Were Hedge Funds Right About QUALCOMM, Incorporated (QCOM)?

Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don’t make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards QUALCOMM, Incorporated (NASDAQ:QCOM) to find out whether there were any major changes in hedge funds’ views.

QUALCOMM, Incorporated (NASDAQ:QCOM) shareholders have witnessed a decrease in support from the world’s most elite money managers lately. QUALCOMM, Incorporated (NASDAQ:QCOM) was in 73 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 87. There were 85 hedge funds in our database with QCOM holdings at the end of December. Our calculations also showed that QCOM isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

John Overdeck of Two Sigma Advisors

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. Now we’re going to take a glance at the latest hedge fund action encompassing QUALCOMM, Incorporated (NASDAQ:QCOM).

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

At the end of the first quarter, a total of 73 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -14% from one quarter earlier. By comparison, 60 hedge funds held shares or bullish call options in QCOM a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Citadel Investment Group was the largest shareholder of QUALCOMM, Incorporated (NASDAQ:QCOM), with a stake worth $472.4 million reported as of the end of March. Trailing Citadel Investment Group was Matrix Capital Management, which amassed a stake valued at $442.5 million. Renaissance Technologies, D E Shaw, and Two Sigma Advisors 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 Bronson Point Partners allocated the biggest weight to QUALCOMM, Incorporated (NASDAQ:QCOM), around 5.63% of its 13F portfolio. Matrix Capital Management is also relatively very bullish on the stock, setting aside 5.11 percent of its 13F equity portfolio to QCOM.

Since QUALCOMM, Incorporated (NASDAQ:QCOM) has experienced falling interest from the entirety of the hedge funds we track, it’s safe to say that there exists a select few fund managers that elected to cut their entire stakes last quarter. Intriguingly, Jacob Mitchell’s Antipodes Partners cut the biggest position of all the hedgies followed by Insider Monkey, comprising an estimated $65.1 million in stock. Bijan Modanlou, Joseph Bou-Saba, and Jayaveera Kodali’s fund, Alta Park Capital, also sold off its stock, about $40.9 million worth. These transactions are interesting, as total hedge fund interest was cut by 12 funds last quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as QUALCOMM, Incorporated (NASDAQ:QCOM) but similarly valued. These stocks are The Boeing Company (NYSE:BA), NextEra Energy, Inc. (NYSE:NEE), United Parcel Service, Inc. (NYSE:UPS), Union Pacific Corporation (NYSE:UNP), The Unilever Group (NYSE:UL), Linde plc (NYSE:LIN), and BHP Group (NYSE:BBL). All of these stocks’ market caps are similar to QCOM’s market cap.

View table here if you experience formatting issues.

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 $2430 million. That figure was $2766 million in QCOM’s case. Union Pacific Corporation (NYSE:UNP) is the most popular stock in this table. On the other hand The Unilever Group (NYSE:UL) is the least popular one with only 20 bullish hedge fund positions. QUALCOMM, Incorporated (NASDAQ:QCOM) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for QCOM is 66.4. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 beat the market again by 6.7 percentage points. Unfortunately QCOM wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on QCOM were disappointed as the stock returned 10.9% since the end of March (through 8/6) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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

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