Were Hedge Funds Right About Morgan Stanley (MS)?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the second quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 6 years and analyze what the smart money thinks of Morgan Stanley (NYSE:MS) based on that data.

Morgan Stanley (NYSE:MS) was in 69 hedge funds’ portfolios at the end of June. The all time high for this statistic is 79. MS has seen a decrease in hedge fund sentiment of late. There were 79 hedge funds in our database with MS holdings at the end of March. Our calculations also showed that MS isn’t among the 30 most popular stocks among hedge funds (click for Q2 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 185.4% since March 2017 and outperformed the S&P 500 ETFs by more than 79 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Boykin Curry of Eagle Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, the demand for helium is soaring and there is a helium supply shortage, so we are checking out stock pitches like this emerging helium stock. 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind we’re going to go over the latest hedge fund action surrounding Morgan Stanley (NYSE:MS).

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

At the end of the second quarter, a total of 69 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -13% from the first quarter of 2020. On the other hand, there were a total of 61 hedge funds with a bullish position in MS a year ago. With the smart money’s capital changing hands, there exists a few noteworthy hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Eagle Capital Management, managed by Boykin Curry, holds the biggest position in Morgan Stanley (NYSE:MS). Eagle Capital Management has a $1.4203 billion position in the stock, comprising 4.1% of its 13F portfolio. The second largest stake is held by Ken Fisher of Fisher Asset Management, with a $893.3 million position; the fund has 0.6% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors with similar optimism include Rajiv Jain’s GQG Partners, Ric Dillon’s Diamond Hill Capital and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Bridger Management allocated the biggest weight to Morgan Stanley (NYSE:MS), around 5% of its 13F portfolio. Eagle Capital Management is also relatively very bullish on the stock, earmarking 4.05 percent of its 13F equity portfolio to MS.

Since Morgan Stanley (NYSE:MS) has faced a decline in interest from the smart money, it’s safe to say that there is a sect of hedgies that decided to sell off their entire stakes last quarter. Intriguingly, Robert Pohly’s Samlyn Capital said goodbye to the biggest stake of the “upper crust” of funds monitored by Insider Monkey, worth about $174.1 million in stock. Brad Farber’s fund, Atika Capital, also said goodbye to its stock, about $15.5 million worth. These bearish behaviors are interesting, as total hedge fund interest fell by 10 funds last quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Morgan Stanley (NYSE:MS) but similarly valued. These stocks are Medtronic plc (NYSE:MDT), SAP SE (NYSE:SAP), QUALCOMM, Incorporated (NASDAQ:QCOM), Pinduoduo Inc. (NASDAQ:PDD), AstraZeneca plc (NASDAQ:AZN), Philip Morris International Inc. (NYSE:PM), and Royal Dutch Shell plc (NYSE:RDS). This group of stocks’ market values are similar to MS’s market value.

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As you can see these stocks had an average of 46.7 hedge funds with bullish positions and the average amount invested in these stocks was $3644 million. That figure was $5348 million in MS’s case. QUALCOMM, Incorporated (NASDAQ:QCOM) is the most popular stock in this table. On the other hand SAP SE (NYSE:SAP) is the least popular one with only 17 bullish hedge fund positions. Morgan Stanley (NYSE:MS) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for MS is 68.5. 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 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 26.3% in 2021 through October 29th and still beat the market by 2.3 percentage points. Hedge funds were also right about betting on MS as the stock returned 13.7% since the end of Q2 (through 10/29) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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