We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Intel Corporation (NASDAQ:INTC) and determine whether hedge funds skillfully traded this stock.
Intel Corporation (NASDAQ:INTC) was in 78 hedge funds’ portfolios at the end of June. The all time high for this statistics is 73. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. INTC investors should be aware of an increase in enthusiasm from smart money recently. There were 73 hedge funds in our database with INTC holdings at the end of March. Our calculations also showed that INTC isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.
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 56 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 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Peter Rathjens of Arrowstreet Capital
At Insider Monkey we scour multiple sources to uncover the next great investment idea. Currently, investors are pessimistic about commercial real estate investments. So, we are checking out this contrarian play to diversify our market exposure. We go through lists like the 10 most profitable companies in America to pick the best large-cap stocks to buy. 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. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. With all of this in mind let’s take a peek at the key hedge fund action surrounding Intel Corporation (NASDAQ:INTC).
What have hedge funds been doing with Intel Corporation (NASDAQ:INTC)?
At the end of the second quarter, a total of 78 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 7% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in INTC over the last 20 quarters. With the smart money’s sentiment swirling, there exists a few notable hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).
The largest stake in Intel Corporation (NASDAQ:INTC) was held by Fisher Asset Management, which reported holding $1715.1 million worth of stock at the end of September. It was followed by Arrowstreet Capital with a $1013.3 million position. Other investors bullish on the company included AQR Capital Management, Millennium Management, and D E Shaw. In terms of the portfolio weights assigned to each position MFP Investors allocated the biggest weight to Intel Corporation (NASDAQ:INTC), around 22.48% of its 13F portfolio. EMS Capital is also relatively very bullish on the stock, setting aside 5.93 percent of its 13F equity portfolio to INTC.
As aggregate interest increased, specific money managers were leading the bulls’ herd. Atreides Management, managed by Gavin Baker, initiated the most valuable position in Intel Corporation (NASDAQ:INTC). Atreides Management had $25.4 million invested in the company at the end of the quarter. Matthew Tewksbury’s Stevens Capital Management also made a $6.6 million investment in the stock during the quarter. The other funds with brand new INTC positions are Jinghua Yan’s TwinBeech Capital, Robert Joseph Caruso’s Select Equity Group, and Zach Schreiber’s Point State Capital.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Intel Corporation (NASDAQ:INTC) but similarly valued. These stocks are NVIDIA Corporation (NASDAQ:NVDA), Verizon Communications Inc. (NYSE:VZ), AT&T Inc. (NYSE:T), Adobe Inc. (NASDAQ:ADBE), Bank of America Corporation (NYSE:BAC), Paypal Holdings Inc (NASDAQ:PYPL), and The Walt Disney Company (NYSE:DIS). This group of stocks’ market caps are closest to INTC’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NVDA | 92 | 5548398 | -3 |
| VZ | 68 | 2973925 | 0 |
| T | 57 | 1659928 | 0 |
| ADBE | 104 | 9651462 | -11 |
| BAC | 91 | 24357766 | -4 |
| PYPL | 144 | 11406883 | 26 |
| DIS | 105 | 6819839 | 3 |
| Average | 94.4 | 8916886 | 1.6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 94.4 hedge funds with bullish positions and the average amount invested in these stocks was $8917 million. That figure was $6480 million in INTC’s case. Paypal Holdings Inc (NASDAQ:PYPL) is the most popular stock in this table. On the other hand AT&T Inc. (NYSE:T) is the least popular one with only 57 bullish hedge fund positions. Intel Corporation (NASDAQ:INTC) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for INTC is 52.1. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 28.2% in 2020 through August 24th and surpassed the market by 20.6 percentage points. Unfortunately INTC wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); INTC investors were disappointed as the stock returned -17.3% since Q2 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 in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.
