We at Insider Monkey have gone over 821 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, near the height of the coronavirus market crash. In this article, we look at what those funds think of International Business Machines Corp. (NYSE:IBM) based on that data.
International Business Machines Corp. (NYSE:IBM) was in 41 hedge funds’ portfolios at the end of the first quarter of 2020. IBM shareholders have witnessed a decrease in hedge fund sentiment recently. There were 50 hedge funds in our database with IBM holdings at the end of the previous quarter. Our calculations also showed that IBM isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). Video: Watch our video about the top 5 most popular hedge fund stocks.
Today there are a lot of metrics market participants can use to assess their stock investments. Two of the most useful metrics are hedge fund and insider trading moves. We have shown that, historically, those who follow the top picks of the best money managers can beat the market by a superb margin (see the details here).
Michael Lowenstein of Kensico Capital
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we are still not out of the woods in terms of the coronavirus pandemic. So, we checked out this successful trader’s “corona catalyst plays“. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to view the fresh hedge fund action surrounding International Business Machines Corp. (NYSE:IBM).
Hedge fund activity in International Business Machines Corp. (NYSE:IBM)
Heading into the second quarter of 2020, a total of 41 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -18% from the fourth quarter of 2019. On the other hand, there were a total of 46 hedge funds with a bullish position in IBM a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Michael Lowenstein’s Kensico Capital has the biggest position in International Business Machines Corp. (NYSE:IBM), worth close to $218 million, corresponding to 6% of its total 13F portfolio. The second largest stake is held by Ken Griffin of Citadel Investment Group, with a $212.9 million call position; 0.1% of its 13F portfolio is allocated to the company. Other professional money managers with similar optimism include Cliff Asness’s AQR Capital Management, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and Phill Gross and Robert Atchinson’s Adage Capital Management. In terms of the portfolio weights assigned to each position Kensico Capital allocated the biggest weight to International Business Machines Corp. (NYSE:IBM), around 5.96% of its 13F portfolio. Beddow Capital Management is also relatively very bullish on the stock, setting aside 5.38 percent of its 13F equity portfolio to IBM.
Due to the fact that International Business Machines Corp. (NYSE:IBM) has faced falling interest from the entirety of the hedge funds we track, we can see that there was a specific group of fund managers who were dropping their positions entirely in the third quarter. At the top of the heap, Renaissance Technologies sold off the biggest position of all the hedgies tracked by Insider Monkey, worth an estimated $207.3 million in stock, and Matthew Tewksbury’s Stevens Capital Management was right behind this move, as the fund dropped about $18.3 million worth. These moves are important to note, as aggregate hedge fund interest fell by 9 funds in the third quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as International Business Machines Corp. (NYSE:IBM) but similarly valued. These stocks are Union Pacific Corporation (NYSE:UNP), Tesla Inc. (NASDAQ:TSLA), Danaher Corporation (NYSE:DHR), and American Tower Corporation (REIT) (NYSE:AMT). This group of stocks’ market valuations are closest to IBM’s market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position UNP,63,3442520,-2 TSLA,61,2124859,10 DHR,63,3193618,2 AMT,57,3819731,11 Average,61,3145182,5.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 61 hedge funds with bullish positions and the average amount invested in these stocks was $3145 million. That figure was $903 million in IBM’s case. Union Pacific Corporation (NYSE:UNP) is the most popular stock in this table. On the other hand American Tower Corporation (REIT) (NYSE:AMT) is the least popular one with only 57 bullish hedge fund positions. Compared to these stocks International Business Machines Corp. (NYSE:IBM) is even less popular than AMT. Hedge funds dodged a bullet by taking a bearish stance towards IBM. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May but managed to beat the market by 13.2 percentage points. Unfortunately IBM wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); IBM investors were disappointed as the stock returned 14.1% during the second quarter (through the end of May) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020.
Disclosure: None. This article was originally published at Insider Monkey.