Wealthy individuals offload Nvidia stocks and flock to ETFs, potentially surging another 45% by year-end

In the ever-changing landscape of the stock market, two prominent billionaire investors, Ken Griffin and David Shaw, have recently adjusted their portfolios. Both have significantly reduced their positions in Nvidia, a tech giant, while simultaneously increasing their stakes in the iShares Russell 2000 ETF.

The iShares Russell 2000 ETF, a benchmark for US small-cap companies, is tracking the 2000 smallest stocks in the Russell 3000 index. This ETF has caught the attention of Griffin and Shaw, as they have increased their positions by 27% (Griffin) and almost 170% (Shaw).

The small-cap stocks, which this ETF represents, are known to react more sensitively to interest rates. With the market expecting the American central bank, the Fed, to start lowering interest rates at its meeting at the end of the month, this could potentially be a favourable environment for small-cap stocks.

Interestingly, neither Griffin nor Shaw completely closed their Nvidia positions, suggesting they may still view it as a long-term investment. This move, coupled with their increased interest in small-cap stocks, indicates a strategic shift in their investment strategies.

The valuations of small-cap stocks are currently at their lowest level compared to large-cap stocks in two decades. This could potentially offer attractive opportunities for investors seeking higher returns. However, it's important to note that small-cap stocks also carry higher risks due to their smaller size and less established businesses.

Several ETFs track the Russell 2000 index, including the Amundi Russell 2000 UCITS ETF USD, Invesco Russell 2000 UCITS ETF Acc, SPDR Russell 2000 US Small Cap UCITS ETF, Xtrackers Russell 2000 UCITS ETF 1C, and L&G Russell 2000 US Small Cap Quality UCITS ETF.

The largest sectors in the Russell 2000 index are currently Industry, Finance, and Healthcare. The Motley Fool conducted an analysis of the portfolios of well-known billionaires and investors, shedding light on this strategic shift towards small-cap stocks.

Tom Lee, head of research at Fundstrat Global Advisors, predicts the Russell 2000 to reach 3000 points by the end of 2024, which corresponds to a rise of around 45 percent. This prediction, if accurate, could make small-cap stocks an attractive investment option for the future.

However, it's worth mentioning that the iShares Russell 2000 ETF is currently difficult to trade in Germany, which could potentially limit its accessibility for some investors.

In recent years, large-cap stocks have outperformed small-cap stocks, with the average annual performance of the Russell 3000 Index over the past decade at 12%, while the Russell 2000 Index was 8%. This shift in investment strategy by Griffin and Shaw could be a response to this trend, as they seek to capitalise on potential opportunities in the small-cap market.