index returned 532% vs. 125% for the broad-based Russell 3000 Index.
However, as the Goldman Sachs Research team put it recently, they’ve gone from "Magnificent 7" to "Maleficent 7." So far this year they’ve plunged more than 13%, while the S&P 500 is down around 4%, as uncertainty surrounding President Trump's policies rattle investors and fears that stocks are overvalued reach a 24-year high.
Hedge funds trimmed positions on net in all of them during the last quarter except for Tesla. Tesla was the one stock of the Magnificent 7 that funds added to in Q4 2024, making it onto Goldman Sachs’ “rising stars” list of stocks with the greatest increases in popularity among hedge funds.
Investors wanted to be part of its post-election surge as it regained its $1 trillion market capitalization on expectations that it would benefit from Elon Musk’s ties to the new administration and deregulation. But Tesla’s fortunes have since reversed and, as Musk’s focus on the Department of Government Efficiency (DOGE) continues, Tesla’s post-election surge has vanished.
It’s important to note that although hedge funds reduced their stakes in the Magnificent 7 stocks last quarter, all but Tesla still sat atop the Hedge Fund VIP list of the most popular long positions.