Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the third quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of ABB Ltd (NYSE:ABB) based on that data.
Is ABB a good stock to buy now? ABB Ltd (NYSE:ABB) investors should pay attention to an increase in enthusiasm from smart money in recent months. ABB Ltd (NYSE:ABB) was in 13 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 18. Our calculations also showed that ABB isn’t among the 30 most popular stocks among hedge funds (click for Q3 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.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a 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. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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. You can subscribe to our free daily newsletter on our website. Keeping this in mind we’re going to take a glance at the key hedge fund action surrounding ABB Ltd (NYSE:ABB).
Do Hedge Funds Think ABB Is A Good Stock To Buy Now?
At the end of September, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, a change of 30% from one quarter earlier. By comparison, 13 hedge funds held shares or bullish call options in ABB 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.
More specifically, Fisher Asset Management was the largest shareholder of ABB Ltd (NYSE:ABB), with a stake worth $371 million reported as of the end of September. Trailing Fisher Asset Management was Arrowstreet Capital, which amassed a stake valued at $12.3 million. Renaissance Technologies, Beddow Capital Management, and Citadel Investment Group 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 Beddow Capital Management allocated the biggest weight to ABB Ltd (NYSE:ABB), around 4.49% of its 13F portfolio. Southport Management is also relatively very bullish on the stock, dishing out 2.75 percent of its 13F equity portfolio to ABB.
As one would reasonably expect, specific money managers have been driving this bullishness. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, established the largest position in ABB Ltd (NYSE:ABB). Arrowstreet Capital had $12.3 million invested in the company at the end of the quarter. Jonathan Dawson’s Southport Management also made a $0.4 million investment in the stock during the quarter. The other funds with brand new ABB positions are Paul Marshall and Ian Wace’s Marshall Wace LLP and Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors.
Let’s now take a look at hedge fund activity in other stocks similar to ABB Ltd (NYSE:ABB). These stocks are U.S. Bancorp (NYSE:USB), Mercadolibre Inc (NASDAQ:MELI), Global Payments Inc (NYSE:GPN), Northrop Grumman Corporation (NYSE:NOC), Chubb Limited (NYSE:CB), Dollar General Corp. (NYSE:DG), and Micron Technology, Inc. (NASDAQ:MU). This group of stocks’ market values are similar to ABB’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| USB | 48 | 6225793 | 0 |
| MELI | 81 | 5769607 | 21 |
| GPN | 57 | 4698299 | -9 |
| NOC | 42 | 843121 | -5 |
| CB | 45 | 1396414 | 5 |
| DG | 56 | 1824156 | -11 |
| MU | 79 | 4570742 | -5 |
| Average | 58.3 | 3618305 | -0.6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 58.3 hedge funds with bullish positions and the average amount invested in these stocks was $3618 million. That figure was $405 million in ABB’s case. Mercadolibre Inc (NASDAQ:MELI) is the most popular stock in this table. On the other hand Northrop Grumman Corporation (NYSE:NOC) is the least popular one with only 42 bullish hedge fund positions. Compared to these stocks ABB Ltd (NYSE:ABB) is even less popular than NOC. Our overall hedge fund sentiment score for ABB is 29.7. 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. Hedge funds dodged a bullet by taking a bearish stance towards ABB. 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 percentage points. These stocks gained 32.9% in 2020 through December 8th but managed to beat the market again by 16.2 percentage points. Unfortunately ABB wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); ABB investors were disappointed as the stock returned 6.4% since the end of the third quarter (through 12/8) 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 2020.
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Disclosure: None. This article was originally published at Insider Monkey.
