Billionaire investors turn bearish as U.S. stocks hit record highs

Mon Aug 15, 2016 7:06pm EDT
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By David Randall

NEW YORK (Reuters) - Several big-name hedge fund investors soured on U.S. stocks in the second quarter and moved to gold and other bearish bets, failing to anticipate the stock market rally in the current quarter.

Noting the recent run-up in the benchmark Standard & Poor's 500 index to fresh record highs while economic growth remains weak and corporate earnings are stagnant - George Soros, Jeffrey Gundlach, Carl Icahn and David Tepper were among billionaire hedge fund investors and money managers who slashed their long equity positions in the second quarter, according to regulatory filings.

All three major U.S. stock indexes ended at all-time highs on Monday, extending their record-setting climb of the past few weeks. The trailing price to earnings ratio of the S&P 500 is now at 20, a level at the high end of its historical range.

Gundlach, who oversees more than $100 billion at DoubleLine Capital, told Reuters last month, "The artist Christopher Wool has a word painting, 'Sell the house, sell the car, sell the kids.' That's exactly how I feel – sell everything. Nothing here looks good."

Gundlach has been selectively shorting stocks and has kept his overweight exposure in gold and gold miners.

Spot gold prices XAU= rose around 7 percent in the second quarter of 2016 to $1,358.20 an ounce, a two-year high and extension from the 16 percent rise in the first quarter - the strongest quarter in nearly three decades - as expectations for a U.S. interest rate hike faded.

Soros, who rose to fame and fortune by betting against the sterling in 1992, has become even more bearish among the "Billionaire Bears" club, slashing his share stake in Mondelez International Inc (MDLZ.O: Quote), PayPal Holdings Inc (PYPL.O: Quote), Lions Gate Entertainment Corp LGF.N as well as his entire stake in Apple Inc (AAPL.O: Quote).

Soros nearly doubled down on his bearish bet against the equities market, with his Soros Fund Management holding "put" options on 4 million shares in an exchange-traded fund that tracks the S&P 500 at the end of the second quarter, according to Soros Fund Management's latest 13-F filing. That’s up from “puts” on 2.1 million shares as of March 31.   Continued...

Jeffrey Gundlach, chief executive and chief investment officer of DoubleLine Capital, speaks at the Sohn Investment Conference in New York, May 5, 2014. REUTERS/Eduardo Munoz