Is Micron (MU) Stock A Buy or Sell?

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. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards Micron Technology, Inc. (NASDAQ:MU) to find out whether there were any major changes in hedge funds’ views.

Is Micron (MU) stock a buy or sell? The smart money was becoming more confident. The number of bullish hedge fund bets improved by 21 recently. Micron Technology, Inc. (NASDAQ:MU) was in 100 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic was previously 94. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that MU ranked 21st among the 30 most popular stocks among hedge funds (click for Q4 rankings).

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 197% since March 2017 and outperformed the S&P 500 ETFs by more than 124 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.

David E. Shaw of D.E. Shaw

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Do Hedge Funds Think MU Is A Good Stock To Buy Now?

At the end of the fourth quarter, a total of 100 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 27% from the third quarter of 2020. Below, you can check out the change in hedge fund sentiment towards MU over the last 22 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

When looking at the institutional investors followed by Insider Monkey, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital has the biggest position in Micron Technology, Inc. (NASDAQ:MU), worth close to $1.3219 billion, corresponding to 1.9% of its total 13F portfolio. The second most bullish fund manager is David Tepper of Appaloosa Management LP, with a $601.4 million position; 9% of its 13F portfolio is allocated to the company. Some other professional money managers with similar optimism comprise David Goel and Paul Ferri’s Matrix Capital Management, D. E. Shaw’s D E Shaw and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Mohnish Pabrai allocated the biggest weight to Micron Technology, Inc. (NASDAQ:MU), around 66.33% of its 13F portfolio. Ariose Capital is also relatively very bullish on the stock, designating 24.31 percent of its 13F equity portfolio to MU.

As one would reasonably expect, some big names have been driving this bullishness. Jericho Capital Asset Management, managed by Josh Resnick, initiated the most valuable position in Micron Technology, Inc. (NASDAQ:MU). Jericho Capital Asset Management had $119.8 million invested in the company at the end of the quarter. John Overdeck and David Siegel’s Two Sigma Advisors also made a $117.8 million investment in the stock during the quarter. The other funds with brand new MU positions are Paul Marshall and Ian Wace’s Marshall Wace LLP, Bijan Modanlou, Joseph Bou-Saba, and Jayaveera Kodali’s Alta Park Capital, and Guy Shahar’s DSAM Partners.

Let’s go over hedge fund activity in other stocks similar to Micron Technology, Inc. (NASDAQ:MU). These stocks are Mondelez International Inc (NASDAQ:MDLZ), Mercadolibre Inc (NASDAQ:MELI), The TJX Companies, Inc. (NYSE:TJX), Anthem Inc (NYSE:ANTM), Snowflake Inc (NYSE:SNOW), S&P Global Inc. (NYSE:SPGI), and Applied Materials, Inc. (NASDAQ:AMAT). This group of stocks’ market valuations are similar to MU’s market valuation.

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As you can see these stocks had an average of 65.3 hedge funds with bullish positions and the average amount invested in these stocks was $4863 million. That figure was $8144 million in MU’s case. Mercadolibre Inc (NASDAQ:MELI) is the most popular stock in this table. On the other hand Mondelez International Inc (NASDAQ:MDLZ) is the least popular one with only 50 bullish hedge fund positions. Compared to these stocks Micron Technology, Inc. (NASDAQ:MU) is more popular among hedge funds. Our overall hedge fund sentiment score for MU is 90. 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. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks returned 5.3% in 2021 through March 19th but still managed to beat the market by 0.8 percentage points. Hedge funds were also right about betting on MU as the stock returned 20.4% since the end of December (through 3/19) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

Disclosure: None. This article was originally published at Insider Monkey.

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