Coronavirus is probably the #1 concern in investors’ minds right now. It should be. We estimate that COVID-19 will kill around 5 million people worldwide and there is a 3.3% probability that Donald Trump will die from the new coronavirus (read the details). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We have processed the filings of the more than 835 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their December 31 holdings, data that is available nowhere else. Should you consider QUALCOMM, Incorporated (NASDAQ:QCOM) for your portfolio? We’ll look to this invaluable collective wisdom for the answer.
Is QUALCOMM, Incorporated (NASDAQ:QCOM) the right pick for your portfolio? The smart money is taking an optimistic view. The number of long hedge fund bets inched up by 7 recently. Our calculations also showed that QCOM 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.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 S&P 500 ETFs by more than 41 percentage points since March 2017 (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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
Jim Simons of Renaissance Technologies
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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. In January, we recommended a long position in one of the most shorted stocks in the market, and that stock returned more than 50% despite the large losses in the market since our recommendation. Keeping this in mind let’s analyze the fresh hedge fund action surrounding QUALCOMM, Incorporated (NASDAQ:QCOM).
What have hedge funds been doing with QUALCOMM, Incorporated (NASDAQ:QCOM)?
At Q4’s end, a total of 67 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 12% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards QCOM over the last 18 quarters. With the smart money’s capital changing hands, there exists an “upper tier” of key hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of QUALCOMM, Incorporated (NASDAQ:QCOM), with a stake worth $507.9 million reported as of the end of September. Trailing Renaissance Technologies was Two Sigma Advisors, which amassed a stake valued at $361.7 million. AQR Capital Management, Matrix 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 Think Investments allocated the biggest weight to QUALCOMM, Incorporated (NASDAQ:QCOM), around 8.59% of its 13F portfolio. Valueworks LLC is also relatively very bullish on the stock, setting aside 7.29 percent of its 13F equity portfolio to QCOM.
With a general bullishness amongst the heavyweights, some big names were leading the bulls’ herd. GQG Partners, managed by Rajiv Jain, created the biggest position in QUALCOMM, Incorporated (NASDAQ:QCOM). GQG Partners had $93.5 million invested in the company at the end of the quarter. Lei Zhang’s Hillhouse Capital Management also made a $17.6 million investment in the stock during the quarter. The other funds with brand new QCOM positions are Michael Rockefeller and Karl Kroeker’s Woodline Partners, David Fiszel’s Honeycomb Asset Management, and Frank Brosens’s Taconic Capital.
Let’s now review hedge fund activity in other stocks similar to QUALCOMM, Incorporated (NASDAQ:QCOM). These stocks are United Parcel Service, Inc. (NYSE:UPS), Rio Tinto plc (NYSE:RIO), General Electric Company (NYSE:GE), and British American Tobacco plc (NYSE:BTI). This group of stocks’ market values match QCOM’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| UPS | 42 | 975024 | -3 |
| RIO | 21 | 1680869 | -1 |
| GE | 60 | 6210817 | 2 |
| BTI | 9 | 607241 | 0 |
| Average | 33 | 2368488 | -0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 33 hedge funds with bullish positions and the average amount invested in these stocks was $2368 million. That figure was $3091 million in QCOM’s case. General Electric Company (NYSE:GE) is the most popular stock in this table. On the other hand British American Tobacco plc (NYSE:BTI) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks QUALCOMM, Incorporated (NASDAQ:QCOM) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks also gained 0.1% in 2020 through March 2nd and beat the market by 4.1 percentage points. Unfortunately QCOM wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on QCOM were disappointed as the stock returned -8.7% during the first two months of 2020 (through March 2nd) 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 in Q1.
Disclosure: None. This article was originally published at Insider Monkey.
