Out of thousands of stocks that are currently traded on the market, it is difficult to determine those that can really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of over 700 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Caterpillar Inc. (NYSE:CAT).
Caterpillar Inc. (NYSE:CAT) investors should be aware of an increase in support from the world’s most elite money managers lately. At the end of this article, we will also compare Caterpillar Inc. (NYSE:CAT) to other stocks, including Capital One Financial Corp. (NYSE:COF), China Telecom Corporation Limited (ADR) (NYSE:CHA), and ABB Ltd (ADR) (NYSE:ABB) to get a better sense of its popularity.
Follow Caterpillar Inc (NYSE:CAT)
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If you’d ask most market participants, hedge funds are perceived as worthless, outdated financial tools of years past. While there are more than 8000 funds in operation at present, our experts hone in on the elite of this group, about 700 funds. It is estimated that this group of investors shepherd the majority of the hedge fund industry’s total capital, and by keeping an eye on their inimitable investments, Insider Monkey has uncovered several investment strategies that have historically surpassed the broader indices. Insider Monkey’s small-cap hedge fund strategy exceeded the S&P 500 index by 12 percentage points a year for a decade in their back tests.
With all of this in mind, we’re going to take a look at the recent action surrounding Caterpillar Inc. (NYSE:CAT).
How are hedge funds trading Caterpillar Inc. (NYSE:CAT)?
Heading into Q4, a total of 40 of the hedge funds tracked by Insider Monkey held long positions in this stock, an increase of 33% from the second quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Michael Larson’s Bill & Melinda Gates Foundation Trust has the biggest position in Caterpillar Inc. (NYSE:CAT), worth close to $736 million, corresponding to 4.3% of its total 13F portfolio. Sitting at the No. 2 spot is Citadel Investment Group, led by Ken Griffin, holding a $52.6 million call position; 0.1% of its 13F portfolio is allocated to the company. Some other professional money managers that hold long positions consist of Matthew Mark’s Jet Capital Investors, D E Shaw, and Joel Greenblatt’s Gotham Asset Management.
Consequently, key money managers have jumped into Caterpillar Inc. (NYSE:CAT) headfirst. Jet Capital Investors, managed by Matthew Mark, initiated the most outsized call position in Caterpillar Inc. (NYSE:CAT). Jet Capital Investors had $52.3 million invested in the company at the end of the quarter. Daniel S. Och’s OZ Management also made a $38.9 million investment in the stock during the quarter. The other funds with new positions in the stock are Israel Englander’s Millennium Management, Don Morgan’s Brigade Capital, and Robert Pohly’s Samlyn Capital.
Let’s now take a look at hedge fund activity in other stocks similar to Caterpillar Inc. (NYSE:CAT). We will take a look at Capital One Financial Corp. (NYSE:COF), China Telecom Corporation Limited (ADR) (NYSE:CHA), ABB Ltd (ADR) (NYSE:ABB), and Credit Suisse Group AG (ADR) (NYSE:CS). All of these stocks’ market caps are closest to Caterpillar Inc. (NYSE:CAT)’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| COF | 53 | 1466178 | 12 |
| CHA | 4 | 6297 | -1 |
| ABB | 9 | 163110 | -2 |
| CS | 7 | 271645 | 1 |
As you can see, these stocks had an average of 18 hedge funds with bullish positions and the average amount invested in these stocks was $477 million. That figure was $1.24 billion in Caterpillar Inc. (NYSE:CAT)’s case. Capital One Financial Corp. (NYSE:COF) is the most popular stock in this table. On the other hand, China Telecom Corporation Limited (ADR) (NYSE:CHA) is the least popular one with only 4 bullish hedge fund positions. Caterpillar Inc. (NYSE:CAT) is not the most popular stock in this group, but hedge fund interest is still above average. This is a slightly positive signal, but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard, Capital One Financial Corp. (NYSE:COF) might be a better candidate to consider a long position.
