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The 800+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the third quarter, which unveil their equity positions as of September 30. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards Cisco Systems, Inc. (NASDAQ:CSCO).
Is CSCO a good stock to buy now? Hedge fund interest in Cisco Systems, Inc. (NASDAQ:CSCO) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that CSCO isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). 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 McDonald's Corporation (NYSE:MCD), Novo Nordisk A/S (NYSE:NVO), and The Unilever Group (NYSE:UL) to gather more data points.
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 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 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
David Blood of Generation Investment Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 5 best cheap stocks to buy according to Ray Dalio to identify stocks with upside potential. 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 website. With all of this in mind we're going to review the new hedge fund action surrounding Cisco Systems, Inc. (NASDAQ:CSCO).
What have hedge funds been doing with Cisco Systems, Inc. (NASDAQ:CSCO)?
At the end of the third quarter, a total of 59 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CSCO over the last 21 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Fisher Asset Management held the most valuable stake in Cisco Systems, Inc. (NASDAQ:CSCO), which was worth $826 million at the end of the third quarter. On the second spot was Generation Investment Management which amassed $726.1 million worth of shares. Arrowstreet Capital, Two Sigma Advisors, and AQR Capital Management 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 Generation Investment Management allocated the biggest weight to Cisco Systems, Inc. (NASDAQ:CSCO), around 3.85% of its 13F portfolio. Game Creek Capital is also relatively very bullish on the stock, setting aside 2.52 percent of its 13F equity portfolio to CSCO.
Due to the fact that Cisco Systems, Inc. (NASDAQ:CSCO) has faced falling interest from the aggregate hedge fund industry, it's safe to say that there were a few hedge funds who were dropping their entire stakes last quarter. Interestingly, Michael Rockefeller and KarláKroeker's Woodline Partners sold off the largest stake of all the hedgies monitored by Insider Monkey, worth an estimated $30.2 million in stock, and Robert Richards's Heathbridge Capital Management was right behind this move, as the fund said goodbye to about $26.1 million worth. These moves are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Cisco Systems, Inc. (NASDAQ:CSCO) but similarly valued. These stocks are McDonald's Corporation (NYSE:MCD), Novo Nordisk A/S (NYSE:NVO), The Unilever Group (NYSE:UL), Costco Wholesale Corporation (NASDAQ:COST), ASML Holding N.V. (NASDAQ:ASML), AbbVie Inc (NYSE:ABBV), and Danaher Corporation (NYSE:DHR). This group of stocks' market values are closest to CSCO's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MCD,65,2480040,8 NVO,22,3294003,-2 UL,13,159946,0 COST,73,3850375,12 ASML,23,2057327,-2 ABBV,82,6293077,-7 DHR,75,4702628,-1 Average,50.4,3262485,1.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 50.4 hedge funds with bullish positions and the average amount invested in these stocks was $3262 million. That figure was $3931 million in CSCO's case. AbbVie Inc (NYSE:ABBV) is the most popular stock in this table. On the other hand The Unilever Group (NYSE:UL) is the least popular one with only 13 bullish hedge fund positions. Cisco Systems, Inc. (NASDAQ:CSCO) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CSCO is 64.4. 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 31.6% in 2020 through December 2nd and still beat the market by 16 percentage points. Hedge funds were also right about betting on CSCO as the stock returned 12.5% since the end of Q3 (through 12/2) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.