Is Morgan Stanley (NYSE:MS) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.
Is Morgan Stanley (NYSE:MS) undervalued? The smart money was betting on the stock. The number of long hedge fund bets advanced by 13 recently. Morgan Stanley (NYSE:MS) was in 79 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic was previously 70. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that MS isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 66 hedge funds in our database with MS holdings at the end of December.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 115 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.
Ken Fisher of Fisher Asset Management
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium 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 analyze the key hedge fund action surrounding Morgan Stanley (NYSE:MS).
Do Hedge Funds Think MS Is A Good Stock To Buy Now?
At the end of March, a total of 79 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 20% from one quarter earlier. On the other hand, there were a total of 70 hedge funds with a bullish position in MS a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
The largest stake in Morgan Stanley (NYSE:MS) was held by Eagle Capital Management, which reported holding $924.5 million worth of stock at the end of December. It was followed by Fisher Asset Management with a $738.3 million position. Other investors bullish on the company included GQG Partners, Greenhaven Associates, and Diamond Hill Capital. In terms of the portfolio weights assigned to each position Greenhaven Associates allocated the biggest weight to Morgan Stanley (NYSE:MS), around 9.99% of its 13F portfolio. Toscafund Asset Management is also relatively very bullish on the stock, dishing out 7.31 percent of its 13F equity portfolio to MS.
Now, key money managers have been driving this bullishness. Holocene Advisors, managed by Brandon Haley, initiated the most valuable position in Morgan Stanley (NYSE:MS). Holocene Advisors had $76.6 million invested in the company at the end of the quarter. Benjamin A. Smith’s Laurion Capital Management also made a $32.8 million investment in the stock during the quarter. The other funds with new positions in the stock are Mika Toikka’s AlphaCrest Capital Management, Daniel Johnson’s Gillson Capital, and Greg Eisner’s Engineers Gate Manager.
Let’s now review hedge fund activity in other stocks similar to Morgan Stanley (NYSE:MS). These stocks are SAP SE (NYSE:SAP), Amgen, Inc. (NASDAQ:AMGN), HDFC Bank Limited (NYSE:HDB), Bristol Myers Squibb Company (NYSE:BMY), Philip Morris International Inc. (NYSE:PM), Shopify Inc (NYSE:SHOP), and Lowe’s Companies, Inc. (NYSE:LOW). This group of stocks’ market caps are similar to MS’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SAP | 19 | 1473996 | 5 |
| AMGN | 47 | 1001957 | -2 |
| HDB | 27 | 1964796 | -4 |
| BMY | 81 | 5037397 | -50 |
| PM | 48 | 5494085 | -4 |
| SHOP | 91 | 9984457 | 1 |
| LOW | 61 | 5171876 | -10 |
| Average | 53.4 | 4304081 | -9.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 53.4 hedge funds with bullish positions and the average amount invested in these stocks was $4304 million. That figure was $5285 million in MS’s case. Shopify Inc (NYSE:SHOP) is the most popular stock in this table. On the other hand SAP SE (NYSE:SAP) is the least popular one with only 19 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 81.7. 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 25.8% in 2021 through August 6th and still beat the market by 6.7 percentage points. Hedge funds were also right about betting on MS as the stock returned 29.9% since the end of Q1 (through 8/6) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Follow Morgan Stanley (NYSE:MS)
Follow Morgan Stanley (NYSE:MS)
Suggested Articles:
- 15 Biggest Oil Refining Companies
- 15 Youngest Tech Billionaires
- 13 Biggest Microfinance Companies In USA
Disclosure: None. This article was originally published at Insider Monkey.
