Big-money investors are piling into stay-at-home stocks and pulling out of China, Bank of America says

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  • Active investors are still pouring into stay-at-home stocks, Bank of America analysts wrote in a recent note looking at large-cap managers and hedge funds.
  • BofA itself is eyeing an Amazon price target of $4,250, compared to a price of about $3,300 today, citing its AWS and advertising units as sources of upside risk.
  • The firm also examined fund managers’ moves out of Chinese stocks, finding large-cap fund managers have cut their China exposure in half over the past two years.
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Active investors are still pouring into stay-at-home stocks like Amazon and trimming China holdings amid the ongoing government crackdown, Bank of America analysts wrote in a recent note looking at large-cap managers and hedge funds.

Two of the biggest stay-at-home winners, Amazon and Comcast, remain significantly overweight in fund manager portfolios even as the pandemic abates. Funds continue to bet that online services will continue to drive overperformance in the months ahead, with communication services coming in as the most overweight sector, according to SEC filings analyzed by BofA.

The bank has tended to agree with the positive verdict on Amazon, citing its AWS and advertising units as sources of upside risk, according to a July report. BofA is eyeing a price target of $4,250, compared to a price of about $3,300 today.

BofA also examined fund managers’ moves out of Chinese stocks, in part due to heightened trans-Pacific tensions as well as Beijing’s regulatory tightening. According to filings, large-cap fund managers have cut their China exposure in half over the past two years. Hedge funds have done so by an even greater margin.

The bank said that overweight Chinese stocks like Alibaba, Baidu, and JD.com could soon see renewed selling pressure as investors continue to pare down their China holdings.

One popular recent trade has been to buy into financial stocks, which are seen as poised to benefit from rising bond yields. But hedge funds, BofA found, are actually more underweight on financials than at any point since the bank began tracking in 2011. This comes in spite of financial stocks beating the market year-to-date, up 25% versus 20% for the S&P 500.