How to Use Hedge Fund Moves to Improve Your Portfolio

Hedge Funds’ Q4 Moves & Key Insights for Individual Investors

Every quarter, investment funds managing over $100 million must disclose their portfolio updates through 13F filings. These reports can offer valuable insights into the strategies of top tier investors. Let’s dive into the Q4 2024 update

Overview
- Hedge fund strategies
- Notable acquisitions and top holdings in Q4
- Case studies
- Implications for individual investors

That said, it’s important to note a few caveats. Simply copying the trades of elite investors isn’t a foolproof strategy. Investing is unpredictable similar to long-range shots in basketball. Even Steph Curry, one of the greatest shooters, misses more than half of his three-pointers. In investing, there are no guaranteed wins

Know what you own and why you own it
Success in investing depends more on patience and discipline than just stock selection.
Having conviction is crucial because every company faces rough patches, leading to temporary stock declines.

“You can borrow someone else’s stock ideas, but you can’t borrow their conviction. True conviction comes from trusting your own research. Do the work to know when to sell. Do the work to hold. Do the work to stand alone”

Limitations of 13F Filings
- They provide only a partial picture, excluding smaller funds
- Reports are delayed by 45 days, making the data less timely
- They do not cover non-U.S. stocks, bonds, or commodities
- Short positions and cash holdings are not disclosed

With these factors in mind, let’s explore what hedge funds bought and held in Q4 2024 and what insights we can draw from their decisions.

Hedge Fund Strategies

Hedge funds are known for their sophisticated and adaptable investment approaches, aiming for high returns. Here are the key elements guiding their strategies:

Market trends:Funds adjust their positions based on economic conditions—favoring long positions in strong markets and shifting to short selling or defensive strategies in downturns.

Sector dynamics:Consumer behavior, regulatory changes, and industry trends shape their investment choices.

Company fundamentals: Earnings, cash flow, and leadership quality play a major role in decision-making.

Macroeconomic influences: Global factors like interest rates and geopolitical events impact strategy

Quantitative models: Many hedge funds use advanced proprietary models to identify investment opportunities beyond traditional analysis

Risk management: While seeking high returns, funds also diversify to mitigate risk

Investor sentiment: Market emotions can create opportunities in undervalued assets or signal when it’s time to exit an overheated market

However, hedge funds don’t always outperform. The Global X Guru ETF (GURU), which tracks top hedge fund holdings, has underperformed the S&P 500 (SPY) over the past decade a reminder that even the best strategies have limitations

The traditional 2 and 20 fee structure charging 2% of managed assets and 20% of profits has contributed to hedge funds' underperformance. These high fees can significantly eat into investor returns. As competition in the market intensifies, this model is facing increased scrutiny.

For individual investors, the key takeaway is clear: while hedge funds boast dynamic strategies and the potential for strong returns, it’s essential to understand their investment approaches and the associated costs before jumping in.

Top Holdings and Buys in Q4

Back in early 2020 just before the COVID driven market surge and subsequent crash—I compiled a list of 20 top-performing hedge funds using TipRanks' methodology. This ranking was based on the funds' ability to generate alpha (returns exceeding the S&P 500). While not a flawless measure, it serves as a solid starting point. Let me know if you'd like details on specific funds from that list.

Now, let’s take a look at what these high-profile funds—frequently discussed on social media and finance podcasts have been doing recently. It’s worth noting that technology, communication, and consumer services make up a significant portion of the S&P 500, so it’s no surprise that these sectors dominate the holdings listed below



The portfolios feature familiar names. In fact, the nine stocks listed below make up nearly half of the top holdings:

☁️ Hyperscalers: AMZN, GOOG, MSFT
⚙️ AI Tech Stack: META, NVDA, TSM
💳 Payments: MELI, SHOP, V

Now, let’s dive into the most exciting part which stocks stole the spotlight in Q4?

