Hedge funds and other investors may be a bit giddy after Alphabet reported Tuesday that quarterly revenue and earnings were well above expectations. Shares of Google parent Alphabet’s two stock classes jumped about 4 percent in aftermarket trading.
At the end of the second quarter, Alphabet’s “A” shares were the third-most widely held stock among hedge funds, and the “C” shares ranked eighth, according to SEI. These investors were likely relieved given that the shares have been under pressure since the news earlier this year that the government is looking into breaking up the company.
Now all eyes are on Magnificent Seven stocks Microsoft and Meta Platforms, which will report earnings after the market closes on Wednesday, and Amazon, which will report after Thursday’s close.
There is a lot at stake.
At the end of the second quarter, Amazon was the most widely held stock among hedge funds, followed by Microsoft. Meta ranked fifth, according to SEI.
Perhaps no major hedge fund is more exposed to Alphabet, Amazon, Microsoft, and Meta than Tiger Global Management. The stocks represented four of the firm’s five largest U.S.-listed long positions at the end of the second quarter, accounting for a combined 40 percent of U.S.-listed long positions, according to the most recent 13F filing. Meta and Microsoft, the two largest longs, made up a combined 28 percent of assets.
Elsewhere, at the end of June, Microsoft also was Lone Pine Capital’s second-largest U.S.-listed long, and Meta ranked fourth. Amazon, Microsoft, and Meta combined accounted for more than one-quarter of Third Point’s U.S. stock book, according to filings. Microsoft was Maverick Capital’s third-largest long after the Tiger Cub more than tripled its position in the second quarter. And Amazon represents half of Skye Global’s U.S. common stock assets.
Heading into Wednesday’s earnings announcement, S3 Partners interestingly points out in a new research report that Microsoft’s short position has been rising after a decline that began September 12.
Meta’s short position has been increasing for two weeks. “The last time it fell right before earnings, the stock rallied, consistent with historical patterns,” S3 noted. The report also stressed that Meta’s short interest increase suggests possible declines, whereas Microsoft’s rising short interest “aligns historically with gains.” S3 added, “Pre-earnings short interest shifts” in both stocks “suggest notable moves may follow earnings, guiding traders on possible short-term outcomes.”
Meanwhile, Apple will also report quarterly earnings on Thursday. As for chip giant Nvidia, perhaps the bellwether of tech stocks, investors will have to wait until November 20 to see how its new Blackstone chip is faring.