These successful hedge fund managers are betting on growth stocks and Bitcoin.
Several hedge fund billionaires trimmed their positions in Nvidia (NVDA 1.75%) during the first quarter, and patched the holes in their portfolios by purchasing the Invesco QQQ Trust (NASDAQ: QQQ) and/or the iShares Bitcoin Trust (NASDAQ: IBIT), two index funds with significant growth prospects.
- Steven Cohen of Point72 Asset Management sold 304,505 shares of Nvidia, reducing his stake by 55%. He also started a small position in the Invesco QQQ Trust, a growth-focused index fund that tracks the Nasdaq-100 index.
- Israel Englander of Millennium Management sold 720,004 shares of Nvidia, reducing his stake by 35%. He also started a sizable position in the iShares Bitcoin Trust (IBIT -1.58%), an index fund that tracks the cryptocurrency Bitcoin.
- Ken Griffin of Citadel Advisors sold 2.4 million shares of Nvidia, reducing his stake by 68%. He also increased his stake in the Invesco QQQ Trust by 74% and started a small position in the iShares Bitcoin Trust.
- David Shaw of D.E. Shaw sold 1.4 million shares of Nvidia, reducing his stake by 38%. He also started a small position in the iShares Bitcoin Trust.
Investors should not interpret those trades to mean Nvidia is a bad investment, but the index funds warrant further consideration because all four hedge fund managers have excellent track records. In fact, Citadel, D.E. Shaw, and Millennium Management are the three most profitable hedge funds in history, and Point72 ranks thirteenth on that list, according to LCH Investments.
Here’s what investors should know about the Invesco QQQ Trust and the iShares Bitcoin Trust.
The Invesco QQQ Trust: A growth-focused index fund
The Invesco QQQ Trust measures the performance of the Nasdaq-100 index, which itself tracks the 100 largest stocks listed on the Nasdaq Stock Exchange. The Invesco QQQ Trust is a growth-focused index fund heavily weighted toward the technology sector. The 10 largest holdings are listed by weight below.
- Apple: 8.6%
- Microsoft: 8.6%
- Nvidia: 8.4%
- Broadcom: 5.2%
- Alphabet: 5.3%
- Amazon: 5%
- Meta Platforms: 4.6%
- Costco Wholesale: 2.5%
- Tesla: 2.3%
- Netflix: 1.9%
The Invesco QQQ Trust returned 171% over the last five years, compounding at 22% annually. Those gains are mind-boggling and may not persist over the next five years. However, investors can reasonably assume the index fund will outperform the S&P 500 over long periods of time. It has done so in the past, and there is no reason that should change in the future. For instance, the Invesco QQQ Trust compounded at 14.6% annually during the last two decades, while the S&P 500 compounded at 10.3% annually during the same period.
The Invesco QQQ Trust bears an expense ratio of 0.2%, meaning investors will pay $20 per year on every $10,000 invested in the fund. All things considered, the Invesco ETF is a good option for risk-tolerant investors comfortable with volatility, especially those that hope to outperform the broader stock market.
The iShares Bitcoin Trust: A cryptocurrency index fund
The iShares Bitcoin Trust is an exchange-traded fund (ETF) that tracks the price of Bitcoin. It is one of several spot Bitcoin ETFs approved by the Securities and Exchange Commission earlier this year. Many pundits view that development as a game-changer for the cryptocurrency.
Spot Bitcoin ETFs offer direct exposure to Bitcoin without the hassle or fees associated with cryptocurrency exchanges. Investors can simply purchase the iShares Bitcoin ETF (or another spot Bitcoin ETF) through their existing brokerage account. That could unlock demand from retail and institutional investors that have so far remained on the sidelines.
Indeed, the iShares Bitcoin Trust reached $10 billion in assets faster than any ETF in history, according to The Wall Street Journal. Additionally, more than 400 institutional investors had purchased positions in the iShares Bitcoin Trust as of March 31, and those positions were collectively worth more than $3 billion. In short, it appears the fund is indeed unlocking demand among institutional investors, and that could ultimately drive the price of Bitcoin much higher.
For instance, Tom Lee of Fundstrat Global Advisors believes the cryptocurrency could reach $500,000 by 2029, and Cathie Wood of Ark Invest thinks Bitcoin could hit $3.8 million by 2030. Those estimates imply upside of 657% and 5,657%, respectively, and both analysts attribute their confidence in part to the recent approval of spot Bitcoin ETFs.
Investors should bear in mind that cryptocurrencies are a volatile and risky asset class. But Bitcoin surged 635% over the last five years, its price compounding at 49% annually. That stunning performance easily outstrips the average among other asset classes like bonds, equities, precious metals, and real estate.
History may or may not repeat itself over the next five years, but the iShares Bitcoin Trust bears a reasonable expense ratio of 0.25%, and risk tolerant investors should consider buying a small position today, given that Bitcoin is about 11% below its all-time high.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Trevor Jennewine has positions in Amazon, Nvidia, and Tesla. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Bitcoin, Costco Wholesale, Meta Platforms, Microsoft, Netflix, Nvidia, and Tesla. The Motley Fool recommends Broadcom and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