Top 5 Buys in Q4
These are the stocks hedge funds purchased the most during the quarter



Key Investment Themes from Q4

Several recurring names highlight major investment trends this quarter

💻 Enterprise Software: APP, CRM, NOW, TEAM
⚙️ Semiconductors: ASML, AVGO
📱 Digital Platforms: RDDT, SPOT
☁️ Hyperscalers: AMZN, GOOG
🏈 Sports Betting: FLUT
🏢 Real Estate: CSGP

Notable Shifts in Q4

-The Return of Some ‘Magnificent 7’ Stocks – Alphabet (GOOG) and Amazon (AMZN) were back among the most-purchased stocks. Additionally, Altimeter boosted its NVDA allocation by 5%, bringing it to 19% of its portfolio. However, the rest of the Magnificent 7 were notably absent—funds didn’t add to META or MSFT, which had been top buys in previous quarters, and Tesla was completely missing.

- Enterprise Software Stays in Focus – AI driven monetization is driving renewed interest in software giants. While past investments targeted the foundational layers of AI, funds are now shifting toward top-layer AI applications, where AI agents could be a game-changer. If inference costs drop, software platforms with extensive distribution could be well-positioned to capitalize.

- Flutter (FLUT) Gains More Traction – Following major investments from Tiger Global and Viking last quarter, Lone Pine and Altimeter have now increased their stakes in the sports betting leader previously covered in our Sports Betting Economics review.

- New Digital Platforms Emerge – Reddit (RDDT) and Spotify (SPOT) had a strong 2024, and hedge funds have taken notice. With solid growth and improving margins, these platforms prove that it’s never too late to achieve operational efficiency

A Reminder on ‘Top Sells’

I intentionally leave out hedge funds’ top sells, as these can often be misleading. Many high-conviction stocks appear in the sell category simply because funds are adjusting positions for risk management rather than losing faith in the investment.

Other Noteworthy Moves Outside My Usual Coverage

Pershing Square (Bill Ackman) – Increased its stake in Brookfield (BN) to 16% of its portfolio. Ackman also announced a $2.3 billion investment in Uber (UBER), likely making it his top holding by Q1 2025

Duquesne (Stanley Druckenmiller) – Built a 5% position in Teva Pharmaceutical (TEVA) while significantly reducing his stake in Coupang (CPNG) though it remains his fifth-largest holding.

Berkshire Hathaway (Warren Buffett)– While not a hedge fund, Buffett’s portfolio is always worth tracking.

Apple (AAPL) Holdings Stabilize – After major cuts in 2024, Buffett did not further reduce his Apple position. The tech giant remains Berkshire’s largest holding, accounting for 28% of the portfolio
Bank of America (BAC) Trimmed by ~15% – Despite the reduction, BAC is still the third-largest holding after American Express (AXP).
New Additions – Berkshire initiated a small position in Constellation Brands (STZ) and increased its stake in Domino’s Pizza (DPZ) though both remain under 0.5% of the portfolio

Key Takeaways for Individual Investors

Tracking hedge fund moves can provide valuable insights, but it’s essential to keep a few things in mind:

-Diversify Wisely – Hedge funds spread their investments across multiple sectors and regions, and you should too. You don’t need to put everything into a single stock to build wealth.

-Think Long Term – Top funds focus on future potential, not just short-term market noise. Avoid getting distracted by daily headlines and instead consider where a company could be in the next few years.

Do Your Own Research Hedge funds have teams analyzing every detail, but that doesn’t mean you should skip due diligence. Stay informed, read about your investments, and always verify the information.

Mind the Fees Investment costs can quietly erode returns. As Jack Bogle put it: "In investing, you get what you don’t pay for. Costs matter." Always be aware of fees and their impact on your gains.

Use 13F Filings as a Starting Point These reports offer useful insights but aren’t real-time updates. Since they reflect past moves, they should serve as a foundation for your research, not a final decision making tool

While hedge funds can provide valuable lessons, your investment approach should be tailored to your goals and risk tolerance.

Long Story short

Successful investing isn’t about blindly following the so-called "smart money" it’s about building a portfolio that aligns with your financial objectives while managing risks effectively. Most of us may not have access to hedge funds’ vast resources, but we do have something just as powerful patience and a long-term mindset

Investing isn’t about following the crowd. It’s about forging your own path, armed with knowledge, discipline, and a commitment to growth