Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts, usually don’t make them change their opinion towards a company. This time it may be different. During the fourth quarter of 2018 we observed increased volatility and a 20% drop in stock prices. Things completely reversed in 2019 and stock indices hit record highs. Recent hedge fund investor letters indicated that they are cutting their overall exposure, closing out some position and doubling down on others. Let’s take a look at the hedge fund sentiment towards ASML Holding N.V. (NASDAQ:ASML) to find out whether it was one of their high conviction long-term ideas.
Is ASML Holding N.V. (NASDAQ:ASML) a splendid investment now? Prominent investors are becoming more confident. The number of long hedge fund bets improved by 3 recently. Our calculations also showed that ASML isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Ken Fisher of Fisher Asset Management
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. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. Let’s check out the latest hedge fund action regarding ASML Holding N.V. (NASDAQ:ASML).
How have hedgies been trading ASML Holding N.V. (NASDAQ:ASML)?
At the end of the third quarter, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 25% from one quarter earlier. By comparison, 13 hedge funds held shares or bullish call options in ASML a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).
More specifically, Fisher Asset Management was the largest shareholder of ASML Holding N.V. (NASDAQ:ASML), with a stake worth $649 million reported as of the end of September. Trailing Fisher Asset Management was D E Shaw, which amassed a stake valued at $73.3 million. Tairen Capital, Citadel Investment Group, and ZWEIG DIMENNA PARTNERS 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 Tairen Capital allocated the biggest weight to ASML Holding N.V. (NASDAQ:ASML), around 3.43% of its 13F portfolio. ZWEIG DIMENNA PARTNERS is also relatively very bullish on the stock, earmarking 0.87 percent of its 13F equity portfolio to ASML.
As aggregate interest increased, some big names have jumped into ASML Holding N.V. (NASDAQ:ASML) headfirst. D E Shaw, managed by David E. Shaw, created the biggest call position in ASML Holding N.V. (NASDAQ:ASML). D E Shaw had $8.5 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also made a $8.4 million investment in the stock during the quarter. The following funds were also among the new ASML investors: Benjamin A. Smith’s Laurion Capital Management, Israel Englander’s Millennium Management, and Frank Slattery’s Symmetry Peak Management.
Let’s check out hedge fund activity in other stocks similar to ASML Holding N.V. (NASDAQ:ASML). We will take a look at Danaher Corporation (NYSE:DHR), United Parcel Service, Inc. (NYSE:UPS), American Express Company (NYSE:AXP), and American Tower Corporation (REIT) (NYSE:AMT). This group of stocks’ market values resemble ASML’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| DHR | 57 | 2732120 | -1 |
| UPS | 41 | 1365649 | 5 |
| AXP | 48 | 21377087 | 3 |
| AMT | 46 | 3645628 | 4 |
| Average | 48 | 7280121 | 2.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 48 hedge funds with bullish positions and the average amount invested in these stocks was $7280 million. That figure was $775 million in ASML’s case. Danaher Corporation (NYSE:DHR) is the most popular stock in this table. On the other hand United Parcel Service, Inc. (NYSE:UPS) is the least popular one with only 41 bullish hedge fund positions. Compared to these stocks ASML Holding N.V. (NASDAQ:ASML) is even less popular than UPS. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on ASML, though not to the same extent, as the stock returned 9.4% during the fourth quarter (through 11/30) and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
