Top hedge funds piled into these S&P 500 stocks in second quarter, Morgan Stanley says

Morgan Stanley's analysis of top 100 hedge funds' Q2 13F filings reveals significant positioning shifts as the market rebounded from April lows. Top funds notably increased exposure to solar firm Enphase Energy, with active ownership rising nearly 8% despite its recent struggles, suggesting a potential value bet. Casino operator MGM Resorts also saw increased ownership, benefiting from a rebound and positive guidance. Additionally, packaged goods brands Campbell's and J.M. Smucker, insurance brokerage Brown & Brown, and pharmaceutical company Charles River Laboratories were popular additions, reflecting diversified conviction across growth, recovery, and defensive sectors.

Analysis

Analysis of second-quarter 13F filings for the top 100 hedge funds reveals significant capital rotation into both contrarian and recovery-themed equities as the market rebounded from its April lows. A notable high-conviction trade was the nearly 8% increase in active ownership of Enphase Energy, a solar company whose stock has fallen over 46% year-to-date following weak third-quarter revenue guidance and tariff-related gross margin pressures, suggesting top funds are viewing it as a value play. Concurrently, funds increased their exposure to casino operator MGM Resorts, which has recovered from a difficult start to the year to post a 6% year-to-date gain, buoyed by an improved full-year guidance from its BetMGM joint venture. Beyond these specific bets, a broader trend of diversification is evident, with increased positioning in defensive consumer packaged goods names like Campbell’s and J.M. Smucker, as well as in the insurance brokerage sector with Brown & Brown and pharmaceuticals with Charles River Laboratories. It is critical to note these holdings reflect positions as of June 30 and may not represent current allocations.

Key Decisions for Investors

• Investors should consider the highlighted stocks as a potential source of high-conviction ideas, noting the blend of contrarian value (ENPH), cyclical recovery (MGM), and defensive positioning (CPB, SJM) favored by top institutional managers.
• The significant institutional buying in Enphase Energy, despite its severe underperformance and negative guidance, warrants a closer look to determine if the market has overly punished the stock, creating a value opportunity.
• For MGM Resorts, the positive guidance from its BetMGM unit appears to be a key driver of institutional interest, suggesting investors should closely monitor the performance of this digital gaming segment as a primary catalyst.
• Given the 45-day delay in 13F reporting, these positions as of the end of June should be used as a starting point for due diligence, not as a real-time indicator of hedge fund sentiment.