World-class money managers like Ken Griffin and Barry Rosenstein only invest their wealthy clients' money after undertaking a rigorous examination of any potential stock. They are particularly successful in this regard when it comes to small-cap stocks, which their peerless research gives them a big information advantage on when it comes to judging their worth. It's not surprising then that they generate their biggest returns from these stocks and invest more of their money in these stocks on average than other investors. It's also not surprising then that we pay close attention to these picks ourselves and have built a market-beating investment strategy around them.
ABB Ltd (NYSE:ABB) was in 15 hedge funds' portfolios at the end of March. ABB has seen an increase in hedge fund interest recently. There were 13 hedge funds in our database with ABB holdings at the end of the previous quarter. Our calculations also showed that ABB isn't among the 30 most popular stocks among hedge funds.
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' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 30.9% through May 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We're going to view the recent hedge fund action encompassing ABB Ltd (NYSE:ABB).
How are hedge funds trading ABB Ltd (NYSE:ABB)?
At Q1's end, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 15% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in ABB over the last 15 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Ken Fisher's Fisher Asset Management has the number one position in ABB Ltd (NYSE:ABB), worth close to $212.8 million, amounting to 0.3% of its total 13F portfolio. On Fisher Asset Management's heels is Jim Simons of Renaissance Technologies, with a $65.1 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Remaining professional money managers with similar optimism consist of Israel Englander's Millennium Management, Ken Griffin's Citadel Investment Group and Kenneth Squire's 13D Management.
As industrywide interest jumped, some big names have jumped into ABB Ltd (NYSE:ABB) headfirst. Millennium Management, managed by Israel Englander, created the most valuable position in ABB Ltd (NYSE:ABB). Millennium Management had $29.5 million invested in the company at the end of the quarter. Louis Bacon's Moore Global Investments also initiated a $1.9 million position during the quarter. The other funds with new positions in the stock are John Overdeck and David Siegel's Two Sigma Advisors, David Costen Haley's HBK Investments, and Murray Stahl's Horizon Asset Management.
Let's also examine hedge fund activity in other stocks similar to ABB Ltd (NYSE:ABB). We will take a look at The Sherwin-Williams Company (NYSE:SHW), BCE Inc. (NYSE:BCE), The Kraft Heinz Company (NASDAQ:KHC), and Edwards Lifesciences Corporation (NYSE:EW). This group of stocks' market caps are closest to ABB's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SHW,42,1153461,-8 BCE,16,422698,0 KHC,29,11047679,-4 EW,25,919640,2 Average,28,3385870,-2.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 28 hedge funds with bullish positions and the average amount invested in these stocks was $3386 million. That figure was $347 million in ABB's case. The Sherwin-Williams Company (NYSE:SHW) is the most popular stock in this table. On the other hand BCE Inc. (NYSE:BCE) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks ABB Ltd (NYSE:ABB) is even less popular than BCE. Hedge funds clearly dropped the ball on ABB as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. A small number of hedge funds were also right about betting on ABB as the stock returned 6.6% during the same period and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.