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Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 750 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Linde plc (NYSE:LIN).
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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. Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We're going to take a look at the fresh hedge fund action regarding Linde plc (NYSE:LIN).
Hedge fund activity in Linde plc (NYSE:LIN)
Heading into the third quarter of 2019, a total of 41 of the hedge funds tracked by Insider Monkey were long this stock, a change of 11% from the first quarter of 2019. Below, you can check out the change in hedge fund sentiment towards LIN over the last 16 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Linde plc (NYSE:LIN) was held by Polaris Capital Management, which reported holding $281.5 million worth of stock at the end of March. It was followed by Steadfast Capital Management with a $278.2 million position. Other investors bullish on the company included Diamond Hill Capital, Impax Asset Management, and Adage Capital Management.
With a general bullishness amongst the heavyweights, specific money managers were breaking ground themselves. Senator Investment Group, managed by Doug Silverman and Alexander Klabin, created the most valuable position in Linde plc (NYSE:LIN). Senator Investment Group had $100.4 million invested in the company at the end of the quarter. Daniel Sundheim's D1 Capital Partners also made a $75.3 million investment in the stock during the quarter. The other funds with brand new LIN positions are Louis Bacon's Moore Global Investments, Vince Maddi and Shawn Brennan's SIR Capital Management, and Michael Kharitonov and Jon David McAuliffe's Voleon Capital.
Let's also examine hedge fund activity in other stocks similar to Linde plc (NYSE:LIN). These stocks are AbbVie Inc (NYSE:ABBV), Sanofi (NASDAQ:SNY), AstraZeneca plc (NYSE:AZN), and Texas Instruments Incorporated (NASDAQ:TXN). This group of stocks' market caps are closest to LIN's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ABBV,55,4126440,8 SNY,25,914861,-1 AZN,24,1602389,-4 TXN,43,2046831,0 Average,36.75,2172630,0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 36.75 hedge funds with bullish positions and the average amount invested in these stocks was $2173 million. That figure was $1865 million in LIN's case. AbbVie Inc (NYSE:ABBV) is the most popular stock in this table. On the other hand AstraZeneca plc (NYSE:AZN) is the least popular one with only 24 bullish hedge fund positions. Linde plc (NYSE:LIN) 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 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately LIN wasn't nearly as popular as these 20 stocks and hedge funds that were betting on LIN were disappointed as the stock returned -3.1% during the third 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 20 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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