Hedge Funds Are Dumping Texas Instruments Incorporated (TXN)

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the fourth quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 6 years and analyze what the smart money thinks of Texas Instruments Incorporated (NASDAQ:TXN) based on that data.

Is Texas Instruments Incorporated (NASDAQ:TXN) the right investment to pursue these days? The smart money was selling. The number of bullish hedge fund positions decreased by 14 in recent months. Texas Instruments Incorporated (NASDAQ:TXN) was in 42 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 60. Our calculations also showed that TXN isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 56 hedge funds in our database with TXN positions at the end of the fourth quarter.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.

David Blood of Generation Investment Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation, which is why we are checking out this inflation play. We go through lists like 10 best gold stocks to buy to identify promising stocks. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind we’re going to check out the key hedge fund action encompassing Texas Instruments Incorporated (NASDAQ:TXN).

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

At first quarter’s end, a total of 42 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -25% from the previous quarter. The graph below displays the number of hedge funds with bullish position in TXN over the last 23 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, AQR Capital Management was the largest shareholder of Texas Instruments Incorporated (NASDAQ:TXN), with a stake worth $536.6 million reported as of the end of March. Trailing AQR Capital Management was Generation Investment Management, which amassed a stake valued at $427.5 million. Diamond Hill Capital, Adage Capital Management, and Impax Asset Management 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 Bristol Gate Capital Partners allocated the biggest weight to Texas Instruments Incorporated (NASDAQ:TXN), around 4.92% of its 13F portfolio. Alta Park Capital is also relatively very bullish on the stock, designating 4.51 percent of its 13F equity portfolio to TXN.

Because Texas Instruments Incorporated (NASDAQ:TXN) has experienced a decline in interest from the aggregate hedge fund industry, logic holds that there exists a select few hedge funds that slashed their entire stakes heading into Q2. Interestingly, Sander Gerber’s Hudson Bay Capital Management cut the biggest position of the “upper crust” of funds tracked by Insider Monkey, comprising close to $49.2 million in stock, and Stephen J. Errico’s Locust Wood Capital Advisers was right behind this move, as the fund said goodbye to about $40.2 million worth. These transactions are intriguing to say the least, as total hedge fund interest was cut by 14 funds heading into Q2.

Let’s also examine hedge fund activity in other stocks similar to Texas Instruments Incorporated (NASDAQ:TXN). These stocks are BHP Group (NYSE:BHP), McDonald’s Corporation (NYSE:MCD), Pinduoduo Inc. (NASDAQ:PDD), Wells Fargo & Company (NYSE:WFC), Danaher Corporation (NYSE:DHR), Medtronic plc (NYSE:MDT), and Novo Nordisk A/S (NYSE:NVO). This group of stocks’ market caps are closest to TXN’s market cap.

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As you can see these stocks had an average of 58 hedge funds with bullish positions and the average amount invested in these stocks was $4394 million. That figure was $2533 million in TXN’s case. Wells Fargo & Company (NYSE:WFC) is the most popular stock in this table. On the other hand BHP Group (NYSE:BHP) is the least popular one with only 18 bullish hedge fund positions. Texas Instruments Incorporated (NASDAQ:TXN) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for TXN is 27.4. 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 negative signal and 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 17.4% in 2021 through June 18th and surpassed the market again by 6.1 percentage points. Unfortunately TXN wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); TXN investors were disappointed as the stock returned -2.6% since the end of March (through 6/18) 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 most of these stocks already outperformed the market in 2021.

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

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