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Hedge Funds Cashing Out Of Motorola Solutions Inc (MSI)

Asma UL Husna

In this article you are going to find out whether hedge funds think Motorola Solutions Inc (NYSE:MSI) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It's not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Motorola Solutions Inc (NYSE:MSI) has seen a decrease in enthusiasm from smart money of late. Our calculations also showed that MSI 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 today’s marketplace there are tons of indicators stock market investors can use to analyze stocks. A couple of the most underrated indicators are hedge fund and insider trading signals. Our experts have shown that, historically, those who follow the top picks of the elite fund managers can beat their index-focused peers by a significant amount (see the details here).

[caption id="attachment_26286" align="aligncenter" width="359"] Jim Simons Founder of Renaissance Technologies[/caption]

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At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020's unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. 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 let's take a gander at the latest hedge fund action surrounding Motorola Solutions Inc (NYSE:MSI).

How have hedgies been trading Motorola Solutions Inc (NYSE:MSI)?

Heading into the second quarter of 2020, a total of 34 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -17% from one quarter earlier. On the other hand, there were a total of 29 hedge funds with a bullish position in MSI a year ago. With the smart money's positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Phill Gross and Robert Atchinson's Adage Capital Management has the number one position in Motorola Solutions Inc (NYSE:MSI), worth close to $53.6 million, amounting to 0.2% of its total 13F portfolio. Sitting at the No. 2 spot is Renaissance Technologies, holding a $49.3 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other professional money managers that are bullish include D. E. Shaw's D E Shaw, Israel Englander's Millennium Management and Peter S. Park's Park West Asset Management. In terms of the portfolio weights assigned to each position Park West Asset Management allocated the biggest weight to Motorola Solutions Inc (NYSE:MSI), around 1.8% of its 13F portfolio. RiverPark Advisors is also relatively very bullish on the stock, setting aside 1.47 percent of its 13F equity portfolio to MSI.

Seeing as Motorola Solutions Inc (NYSE:MSI) has experienced falling interest from the aggregate hedge fund industry, it's easy to see that there was a specific group of hedgies that elected to cut their positions entirely in the third quarter. Interestingly, Robert Boucai's Newbrook Capital Advisors dumped the largest position of all the hedgies tracked by Insider Monkey, totaling an estimated $64.3 million in stock. Brandon Haley's fund, Holocene Advisors, also dumped its stock, about $47.4 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest fell by 7 funds in the third quarter.

Let's also examine hedge fund activity in other stocks similar to Motorola Solutions Inc (NYSE:MSI). These stocks are Paychex, Inc. (NASDAQ:PAYX), O'Reilly Automotive Inc (NASDAQ:ORLY), KLA Corporation (NASDAQ:KLAC), and Spotify Technology S.A. (NYSE:SPOT). This group of stocks' market caps are closest to MSI's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PAYX,41,643102,5 ORLY,60,2486584,-4 KLAC,26,382931,-4 SPOT,40,1124522,2 Average,41.75,1159285,-0.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 41.75 hedge funds with bullish positions and the average amount invested in these stocks was $1159 million. That figure was $309 million in MSI's case. O'Reilly Automotive Inc (NASDAQ:ORLY) is the most popular stock in this table. On the other hand KLA Corporation (NASDAQ:KLAC) is the least popular one with only 26 bullish hedge fund positions. Motorola Solutions Inc (NYSE:MSI) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and 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 8.3% in 2020 through the end of May and surpassed the market by 13.2 percentage points. Unfortunately MSI wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); MSI investors were disappointed as the stock returned 1.8% during 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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