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Do Hedge Funds Love Linde plc (LIN)?

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·6 min read
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In this article we are going to use hedge fund sentiment as a tool and determine whether Linde plc (NYSE:LIN) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds' picks don't beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.

Linde plc (NYSE:LIN) was in 43 hedge funds' portfolios at the end of March. The all time high for this statistic is 60. LIN shareholders have witnessed a decrease in hedge fund sentiment recently. There were 50 hedge funds in our database with LIN holdings at the end of December. Our calculations also showed that LIN 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.

John Armitage Egerton Capital
John Armitage Egerton Capital

John Armitage of Egerton 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 take a gander at the key hedge fund action encompassing Linde plc (NYSE:LIN).

Do Hedge Funds Think LIN Is A Good Stock To Buy Now?

At Q1's end, a total of 43 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -14% from the fourth quarter of 2020. On the other hand, there were a total of 53 hedge funds with a bullish position in LIN a year ago. With hedge funds' sentiment swirling, there exists a few noteworthy hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).

Is LIN A Good Stock To Buy?
Is LIN A Good Stock To Buy?

The largest stake in Linde plc (NYSE:LIN) was held by Ako Capital, which reported holding $1184 million worth of stock at the end of December. It was followed by Egerton Capital Limited with a $909.6 million position. Other investors bullish on the company included Impax Asset Management, Diamond Hill Capital, and Holocene Advisors. In terms of the portfolio weights assigned to each position Ako Capital allocated the biggest weight to Linde plc (NYSE:LIN), around 14.64% of its 13F portfolio. Locust Wood Capital Advisers is also relatively very bullish on the stock, dishing out 8.03 percent of its 13F equity portfolio to LIN.

Seeing as Linde plc (NYSE:LIN) has experienced a decline in interest from the aggregate hedge fund industry, we can see that there lies a certain "tier" of fund managers that slashed their full holdings heading into Q2. Interestingly, Steve Cohen's Point72 Asset Management cut the largest investment of the 750 funds followed by Insider Monkey, totaling close to $42.2 million in stock. Renaissance Technologies, also sold off its stock, about $28.3 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest was cut by 7 funds heading into Q2.

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Linde plc (NYSE:LIN) but similarly valued. We will take a look at BHP Group (NYSE:BBL), Morgan Stanley (NYSE:MS), SAP SE (NYSE:SAP), Amgen, Inc. (NASDAQ:AMGN), HDFC Bank Limited (NYSE:HDB), Bristol Myers Squibb Company (NYSE:BMY), and Philip Morris International Inc. (NYSE:PM). This group of stocks' market valuations match LIN's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BBL,23,1353821,5 MS,79,5285168,13 SAP,19,1473996,5 AMGN,47,1001957,-2 HDB,27,1964796,-4 BMY,81,5037397,-50 PM,48,5494085,-4 Average,46.3,3087317,-5.3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 46.3 hedge funds with bullish positions and the average amount invested in these stocks was $3087 million. That figure was $4636 million in LIN's case. Bristol Myers Squibb Company (NYSE:BMY) is the most popular stock in this table. On the other hand SAP SE (NYSE:SAP) is the least popular one with only 19 bullish hedge fund positions. Linde plc (NYSE:LIN) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for LIN is 38.9. 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. 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 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 surpassed the market again by 6.1 percentage points. Unfortunately LIN wasn't nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); LIN investors were disappointed as the stock returned 1% since the end of March (through 6/18) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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