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Hedge Funds Cashing Out Of Micron Technology (MU)

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. We at Insider Monkey have plowed through 823 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 June 30th, when the S&P 500 Index was trading around the 3100 level. Stocks kept going up since then. In this article we look at how hedge funds traded Micron Technology, Inc. (NASDAQ:MU) and determine whether the smart money was really smart about this stock.

Micron Technology, Inc. (NASDAQ:MU) was in 84 hedge funds' portfolios at the end of the second quarter of 2020. The all time high for this statistics is 94. MU has experienced a decrease in support from the world's most elite money managers of late. There were 94 hedge funds in our database with MU holdings at the end of March. Our calculations also showed that MU isn't among the 30 most popular stocks among hedge funds (click for Q2 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.

To most shareholders, hedge funds are assumed to be slow, old investment tools of the past. While there are more than 8000 funds in operation at present, Our experts choose to focus on the moguls of this club, approximately 850 funds. These investment experts shepherd the lion's share of all hedge funds' total capital, and by shadowing their inimitable stock picks, Insider Monkey has formulated several investment strategies that have historically outstripped the S&P 500 index. Insider Monkey's flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

David Tepper of Appaloosa Management LP

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Currently, investors are pessimistic about commercial real estate investments. So, we are checking out this contrarian play to diversify our market exposure. We go through lists like the 10 most profitable companies in America to pick the best large-cap stocks to buy. 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. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Keeping this in mind let's analyze the key hedge fund action encompassing Micron Technology, Inc. (NASDAQ:MU).

Hedge fund activity in Micron Technology, Inc. (NASDAQ:MU)

At the end of the second quarter, a total of 84 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -11% from the first quarter of 2020. By comparison, 62 hedge funds held shares or bullish call options in MU a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Micron Technology, Inc. (NASDAQ:MU) was held by Arrowstreet Capital, which reported holding $686.6 million worth of stock at the end of September. It was followed by Appaloosa Management LP with a $481.7 million position. Other investors bullish on the company included Matrix Capital Management, AQR Capital Management, and D E Shaw. In terms of the portfolio weights assigned to each position Mohnish Pabrai allocated the biggest weight to Micron Technology, Inc. (NASDAQ:MU), around 63.48% of its 13F portfolio. Lansdowne Partners is also relatively very bullish on the stock, earmarking 8.84 percent of its 13F equity portfolio to MU.

Seeing as Micron Technology, Inc. (NASDAQ:MU) has faced declining sentiment from the smart money, it's safe to say that there lies a certain "tier" of fund managers who sold off their positions entirely last quarter. Interestingly, Alex Sacerdote's Whale Rock Capital Management cut the largest stake of the "upper crust" of funds followed by Insider Monkey, totaling an estimated $129.2 million in stock, and Leon Shaulov's Maplelane Capital was right behind this move, as the fund cut about $72.6 million worth. These transactions are interesting, as total hedge fund interest dropped by 10 funds last quarter.

Let's also examine hedge fund activity in other stocks similar to Micron Technology, Inc. (NASDAQ:MU). These stocks are Chubb Limited (NYSE:CB), Ecolab Inc. (NYSE:ECL), Takeda Pharmaceutical Company Limited (NYSE:TAK), U.S. Bancorp (NYSE:USB), Applied Materials, Inc. (NASDAQ:AMAT), Illinois Tool Works Inc. (NYSE:ITW), and America Movil SAB de CV (NYSE:AMX). This group of stocks' market values are closest to MU's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CB,40,1288157,7 ECL,46,2099678,8 TAK,18,790266,-4 USB,48,6299135,-3 AMAT,58,2461809,2 ITW,35,565341,1 AMX,11,97994,0 Average,36.6,1943197,1.6 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 36.6 hedge funds with bullish positions and the average amount invested in these stocks was $1943 million. That figure was $4286 million in MU's case. Applied Materials, Inc. (NASDAQ:AMAT) is the most popular stock in this table. On the other hand America Movil SAB de CV (NYSE:AMX) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Micron Technology, Inc. (NASDAQ:MU) is more popular among hedge funds. Our overall hedge fund sentiment score for MU is 71.8. 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 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 28.2% in 2020 through August 24th and still beat the market by 20.6 percentage points. Unfortunately MU wasn't nearly as popular as these 10 stocks and hedge funds that were betting on MU were disappointed as the stock returned -15.1% since the end of the second quarter 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 most of these stocks already outperformed the market in 2020.

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

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