Did Hedge Funds Catch A Break With Intel Corporation (INTC)?

Stocks, especially the once high flying technology stocks, had a lousy start to the new year. QQQ lost 9% of its value in January. We aren’t certain about the bubbly technology stocks that trade for ridiculously high multiples of their revenues, but we believe top hedge fund stocks will deliver positive returns for the rest of the year. In this article, we will take a closer look at hedge fund sentiment towards Intel Corporation (NASDAQ:INTC) at the end of the third quarter and determine whether the smart money was really smart about this stock.

Is Intel Corporation (NASDAQ:INTC) a superb investment now? Investors who are in the know were turning less bullish. The number of long hedge fund bets shrunk by 12 lately. Intel Corporation (NASDAQ:INTC) was in 66 hedge funds’ portfolios at the end of September. The all time high for this statistic is 83. Our calculations also showed that INTC isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings). There were 78 hedge funds in our database with INTC positions at the end of the second quarter.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Now let’s review the key hedge fund action encompassing Intel Corporation (NASDAQ:INTC).

Seth Klarman of Baupost Group

Do Hedge Funds Think INTC Is A Good Stock To Buy Now?

At Q3’s end, a total of 66 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -15% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards INTC over the last 25 quarters. With the smart money’s capital changing hands, there exists a select group of notable hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).

Among these funds, Fisher Asset Management held the most valuable stake in Intel Corporation (NASDAQ:INTC), which was worth $1730.8 million at the end of the third quarter. On the second spot was Baupost Group which amassed $1052 million worth of shares. Generation Investment Management, Citadel Investment Group, and D E Shaw were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position MFP Investors allocated the biggest weight to Intel Corporation (NASDAQ:INTC), around 12.63% of its 13F portfolio. Baupost Group is also relatively very bullish on the stock, setting aside 9.66 percent of its 13F equity portfolio to INTC.

Seeing as Intel Corporation (NASDAQ:INTC) has experienced a decline in interest from the aggregate hedge fund industry, we can see that there lies a certain “tier” of hedgies that elected to cut their entire stakes heading into Q4. At the top of the heap, Panayotis Takis Sparaggis’s Alkeon Capital Management dumped the biggest stake of all the hedgies tracked by Insider Monkey, totaling about $140.7 million in call options, and Mikal Patel’s Oribel Capital Management was right behind this move, as the fund said goodbye to about $67.2 million worth. These bearish behaviors are interesting, as total hedge fund interest dropped by 12 funds heading into Q4.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Intel Corporation (NASDAQ:INTC) but similarly valued. We will take a look at Abbott Laboratories (NYSE:ABT), PepsiCo, Inc. (NASDAQ:PEP), Accenture Plc (NYSE:ACN), Broadcom Inc (NASDAQ:AVGO), Costco Wholesale Corporation (NASDAQ:COST), Chevron Corporation (NYSE:CVX), and AT&T Inc. (NYSE:T). All of these stocks’ market caps are similar to INTC’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 57.4 hedge funds with bullish positions and the average amount invested in these stocks was $3895 million. That figure was $6473 million in INTC’s case. AT&T Inc. (NYSE:T) is the most popular stock in this table. On the other hand Broadcom Inc (NASDAQ:AVGO) is the least popular one with only 50 bullish hedge fund positions. Intel Corporation (NASDAQ:INTC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for INTC is 66.9. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 29.6% in 2021 and beat the market again by 3.6 percentage points. Unfortunately, INTC wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on INTC were disappointed as the stock returned -7.7% since the end of September (through 1/31) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as all of these stocks already outperformed the market since 2019.

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Disclosure: None. This article was originally published at Insider Monkey.