Coronavirus is probably the #1 concern in investors' minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president.
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 835 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of December 31st. In this article we look at what those investors think of ABB Ltd (NYSE:ABB).
ABB Ltd (NYSE:ABB) was in 10 hedge funds' portfolios at the end of December. ABB investors should be aware of a decrease in activity from the world's largest hedge funds recently. There were 13 hedge funds in our database with ABB positions at the end of the previous quarter. Our calculations also showed that ABB isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by more than 41 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_26335" align="aligncenter" width="400"] Ken Fisher of Fisher Asset Management[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. In January, we recommended a long position in one of the most shorted stocks in the market, and that stock returned more than 50% despite the large losses in the market since our recommendation. Now we're going to go over the latest hedge fund action encompassing ABB Ltd (NYSE:ABB).
What have hedge funds been doing with ABB Ltd (NYSE:ABB)?
At the end of the fourth quarter, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -23% from the previous quarter. The graph below displays the number of hedge funds with bullish position in ABB over the last 18 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in ABB Ltd (NYSE:ABB) was held by Fisher Asset Management, which reported holding $315.4 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $24.2 million position. Other investors bullish on the company included 13D Management, Luminus Management, and Beddow Capital Management. In terms of the portfolio weights assigned to each position 13D Management allocated the biggest weight to ABB Ltd (NYSE:ABB), around 4.31% of its 13F portfolio. Beddow Capital Management is also relatively very bullish on the stock, designating 4.25 percent of its 13F equity portfolio to ABB.
Since ABB Ltd (NYSE:ABB) has witnessed a decline in interest from hedge fund managers, it's easy to see that there exists a select few hedge funds that slashed their entire stakes in the third quarter. Interestingly, Steve Cohen's Point72 Asset Management dumped the largest stake of the 750 funds watched by Insider Monkey, totaling an estimated $1.3 million in stock. Michael Gelband's fund, ExodusPoint Capital, also said goodbye to its stock, about $0.7 million worth. These transactions are important to note, as aggregate hedge fund interest dropped by 3 funds in the third quarter.
Let's go over hedge fund activity in other stocks similar to ABB Ltd (NYSE:ABB). These stocks are General Dynamics Corporation (NYSE:GD), Sumitomo Mitsui Financial Grp, Inc. (NYSE:SMFG), Uber Technologies, Inc. (NYSE:UBER), and Norfolk Southern Corp. (NYSE:NSC). This group of stocks' market caps are similar to ABB's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GD,46,6699253,4 SMFG,11,584035,0 UBER,94,6677417,46 NSC,52,1931031,2 Average,50.75,3972934,13 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 50.75 hedge funds with bullish positions and the average amount invested in these stocks was $3973 million. That figure was $372 million in ABB's case. Uber Technologies, Inc. (NYSE:UBER) is the most popular stock in this table. On the other hand Sumitomo Mitsui Financial Grp, Inc. (NYSE:SMFG) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks ABB Ltd (NYSE:ABB) is even less popular than SMFG. Hedge funds dodged a bullet by taking a bearish stance towards ABB. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 11.7% in 2020 through March 11th but managed to beat the market by 3.1 percentage points. Unfortunately ABB wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); ABB investors were disappointed as the stock returned -21.8% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in Q1.
Disclosure: None. This article was originally published at Insider Monkey.