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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. Insider Monkey finished processing 866 13F filings submitted by hedge funds and prominent investors. These filings show these funds' portfolio positions as of March 31st, 2020. In this article we are going to take a look at smart money sentiment towards International Business Machines Corp. (NYSE:IBM).
International Business Machines Corp. (NYSE:IBM) investors should pay attention to a decrease in hedge fund sentiment lately. International Business Machines Corp. (NYSE:IBM) was in 41 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic is 63. Our calculations also showed that IBM isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).
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. Hedge funds have more than $3.5 trillion in assets under management, so you can't expect their entire portfolios to beat the market by large margins. 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 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds' moves today.
Phillip Gross of Adage Capital
At Insider Monkey we leave no stone unturned when looking for 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, which is why we are checking out this inflation play. We go through lists like 10 best gold stocks to buy to identify promising stocks. 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. Keeping this in mind we're going to view the recent hedge fund action encompassing International Business Machines Corp. (NYSE:IBM).
Do Hedge Funds Think IBM Is A Good Stock To Buy Now?
At Q1's end, a total of 41 of the hedge funds tracked by Insider Monkey were long this stock, a change of -20% from the fourth quarter of 2020. The graph below displays the number of hedge funds with bullish position in IBM over the last 23 quarters. With hedgies' capital changing hands, there exists an "upper tier" of notable hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).
The largest stake in International Business Machines Corp. (NYSE:IBM) was held by Arrowstreet Capital, which reported holding $482.9 million worth of stock at the end of December. It was followed by Citadel Investment Group with a $352.7 million position. Other investors bullish on the company included AQR Capital Management, Renaissance Technologies, and Adage Capital Management. In terms of the portfolio weights assigned to each position Beddow Capital Management allocated the biggest weight to International Business Machines Corp. (NYSE:IBM), around 3.47% of its 13F portfolio. Levin Capital Strategies is also relatively very bullish on the stock, dishing out 3.4 percent of its 13F equity portfolio to IBM.
Judging by the fact that International Business Machines Corp. (NYSE:IBM) has faced a decline in interest from the entirety of the hedge funds we track, it's easy to see that there is a sect of funds who sold off their full holdings heading into Q2. It's worth mentioning that Michael Kharitonov and Jon David McAuliffe's Voleon Capital sold off the largest stake of all the hedgies followed by Insider Monkey, totaling an estimated $44.2 million in stock, and Mikal Patel's Oribel Capital Management was right behind this move, as the fund said goodbye to about $19.4 million worth. These transactions are interesting, as aggregate hedge fund interest dropped by 10 funds heading into Q2.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as International Business Machines Corp. (NYSE:IBM) but similarly valued. These stocks are HSBC Holdings plc (NYSE:HSBC), The Toronto-Dominion Bank (NYSE:TD), Deere & Company (NYSE:DE), Raytheon Technologies Corp (NYSE:RTX), Sea Limited (NYSE:SE), General Electric Company (NYSE:GE), and BlackRock, Inc. (NYSE:BLK). This group of stocks' market valuations match IBM's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HSBC,12,234093,-2 TD,19,212935,-3 DE,51,2047270,-3 RTX,58,2497449,-1 SE,98,10433038,-17 GE,68,6166147,-1 BLK,42,1524856,-11 Average,49.7,3302255,-5.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 49.7 hedge funds with bullish positions and the average amount invested in these stocks was $3302 million. That figure was $1356 million in IBM's case. Sea Limited (NYSE:SE) is the most popular stock in this table. On the other hand HSBC Holdings plc (NYSE:HSBC) is the least popular one with only 12 bullish hedge fund positions. International Business Machines Corp. (NYSE:IBM) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for IBM is 31.4. 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 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 17.4% in 2021 through June 18th and beat the market by 6.1 percentage points. A small number of hedge funds were also right about betting on IBM, though not to the same extent, as the stock returned 8.6% since the end of Q1 (through June 18th) and outperformed the market.
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Disclosure: None. This article was originally published at Insider Monkey.