What Do Hedge Funds Think of International Business Machines Corp. (IBM)?

We at Insider Monkey have gone over 700 13F filings that hedge funds and prominent investors are required to file by the government. The 13F filings show the funds’ and investors’ portfolio positions as of September 30. In this article, we look at what those funds think of International Business Machines Corp. (NYSE:IBM) based on that data.

International Business Machines Corp. (NYSE:IBM) shareholders have witnessed an increase in support from the world’s most elite money managers of late. IBM was in 63 hedge funds’ portfolios at the end of the third quarter of 2015. There were 59 hedge funds in our database with IBM holdings at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Merck & Co., Inc. (NYSE:MRK), PepsiCo, Inc. (NYSE:PEP), and Cisco Systems, Inc. (NASDAQ:CSCO) to gather more data points.

According to most shareholders, hedge funds are assumed to be slow, old financial vehicles of years past. While there are over 8,000 funds trading at present, We look at the masters of this club, approximately 700 funds. Most estimates calculate that this group of people command most of the hedge fund industry’s total capital, and by paying attention to their matchless investments, Insider Monkey has unearthed numerous investment strategies that have historically beaten the broader indices. Insider Monkey’s small-cap hedge fund strategy surpassed the S&P 500 index by 12 percentage points per annum for a decade in their back tests.

Now, let’s take a look at the key action regarding International Business Machines Corp. (NYSE:IBM).

Hedge fund activity in International Business Machines Corp. (NYSE:IBM)

Heading into Q4, a total of 63 of the hedge funds tracked by Insider Monkey were long this stock, a change of 7% from the previous quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were upping their stakes considerably (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Berkshire Hathaway, managed by Warren Buffett, holds the largest position in International Business Machines Corp. (NYSE:IBM). Berkshire Hathaway has a $11.7474 billion position in the stock, comprising 9.2% of its 13F portfolio. The second most bullish fund manager is Fairfax Financial Holdings, led by Prem Watsa, holding a $197.6 million position; 18.3% of its 13F portfolio is allocated to the stock. Remaining peers with similar optimism consist of Phill Gross and Robert Atchinson’s Adage Capital Management, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and Jonathon Jacobson’s Highfields Capital Management.

With a general bullishness amongst the heavyweights, specific money managers were breaking ground themselves. Fairholme (FAIRX), managed by Bruce Berkowitz, assembled the biggest position in International Business Machines Corp. (NYSE:IBM). Fairholme (FAIRX) had $109.4 million invested in the company at the end of the quarter. Edward Lampert’s ESL Investments also initiated a $63.8 million position during the quarter. The other funds with brand new IBM positions are Matthew Tewksbury’s Stevens Capital Management, Paul Marshall and Ian Wace’s Marshall Wace LLP, and Alec Litowitz and Ross Laser’s Magnetar Capital.

Let’s go over hedge fund activity in other stocks similar to International Business Machines Corp. (NYSE:IBM). We will take a look at Merck & Co., Inc. (NYSE:MRK), PepsiCo, Inc. (NYSE:PEP), Cisco Systems, Inc. (NASDAQ:CSCO), and PetroChina Company Limited (ADR) (NYSE:PTR). This group of stocks’ market values are closest to IBM’s market value.

As you can see these stocks had an average of 49 hedge funds with bullish positions and the average amount invested in these stocks was $3,343 million. That figure was $13,495 million in IBM’s case. Cisco Systems, Inc. (NASDAQ:CSCO) is the most popular stock in this table. On the other hand PetroChina Company Limited (ADR) (NYSE:PTR) is the least popular one with only 10 bullish hedge fund positions. International Business Machines Corp. (NYSE:IBM) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard CSCO might be a better candidate to consider a long position.