World-class money managers like Ken Griffin and Barry Rosenstein only invest their wealthy clients’ money after undertaking a rigorous examination of any potential stock. They are particularly successful in this regard when it comes to small-cap stocks, which their peerless research gives them a big information advantage on when it comes to judging their worth. It’s not surprising then that they generate their biggest returns from these stocks and invest more of their money in these stocks on average than other investors. It’s also not surprising then that we pay close attention to these picks ourselves and have built a market-beating investment strategy around them.
Is STMicroelectronics N.V. (NYSE:STM) undervalued? The smart money is turning less bullish. The number of long hedge fund bets decreased by 1 lately. Our calculations also showed that STM isn’t among the 30 most popular stocks among hedge funds (view the video below). STM was in 13 hedge funds’ portfolios at the end of the second quarter of 2019. There were 14 hedge funds in our database with STM holdings at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
According to most investors, hedge funds are assumed to be worthless, outdated investment vehicles of yesteryear. While there are more than 8000 funds with their doors open at present, We look at the top tier of this club, around 750 funds. These hedge fund managers shepherd the majority of the hedge fund industry’s total capital, and by shadowing their finest stock picks, Insider Monkey has figured out many investment strategies that have historically defeated the market. Insider Monkey’s flagship hedge fund strategy surpassed the S&P 500 index by around 5 percentage points annually since its inception in May 2014. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 25.7% since February 2017 (through September 30th) even though the market was up more than 33% during the same period. We just shared a list of 10 short targets in our latest quarterly update .
Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s review the latest hedge fund action encompassing STMicroelectronics N.V. (NYSE:STM).
What have hedge funds been doing with STMicroelectronics N.V. (NYSE:STM)?
Heading into the third quarter of 2019, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, a change of -7% from the previous quarter. By comparison, 18 hedge funds held shares or bullish call options in STM a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in STMicroelectronics N.V. (NYSE:STM) was held by Arrowstreet Capital, which reported holding $48.1 million worth of stock at the end of March. It was followed by KCL Capital with a $16.7 million position. Other investors bullish on the company included Renaissance Technologies, Sensato Capital Management, and Balyasny Asset Management.
Since STMicroelectronics N.V. (NYSE:STM) has experienced declining sentiment from the entirety of the hedge funds we track, it’s safe to say that there were a few fund managers that elected to cut their full holdings heading into Q3. At the top of the heap, Joe DiMenna’s ZWEIG DIMENNA PARTNERS dropped the biggest stake of the 750 funds tracked by Insider Monkey, totaling close to $1.9 million in stock, and Matthew Tewksbury’s Stevens Capital Management was right behind this move, as the fund said goodbye to about $1 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest dropped by 1 funds heading into Q3.
Let’s check out hedge fund activity in other stocks similar to STMicroelectronics N.V. (NYSE:STM). These stocks are Citizens Financial Group Inc (NYSE:CFG), Franco-Nevada Corporation (NYSE:FNV), Marvell Technology Group Ltd. (NASDAQ:MRVL), and WPP plc (NYSE:WPP). This group of stocks’ market valuations are similar to STM’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CFG | 39 | 1255204 | -2 |
| FNV | 18 | 532557 | -1 |
| MRVL | 37 | 1148127 | 5 |
| WPP | 3 | 35860 | -8 |
| Average | 24.25 | 742937 | -1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.25 hedge funds with bullish positions and the average amount invested in these stocks was $743 million. That figure was $112 million in STM’s case. Citizens Financial Group Inc (NYSE:CFG) is the most popular stock in this table. On the other hand WPP plc (NYSE:WPP) is the least popular one with only 3 bullish hedge fund positions. STMicroelectronics N.V. (NYSE:STM) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on STM as the stock returned 10.1% during the same time frame and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
