Hedge funds still selling stocks while everyone else is buying

Institutional investors were buying stocks last week, but hedge funds sold equities for the tenth straight week, according to data from Bank of America. The firm's private clients were also sellers of stocks this past week, although they racked up almost record inflows to equities the previous week.

Bank of America analyst Jill Carey Hall and team said both single stocks and exchange-traded funds saw inflows last week as the S&P 500 gained 1.9% BofA Securities clients sold stocks for two weeks but became net buyers last week. 

Corporate buybacks were down dramatically last week following a nine-week acceleration. Buybacks troughed in early April. The biggest decline in buybacks came in the Financials sector, as financial firms have bought back more shares than companies in any other sector in recent years. Corporate buybacks peaked the week of March 9. Tech and Communication Services have been driving more than 70% of buybacks more recently.

Industrials and Tech switch to inflows

BofA said clients bought stocks in eight of 11 sectors. Inflows to Consumer Discretionary and Energy drove the stock buying. Materials, Financials and Health Care were the only sectors that saw net selling last week.

Industrials and Tech did have the longest selling streaks at six and five weeks, respectively. However, they switched to net buying last week. The sector with the longest selling streak is now Materials at three weeks. Utilities has the longest buying streak at five weeks.

The firm said its clients mostly bought large-cap stocks as small-cap stocks saw close to record high outflows since it started tracking data in 2008.

Value ETFs continue to see strong inflows

Interestingly, the BofA team noted an ongoing shift toward value ETFs as last week marked the fifth straight week of inflows for them. They believe a value rotation could be in the works.

They also said almost all of the ETF inflows last week were in fixed income ETFs. Last week marked the second straight week of outflows for equity ETFs. Hedge funds were the only sellers of both fixed income and equity ETFs, while private clients and institutional investors were net buyers. 

The biggest ETF inflows were in Financials, which saw the largest inflows since December. Tech ETFs were in second place. The only sectors that recorded outflows last week were Consumer Discretionary and Health Care ETFs. Health Care was the only sector to record selling in both stocks and ETFs. 

About Michelle Jones

Michelle Jones was a television news producer for eight years. She produced the morning news programs for the NBC affiliates in Evansville, Indiana and Huntsville, Alabama and spent a short time at the CBS affiliate in Huntsville. She has experience as a writer and public relations expert for a wide variety of businesses. Michelle has been with ValueWalk since 2012 and is now our editor-in-chief. Email her at Mjones@valuewalk.com.