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Hedge Funds Never Been This Bullish On Intel Corporation (INTC)

·6 min read

Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Intel Corporation (NASDAQ:INTC).

Is Intel Corporation (NASDAQ:INTC) a marvelous investment right now? Money managers were betting on the stock. The number of bullish hedge fund positions moved up by 11 recently. Intel Corporation (NASDAQ:INTC) was in 83 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic was previously 78. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that INTC isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 72 hedge funds in our database with INTC holdings at the end of December.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still 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). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.


Seth Klarman of Baupost Group

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best hydrogen fuel cell stocks to pick the next Tesla that will deliver a 10x return. 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 Intel Corporation (NASDAQ:INTC).

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

At Q1's end, a total of 83 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 15% from the previous quarter. The graph below displays the number of hedge funds with bullish position in INTC over the last 23 quarters. With hedge funds' capital changing hands, there exists a select group of notable hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).

Is INTC A Good Stock To Buy?
Is INTC A Good Stock To Buy?

The largest stake in Intel Corporation (NASDAQ:INTC) was held by Fisher Asset Management, which reported holding $1932.5 million worth of stock at the end of December. It was followed by Baupost Group with a $1491.5 million position. Other investors bullish on the company included AQR Capital Management, Citadel Investment Group, and Citadel Investment Group. In terms of the portfolio weights assigned to each position MFP Investors allocated the biggest weight to Intel Corporation (NASDAQ:INTC), around 15.66% of its 13F portfolio. Pennant Capital Management is also relatively very bullish on the stock, setting aside 12.18 percent of its 13F equity portfolio to INTC.

As aggregate interest increased, key money managers were breaking ground themselves. Matrix Capital Management, managed by David Goel and Paul Ferri, established the most outsized position in Intel Corporation (NASDAQ:INTC). Matrix Capital Management had $193.4 million invested in the company at the end of the quarter. Leon Shaulov's Maplelane Capital also made a $117.1 million investment in the stock during the quarter. The following funds were also among the new INTC investors: John Hurley's Cavalry Asset Management, Dmitry Balyasny's Balyasny Asset Management, and Josh Resnick's Jericho Capital Asset Management.

Let's check out hedge fund activity in other stocks similar to Intel Corporation (NASDAQ:INTC). We will take a look at ASML Holding N.V. (NASDAQ:ASML), Comcast Corporation (NASDAQ:CMCSA), Verizon Communications Inc. (NYSE:VZ), Exxon Mobil Corporation (NYSE:XOM), Netflix, Inc. (NASDAQ:NFLX), Adobe Inc. (NASDAQ:ADBE), and The Coca-Cola Company (NYSE:KO). This group of stocks' market values resemble INTC's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ASML,35,3827143,5 CMCSA,88,9762151,4 VZ,69,11383576,2 XOM,65,2770198,2 NFLX,110,14159343,-6 ADBE,107,12111692,-7 KO,61,24903946,-1 Average,76.4,11274007,-0.1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 76.4 hedge funds with bullish positions and the average amount invested in these stocks was $11274 million. That figure was $7617 million in INTC's case. Netflix, Inc. (NASDAQ:NFLX) is the most popular stock in this table. On the other hand ASML Holding N.V. (NASDAQ:ASML) is the least popular one with only 35 bullish hedge fund positions. Intel Corporation (NASDAQ:INTC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for INTC is 72. 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 positive signal but 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 17.2% in 2021 through June 11th and beat the market again by 3.3 percentage points. Unfortunately INTC wasn't nearly as popular as these 5 stocks and hedge funds that were betting on INTC were disappointed as the stock returned -9.1% since the end of March (through 6/11) 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 many of these stocks already outperformed the market since 2019.

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

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