Few investors have been as adept at picking stocks as Ken Griffin. He’s worth nearly $38 billion. He founded Citadel in 1990. It has since become the most successful hedge fund of all time.
However, Griffin’s two biggest purchases in the second quarter of 2024 weren’t individual stocks. Instead, the billionaire investor bought shares of two exchange-traded funds (ETFs) hand over fist in Q2.
Griffin’s big ETF buys
Citadel’s largest holding — by far — is the SPDR S&P 500 ETF Trust (NYSEMKT: SPY). Griffin likes this ETF so much that he bought more than 2 million additional shares in Q2, increasing his hedge fund’s stake by roughly 56.7%.
As its name hints, this ETF attempts to track the performance of the S&P 500 index. The SPDR S&P 500 ETF Trust was the first ETF listed in the U.S. It ranks as the biggest ETF on the market based on assets under management (AUM) and is one of the most heavily traded ETFs in the world.
Another ETF is now Citadel’s second-largest holding: the Invesco QQQ ETF (NASDAQ: QQQ). Citadel bought 2.82 million shares of the ETF in Q2. This boosted the hedge fund’s position in the Invesco QQQ ETF by nearly 585%.
The Invesco QQQ ETF tracks the Nasdaq-100 index, which includes the 100 largest non-financial companies trading on the Nasdaq stock exchange. Launched in 1999, the ETF ranks at No. 5 based on AUM and is among the 10 most heavily traded ETFs.
Why did Griffin load up on these two ETFs?
Griffin usually doesn’t make public comments about his quarterly investment transactions, so it’s not surprising he hasn’t done so for the recent ones. However, we can make some educated guesses as to why he loaded up on these two ETFs.
One potential reason behind Griffin’s aggressive buying of these funds is that he remains bullish about the U.S. economy — and large-cap stocks, in particular. The SPDR S&P 500 ETF Trust provides an easy way to invest in the 500 largest U.S. companies. The Invesco QQQ ETF’s portfolio includes the biggest stocks that trade on the Nasdaq, many of which are also in the S&P 500.
Griffin might also remain optimistic about the prospects for companies focusing on artificial intelligence (AI). Nine of the top 10 holdings in the Invesco QQQ ETF are AI stocks. Eight of the SPDR S&P 500 ETF Trust’s top 10 holdings are AI stocks.
It’s likely that the hedge fund manager also prizes the diversification offered by both ETFs. He was able to gain positions in 503 stocks with the SPDR fund and 101 stocks with the Invesco fund.
Should you buy these ETFs, too?
It’s not smart to make personal investing decisions solely based on what a famous, wealthy investor does. However, the probable underlying reasons for someone like Griffin buying shares of the SPDR S&P 500 ETF Trust and the Invesco QQQ ETF could appeal to you.
Let’s assume Griffin indeed bought these two ETFs because he’s bullish about the economy and AI stocks and wanted to diversify. Should you buy them for the same resaons? I think they’re good picks, but I also believe there are even better ETFs with lower costs.
Instead of the SPDR S&P 500 ETF Trust, consider the Vanguard 500 ETF. Both ETFs track the S&P 500. However, the Vanguard fund’s annual expense ratio is only 0.03% versus 0.0945% for the SPDR ETF.
Likewise, the Vanguard Mega Cap Growth ETF owns many of the same stocks in the Invesco QQQ ETF. But the Vanguard ETF’s expense ratio of 0.07% is much lower than the Invesco ETF’s expense ratio of 0.2%. It has also outperformed the Vanguard fund over the last 12 months.
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Keith Speights has positions in Vanguard S&P 500 ETF. The Motley Fool has positions in and recommends Vanguard S&P 500 ETF. The Motley Fool recommends Nasdaq. The Motley Fool has a disclosure policy.
Billionaire Ken Griffin Bought These 2 ETFs Hand Over Fist in Q2 was originally published by The Motley Fool
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