Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president.
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. After several tireless days we have finished crunching the numbers from nearly 835 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms’ equity portfolios as of December 31st. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards Linde plc (NYSE:LIN).
Linde plc (NYSE:LIN) investors should pay attention to an increase in support from the world’s most elite money managers in recent months. Our calculations also showed that LIN isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by more than 41 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Daniel Sundheim of D1 Capital Partners
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. In January, we recommended a long position in one of the most shorted stocks in the market, and that stock returned more than 50% despite the large losses in the market since our recommendation. Now we’re going to analyze the new hedge fund action surrounding Linde plc (NYSE:LIN).
Hedge fund activity in Linde plc (NYSE:LIN)
Heading into the first quarter of 2020, a total of 47 of the hedge funds tracked by Insider Monkey were long this stock, a change of 2% from one quarter earlier. By comparison, 37 hedge funds held shares or bullish call options in LIN a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Ako Capital held the most valuable stake in Linde plc (NYSE:LIN), which was worth $559.8 million at the end of the third quarter. On the second spot was Steadfast Capital Management which amassed $272.7 million worth of shares. Polaris Capital Management, D1 Capital Partners, and Diamond Hill Capital 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 Ako Capital allocated the biggest weight to Linde plc (NYSE:LIN), around 12.04% of its 13F portfolio. Polaris Capital Management is also relatively very bullish on the stock, designating 9.64 percent of its 13F equity portfolio to LIN.
As aggregate interest increased, some big names have jumped into Linde plc (NYSE:LIN) headfirst. Ako Capital, managed by Nicolai Tangen, assembled the biggest position in Linde plc (NYSE:LIN). Ako Capital had $559.8 million invested in the company at the end of the quarter. Steve Cohen’s Point72 Asset Management also made a $15.1 million investment in the stock during the quarter. The other funds with new positions in the stock are John Nevin Jr’s Ayrshire Capital Management, Qing Li’s Sciencast Management, and James Dondero’s Highland Capital Management.
Let’s check out hedge fund activity in other stocks similar to Linde plc (NYSE:LIN). These stocks are Royal Bank of Canada (NYSE:RY), Lockheed Martin Corporation (NYSE:LMT), Danaher Corporation (NYSE:DHR), and Charter Communications, Inc. (NASDAQ:CHTR). All of these stocks’ market caps are closest to LIN’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| RY | 20 | 336905 | 1 |
| LMT | 47 | 1777473 | -4 |
| DHR | 61 | 2354152 | -1 |
| CHTR | 65 | 9013923 | -5 |
| Average | 48.25 | 3370613 | -2.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 48.25 hedge funds with bullish positions and the average amount invested in these stocks was $3371 million. That figure was $2791 million in LIN’s case. Charter Communications, Inc. (NASDAQ:CHTR) is the most popular stock in this table. On the other hand Royal Bank of Canada (NYSE:RY) is the least popular one with only 20 bullish hedge fund positions. Linde plc (NYSE:LIN) is not the least popular stock in this group but hedge fund interest is still below average. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 11.7% in 2020 through March 11th but beat the market by 3.1 percentage points. Unfortunately LIN wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); LIN investors were disappointed as the stock returned -17.9% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in Q1.
Disclosure: None. This article was originally published at Insider Monkey.
