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. Keeping this in mind, let’s analyze whether STMicroelectronics N.V. (NYSE:STM) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market when we factor in known risk factors.
STMicroelectronics N.V. (NYSE:STM) was in 17 hedge funds’ portfolios at the end of the fourth quarter of 2019. STM investors should be aware of an increase in support from the world’s most elite money managers recently. There were 13 hedge funds in our database with STM holdings at the end of the previous quarter. Our calculations also showed that STM 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.
Today there are tons of tools market participants put to use to grade publicly traded companies. A couple of the most underrated tools are hedge fund and insider trading moves. Our experts have shown that, historically, those who follow the best picks of the top money managers can trounce the broader indices by a healthy amount (see the details here).
Dmitry Balyasny of Balyasny Asset Managemnet
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to view the latest hedge fund action regarding STMicroelectronics N.V. (NYSE:STM).
How are hedge funds trading STMicroelectronics N.V. (NYSE:STM)?
At the end of the fourth quarter, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 31% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards STM over the last 18 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Arrowstreet Capital was the largest shareholder of STMicroelectronics N.V. (NYSE:STM), with a stake worth $58.6 million reported as of the end of September. Trailing Arrowstreet Capital was Balyasny Asset Management, which amassed a stake valued at $20.2 million. Woodline Partners, Schonfeld Strategic Advisors, 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 Nishkama Capital allocated the biggest weight to STMicroelectronics N.V. (NYSE:STM), around 3.96% of its 13F portfolio. Breakline Capital is also relatively very bullish on the stock, setting aside 1.42 percent of its 13F equity portfolio to STM.
As aggregate interest increased, specific money managers have jumped into STMicroelectronics N.V. (NYSE:STM) headfirst. Balyasny Asset Management, managed by Dmitry Balyasny, established the most valuable position in STMicroelectronics N.V. (NYSE:STM). Balyasny Asset Management had $20.2 million invested in the company at the end of the quarter. Michael Rockefeller and Karl Kroeker’s Woodline Partners also initiated a $19.2 million position during the quarter. The following funds were also among the new STM investors: Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors, Ravee Mehta’s Nishkama Capital, and Michael Gelband’s ExodusPoint Capital.
Let’s now review hedge fund activity in other stocks similar to STMicroelectronics N.V. (NYSE:STM). We will take a look at Waste Connections, Inc. (NYSE:WCN), Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN), Entergy Corporation (NYSE:ETR), and Kellogg Company (NYSE:K). This group of stocks’ market values are closest to STM’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| WCN | 37 | 623995 | 3 |
| ALXN | 48 | 2927643 | 0 |
| ETR | 31 | 1402438 | 2 |
| K | 30 | 569797 | 1 |
| Average | 36.5 | 1380968 | 1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 36.5 hedge funds with bullish positions and the average amount invested in these stocks was $1381 million. That figure was $146 million in STM’s case. Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN) is the most popular stock in this table. On the other hand Kellogg Company (NYSE:K) is the least popular one with only 30 bullish hedge fund positions. Compared to these stocks STMicroelectronics N.V. (NYSE:STM) is even less popular than K. Hedge funds dodged a bullet by taking a bearish stance towards STM. Our calculations showed that the top 20 most popular hedge fund stocks 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 managed to beat the market by 3.1 percentage points. Unfortunately STM wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); STM investors were disappointed as the stock returned -15% 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 so far in Q1.
Disclosure: None. This article was originally published at Insider Monkey.
