The third quarter was a volatile one, which prompted many investors, both big and small, to re-evaluate their portfolios and ferret out what they perceived as potential weak links. We witnessed a collective flight from several dozen stocks during the quarter, including ten notable mid-cap stocks. In this first part of a two-part series, we’ll highlight five of those ten stocks that witnessed a large third-quarter decline in how many smart money investors tracked by Insider Monkey were long those stocks. Be sure to check out part two for the remaining five stocks that hedge funds were fleeing.
Viacom, Inc. (NASDAQ:VIAB)
– Elite Investors with Long Positions (as of September 30): 35
– Aggregate Value of Elite Investors’ Holdings (as of September 30): $1.27 billion
We’ll start with Viacom, Inc. (NASDAQ:VIAB), which was held in the portfolios of 47 of the investors in our database on June 30, with their positions totaling $2.25 billion at that time. Shares of the media company fell by about 33% in the third quarter. After staging a solid rally from its 52-week low in mid-August, the stock pulled back this week, dropping by nearly 10%. Mario Gabelli of GAMCO Investors, the company’s second-largest shareholder, told Reuters on Wednesday that Viacom, Inc. (NASDAQ:VIAB) should sell a stake in Paramount Pictures to Alibaba Group Holding Ltd (NYSE:BABA). It was reported that Gabelli also called into question the ability of Viacom Executive Chairman Sumner Redstone, whose ex-girlfriend filed a lawsuit against him late last month that demanded he receive a mental examination. Clint Carlson’s Carlson Capital was one of the funds to sell off its stake in Viacom during the third quarter, a 323,900-share position that it opened in the second quarter.
Check Point Software Technologies Ltd. (NASDAQ:CHKP)
– Elite Investors with Long Positions (as of September 30): 32
– Aggregate Value of Elite Investors’ Holdings (as of September 30): $1.42 billion
As we reported late last month, hedge funds were selling Check Point Software Technologies Ltd. (NASDAQ:CHKP) in the third quarter, with ownership falling by ten during a volatile quarter for the stock, that ended with it trading relatively flat for the period. Despite a total of ten less investors that we track being long Check Point by the end of the quarter, the value of their collective holdings slid only marginally, from $1.48 billion, suggesting that it was primarily investors with smaller positions that vacated the stock and that larger shareholders retained their conviction in it. Check Point Software Technologies Ltd. (NASDAQ:CHKP) has enjoyed a strong fourth quarter, gaining nearly 10%. Needham has Check Point Software rated as a ‘Buy’ and believes that it is one of a handful of internet security providers that is taking over the market. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, closed a position of just under 1.0 million shares of Check Point Software during the third quarter.
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WEC Energy Group Inc. (NYSE:WEC)
– Elite Investors with Long Positions (as of September 30): 14
– Aggregate Value of Elite Investors’ Holdings (as of September 30): $57.07 million
WEC Energy Group Inc. (NYSE:WEC) witnessed the largest percentage decline in ownership on this list, as it fell by nearly 50%, from 26 shareholders with $126.90 million in shares on June 30. That left investors in our database holding a miniscule 0.30% of WEC Energy Group’s shares on September 30. Given that shares made two big surges during the quarter, it’s possible that investors rode those waves and then got out on top, feeling there was little short-term upside left. It’s certainly rare to see a stock gain more than 15% during a quarter and yet witness a massive decline in hedge fund ownership, including a 55% drop in the aggregate value of their holdings. Shares have retreated by about 5% during the fourth quarter. Jonathan Barrett and Paul Segal’s Luminus Management sold off a 439,325-share WEC Energy Group Inc. (NYSE:WEC) holding in the third quarter.
Fifth Third Bancorp (NASDAQ:FITB)
– Elite Investors with Long Positions (as of September 30): 28
– Aggregate Value of Elite Investors’ Holdings (as of September 30): $440.32 million
Hedge fund ownership of Fifth Third Bancorp (NASDAQ:FITB) fell by 13 during the third quarter, while the value of funds’ collective holdings fell by $185 million. Shares fell by just 9% during the quarter, so there was a notable flight of capital from the stock, which left shareholders in our database owning just 2.90% of Fifth Third Bancorp (NASDAQ:FITB)’s shares at the end of September. Fifth Third recently announced that it will further cut its stake in Vantiv, which was spun-off from Fifth Third in 2009. The bank will sell 13.4 million class A Vantiv shares as part of a secondary offering of shares of the payment processing firm. That prompted a slight upgrade from UBS, which maintained its ‘Buy’ rating on Fifth Third, and bumped its price target on the stock up by $1 to $23. Phill Gross and Robert Atchinson‘s Adage Capital Management sold off a Fifth Third position that had contained 486,298 shares on June 30.
Applied Materials, Inc. (NASDAQ:AMAT)
– Elite Investors with Long Positions (as of September 30): 54
– Aggregate Value of Elite Investors’ Holdings (as of September 30): $1.60 billion
Hedge funds in our database continued to flee from Applied Materials, Inc. (NASDAQ:AMAT) for a second-straight quarter. After ownership fell from 81 to 65 during the second quarter, it tumbled again during the third quarter, to 54. Furthermore, the value of investors’ holdings in the stock has fallen from $4.36 billion on March 31 to $2.47 billion on June 30, and then to $1.60 billion on September 30. Shares fell heavily during that time, but began to turn around in the fourth quarter. Shares made gains on October 21 after Intel Corporation (NASDAQ:INTC) announced $5.5 billion worth of flash memory investments in China, with Applied Materials expected to benefit from some of that. Shares surged again on November 12 after Applied Materials, Inc. (NASDAQ:AMAT)’s latest financial results showed improving chip demand and the company also revealed that it was open to a merger. Louis Bacon’s Moore Global Investments sold off its Applied Materials position of 550,379 shares during the September quarter.
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