Core Insights - Despite the strong performance of technology stocks in the market this year, mainstream institutional investors in the U.S. are generally avoiding them [1][2] - Public funds have reached a historic low in their allocation to the information technology sector, while hedge funds are also at their lowest allocation level for tech stocks since 2024 [1][2] Institutional Investor Strategies - Both public funds and hedge funds are significantly underweight in the TMT (Technology, Media, Telecom) sector, while they are overweight in healthcare and industrial sectors [1] - In Q2, both types of institutional investors increased their holdings in the financial sector, with Capital One being a standout stock for both public and hedge funds [1][5] Technology Sector Analysis - The cautious stance towards technology stocks indicates that institutional investors believe these stocks face valuation pressures or growth slowdown risks [3] - Alphabet, the parent company of Google, is notably among the most reduced stocks in public funds and has seen significant declines in hedge fund holdings [3] Magnificent 7 Holdings - There is a divergence in strategies regarding the "Magnificent 7" tech stocks between public funds and hedge funds [4] - Public funds have increased their underweight position on the "Magnificent 7" from 723 basis points in Q1 to 819 basis points, reducing holdings in all seven stocks [4] - Conversely, hedge funds have increased their overall exposure to the "Magnificent 7," raising their weight from 11.8% to 12.8% in their long positions [4] - Hedge funds have shown mixed actions at the individual stock level, reducing holdings in Meta and Alphabet while increasing positions in Nvidia, Amazon, and Apple [4] Financial Sector Preference - The financial sector has garnered significant interest from both public and hedge funds, indicating a positive outlook from institutional investors [5] - Capital One has emerged as the most popular stock among fund managers based on net holding changes, alongside other financial stocks like Fidelity National Information Services and Nu Holdings [5] Common Stock Preferences - Currently, there are only seven stocks that are favored by both public and hedge funds, including AppLovin, CRH, Mastercard, Charles Schwab, Spotify, Visa, and Vertiv [6] - This common stock portfolio has outperformed the S&P 500 index by 11 percentage points year-to-date [6]