Hedge fund managers like David Einhorn, Dan Loeb, or Carl Icahn became billionaires through reaping large profits for their investors, which is why piggybacking their stock picks may provide us with significant returns as well. Many hedge funds, like Paul Singer’s Elliott Management, are pretty secretive, but we can still get some insights by analyzing their quarterly 13F filings. One of the most fertile grounds for large abnormal returns is hedge funds’ most popular small-cap picks, which are not so widely followed and often trade at a discount to their intrinsic value. In this article we will check out hedge fund activity in another small-cap stock: 3M Co (NYSE:MMM).
Is 3M Co (NYSE:MMM) a great investment now? Judging by the fact that the number of long hedge funds positions went up by three lately, it seems like hedge funds are becoming hopeful. At the end of this article we will also compare MMM to other stocks including McDonald’s Corporation (NYSE:MCD), GlaxoSmithKline plc (ADR) (NYSE:GSK), and CVS Caremark Corporation (NYSE:CVS) to get a better sense of its popularity.
Follow 3M Co (NYSE:MMM)
Follow 3M Co (NYSE:MMM)
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
Stuart Monk / shutterstock.com
With all of this in mind, we’re going to analyze the latest action encompassing 3M Co (NYSE:MMM).
How have hedgies been trading 3M Co (NYSE:MMM)?
At the end of the third quarter, a total of 40 funds tracked by Insider Monkey held long positions in 3M Co., up by 8% from the end of June. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
Of the funds tracked by Insider Monkey, AQR Capital Management, led by Cliff Asness, holds the biggest position in 3M Co (NYSE:MMM). AQR Capital Management has a $176.1 million position in the stock, comprising 0.3% of its 13F portfolio. The second largest stake is held by Citadel Investment Group, managed by Ken Griffin, which holds a $43.6 million call position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other professional money managers that are bullish encompass Phill Gross and Robert Atchinson’s Adage Capital Management, Israel Englander’s Millennium Management and Tom Gayner’s Markel Gayner Asset Management.
As one would reasonably expect, key hedge funds were breaking ground themselves. David Harding’s Winton Capital Management initiated a $15 million position during the third quarter. The other funds with new positions in the stock are George Hall’s Clinton Group, Matthew Tewksbury’s Stevens Capital Management, and Dmitry Balyasny’s Balyasny Asset Management.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as 3M Co (NYSE:MMM) but similarly valued. We will take a look at McDonald’s Corporation (NYSE:MCD), GlaxoSmithKline plc (ADR) (NYSE:GSK), CVS Caremark Corporation (NYSE:CVS), and AbbVie Inc (NYSE:ABBV). This group of stocks’ market values resemble MMM’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MCD | 55 | 2771731 | -8 |
| GSK | 33 | 1094325 | 5 |
| CVS | 58 | 2005455 | 4 |
| ABBV | 56 | 4170340 | -1 |
As you can see these stocks had an average of 51 investors with bullish positions and the average amount invested in these stocks was $2.51 billion. That figure was just $539 million in MMM’s case. CVS Caremark Corporation (NYSE:CVS) is the most popular stock in this table. On the other hand GlaxoSmithKline plc (ADR) (NYSE:GSK) is the least popular one with only 33 bullish hedge fund positions. 3M Co (NYSE:MMM) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard CVS Caremark Corporation (NYSE:CVS) might be a better candidate to consider a long position.
