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 at Insider Monkey have plowed through 867 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of September 30th. Hedge funds’ consensus stock picks performed spectacularly over the last 3 years, but 2022 hasn’t been kind to hedge funds. In this article we look at how hedge funds traded Caterpillar Inc. (NYSE:CAT) and determine whether the smart money was really smart about this stock.
Is Caterpillar Inc. (NYSE:CAT) the right investment to pursue these days? Hedge funds were becoming less hopeful. The number of long hedge fund positions were cut by 16 in recent months. Caterpillar Inc. (NYSE:CAT) was in 46 hedge funds’ portfolios at the end of September. The all time high for this statistic is 63. Our calculations also showed that CAT isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings). There were 62 hedge funds in our database with CAT holdings at the end of June.
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. With all of this in mind we’re going to take a peek at the fresh hedge fund action regarding Caterpillar Inc. (NYSE:CAT).
David Siegel of Two Sigma Advisors
Do Hedge Funds Think CAT Is A Good Stock To Buy Now?
At Q3’s end, a total of 46 of the hedge funds tracked by Insider Monkey were long this stock, a change of -26% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in CAT over the last 25 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Bill & Melinda Gates Foundation Trust held the most valuable stake in Caterpillar Inc. (NYSE:CAT), which was worth $1859.3 million at the end of the third quarter. On the second spot was Fisher Asset Management which amassed $1312.3 million worth of shares. Two Sigma Advisors, Citadel Investment Group, and D E Shaw 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 Bill & Melinda Gates Foundation Trust allocated the biggest weight to Caterpillar Inc. (NYSE:CAT), around 8.02% of its 13F portfolio. Plaisance Capital is also relatively very bullish on the stock, setting aside 2.4 percent of its 13F equity portfolio to CAT.
Judging by the fact that Caterpillar Inc. (NYSE:CAT) has witnessed a decline in interest from the entirety of the hedge funds we track, logic holds that there exists a select few hedgies who sold off their entire stakes heading into Q4. Intriguingly, Matthew Stadelman’s Diamond Hill Capital dropped the largest stake of all the hedgies tracked by Insider Monkey, totaling about $264.5 million in stock. Stanley Druckenmiller’s fund, Duquesne Capital, also cut its stock, about $34 million worth. These moves are interesting, as aggregate hedge fund interest fell by 16 funds heading into Q4.
Let’s now review hedge fund activity in other stocks similar to Caterpillar Inc. (NYSE:CAT). We will take a look at Deere & Company (NYSE:DE), S&P Global Inc. (NYSE:SPGI), 3M Company (NYSE:MMM), Airbnb, Inc. (NASDAQ:ABNB), Stryker Corporation (NYSE:SYK), Atlassian Corporation Plc (NASDAQ:TEAM), and Booking Holdings Inc. (NASDAQ:BKNG). This group of stocks’ market caps match CAT’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| DE | 54 | 2530736 | 2 |
| SPGI | 78 | 7036868 | 7 |
| MMM | 46 | 1624838 | 4 |
| ABNB | 58 | 2712558 | 0 |
| SYK | 46 | 3364535 | -2 |
| TEAM | 60 | 6079499 | -4 |
| BKNG | 96 | 8429836 | -4 |
| Average | 62.6 | 4539839 | 0.4 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 62.6 hedge funds with bullish positions and the average amount invested in these stocks was $4540 million. That figure was $4779 million in CAT’s case. Booking Holdings Inc. (NASDAQ:BKNG) is the most popular stock in this table. On the other hand 3M Company (NYSE:MMM) is the least popular one with only 46 bullish hedge fund positions. Compared to these stocks Caterpillar Inc. (NYSE:CAT) is even less popular than MMM. Our overall hedge fund sentiment score for CAT is 10.9. 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. Hedge funds clearly dropped the ball on CAT as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 29.6% in 2021 and still beat the market by 3.6 percentage points. A small number of hedge funds were also right about betting on CAT as the stock returned 5.6% since Q3 (through January 31st) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
