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 752 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 September 30th. In this article we look at what those investors think of Morgan Stanley (NYSE:MS).
Is Morgan Stanley (NYSE:MS) a healthy stock for your portfolio? The smart money is taking a bullish view. The number of long hedge fund bets increased by 1 lately. Our calculations also showed that MS isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). MS was in 61 hedge funds' portfolios at the end of September. There were 60 hedge funds in our database with MS holdings at the end of the previous quarter. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_30493" align="aligncenter" width="498"] Jeffrey Ubben of ValueAct Capital[/caption]
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. Let's go over the latest hedge fund action encompassing Morgan Stanley (NYSE:MS).
Hedge fund activity in Morgan Stanley (NYSE:MS)
At Q3's end, a total of 61 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 2% from the previous quarter. By comparison, 51 hedge funds held shares or bullish call options in MS a year ago. With hedgies' capital changing hands, there exists a few notable hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Jeffrey Ubben's ValueAct Capital has the most valuable position in Morgan Stanley (NYSE:MS), worth close to $949.4 million, corresponding to 10.2% of its total 13F portfolio. The second largest stake is held by Eagle Capital Management, led by Boykin Curry, holding a $661.3 million position; 2.3% of its 13F portfolio is allocated to the stock. Other professional money managers that are bullish encompass Richard S. Pzena's Pzena Investment Management, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital and Ric Dillon's Diamond Hill Capital. In terms of the portfolio weights assigned to each position Springhouse Capital Management allocated the biggest weight to Morgan Stanley (NYSE:MS), around 10.37% of its portfolio. ValueAct Capital is also relatively very bullish on the stock, dishing out 10.24 percent of its 13F equity portfolio to MS.
Consequently, specific money managers were leading the bulls' herd. Carlson Capital, managed by Clint Carlson, initiated the most outsized position in Morgan Stanley (NYSE:MS). Carlson Capital had $69.1 million invested in the company at the end of the quarter. Edgar Wachenheim's Greenhaven Associates also initiated a $11.7 million position during the quarter. The other funds with new positions in the stock are Ravi Chopra's Azora Capital, Perella Weinberg Partners, and Karim Abbadi and Edward McBride's Centiva Capital.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Morgan Stanley (NYSE:MS) but similarly valued. These stocks are Fiserv, Inc. (NASDAQ:FISV), Celgene Corporation (NASDAQ:CELG), Automatic Data Processing, Inc. (NASDAQ:ADP), and Duke Energy Corporation (NYSE:DUK). This group of stocks' market values are closest to MS's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FISV,73,3874672,25 CELG,93,12535017,5 ADP,49,3101422,6 DUK,28,1316998,-4 Average,60.75,5207027,8 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 60.75 hedge funds with bullish positions and the average amount invested in these stocks was $5207 million. That figure was $4163 million in MS's case. Celgene Corporation (NASDAQ:CELG) is the most popular stock in this table. On the other hand Duke Energy Corporation (NYSE:DUK) is the least popular one with only 28 bullish hedge fund positions. Morgan Stanley (NYSE:MS) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on MS as the stock returned 16.8% during the fourth quarter (through the end of November) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.