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Hedge Funds Cashed Out Of Medtronic plc (MDT) During The Crash

Reymerlyn Martin

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 821 13F filings submitted by hedge funds and prominent investors. These filings show these funds' portfolio positions as of March 31st, 2020. What do these smart investors think about Medtronic plc (NYSE:MDT)?

Is Medtronic plc (NYSE:MDT) a safe investment right now? Investors who are in the know are getting less optimistic. The number of long hedge fund bets went down by 7 lately. Our calculations also showed that MDT isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). Video: Watch our video about the top 5 most popular hedge fund stocks.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 72% since March 2017 and outperformed the S&P 500 ETFs by more than 44 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

[caption id="attachment_30621" align="aligncenter" width="400"] Cliff Asness of AQR Capital Management[/caption]

AQR CAPITAL MANAGEMENT

At Insider Monkey 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 checked out this European marijuana stock pitch. Also, we are still not out of the woods in terms of the coronavirus pandemic. So, we checked out this analyst’s “corona catalyst plays“.  We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we're going to check out the latest hedge fund action surrounding Medtronic plc (NYSE:MDT).

How have hedgies been trading Medtronic plc (NYSE:MDT)?

Heading into the second quarter of 2020, a total of 59 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -11% from the previous quarter. On the other hand, there were a total of 50 hedge funds with a bullish position in MDT a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Diamond Hill Capital was the largest shareholder of Medtronic plc (NYSE:MDT), with a stake worth $328.7 million reported as of the end of September. Trailing Diamond Hill Capital was Holocene Advisors, which amassed a stake valued at $207.4 million. AQR Capital Management, D E Shaw, and Adage 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 Tamarack Capital Management allocated the biggest weight to Medtronic plc (NYSE:MDT), around 7.68% of its 13F portfolio. Integral Health Asset Management is also relatively very bullish on the stock, dishing out 4.57 percent of its 13F equity portfolio to MDT.

Since Medtronic plc (NYSE:MDT) has experienced falling interest from the smart money, logic holds that there is a sect of money managers that slashed their full holdings by the end of the third quarter. Interestingly, Aaron Cowen's Suvretta Capital Management dumped the biggest investment of the "upper crust" of funds watched by Insider Monkey, valued at about $99.2 million in stock. Michael Castor's fund, Sio Capital, also dumped its stock, about $16.7 million worth. These bearish behaviors are important to note, as total hedge fund interest was cut by 7 funds by the end of the third quarter.

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Medtronic plc (NYSE:MDT) but similarly valued. We will take a look at Amgen, Inc. (NASDAQ:AMGN), NextEra Energy, Inc. (NYSE:NEE), Wells Fargo & Company (NYSE:WFC), and AstraZeneca plc (NYSE:AZN). This group of stocks' market valuations resemble MDT's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AMGN,52,2056537,-6 NEE,52,1436389,6 WFC,76,12935257,-3 AZN,26,1772166,-6 Average,51.5,4550087,-2.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 51.5 hedge funds with bullish positions and the average amount invested in these stocks was $4550 million. That figure was $1840 million in MDT's case. Wells Fargo & Company (NYSE:WFC) is the most popular stock in this table. On the other hand AstraZeneca plc (NYSE:AZN) is the least popular one with only 26 bullish hedge fund positions. Medtronic plc (NYSE:MDT) 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. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 7.9% in 2020 through May 22nd but beat the market by 15.6 percentage points. Unfortunately MDT wasn't nearly as popular as these 10 stocks and hedge funds that were betting on MDT were disappointed as the stock returned 5% 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 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

Disclosure: None. This article was originally published at Insider Monkey.

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