Hedge Funds Are Snapping Up Texas Instruments Incorporated (TXN)

Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don’t make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards Texas Instruments Incorporated (NASDAQ:TXN) to find out whether there were any major changes in hedge funds’ views.

Texas Instruments Incorporated (NASDAQ:TXN) investors should pay attention to an increase in enthusiasm from smart money lately. Texas Instruments Incorporated (NASDAQ:TXN) was in 50 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 60. There were 42 hedge funds in our database with TXN holdings at the end of March. Our calculations also showed that TXN isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

David Blood of Generation Investment Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. 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. 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. Keeping this in mind we’re going to take a look at the recent hedge fund action encompassing Texas Instruments Incorporated (NASDAQ:TXN).

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

Heading into the third quarter of 2021, a total of 50 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 19% from the previous quarter. On the other hand, there were a total of 55 hedge funds with a bullish position in TXN a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).

Among these funds, AQR Capital Management held the most valuable stake in Texas Instruments Incorporated (NASDAQ:TXN), which was worth $470.5 million at the end of the second quarter. On the second spot was Generation Investment Management which amassed $324.5 million worth of shares. Diamond Hill Capital, Impax Asset Management, and Adage Capital 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 4.2% of its 13F portfolio. Heathbridge Capital Management is also relatively very bullish on the stock, dishing out 3.97 percent of its 13F equity portfolio to TXN.

Now, some big names have jumped into Texas Instruments Incorporated (NASDAQ:TXN) headfirst. Renaissance Technologies, created the most outsized position in Texas Instruments Incorporated (NASDAQ:TXN). Renaissance Technologies had $36.6 million invested in the company at the end of the quarter. Ray Dalio’s Bridgewater Associates also made a $17.2 million investment in the stock during the quarter. The other funds with brand new TXN positions are D. E. Shaw’s D E Shaw, Karim Abbadi and Edward McBride’s Centiva Capital, and Stephen Mildenhall’s Contrarius Investment Management.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Texas Instruments Incorporated (NASDAQ:TXN) but similarly valued. We will take a look at Costco Wholesale Corporation (NASDAQ:COST), McDonald’s Corporation (NYSE:MCD), Morgan Stanley (NYSE:MS), Medtronic plc (NYSE:MDT), SAP SE (NYSE:SAP), QUALCOMM, Incorporated (NASDAQ:QCOM), and Pinduoduo Inc. (NASDAQ:PDD). All of these stocks’ market caps resemble TXN’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 56.4 hedge funds with bullish positions and the average amount invested in these stocks was $3815 million. That figure was $2469 million in TXN’s case. QUALCOMM, Incorporated (NASDAQ:QCOM) is the most popular stock in this table. On the other hand SAP SE (NYSE:SAP) is the least popular one with only 17 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 65. 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 22.9% in 2021 through October 1st and surpassed the market again by 5.6 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 1.3% since the end of June (through 10/1) 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.