Hedge Funds Have Never Been This Bullish On Motorola Solutions Inc (MSI)
Amid an overall bull market, many stocks that smart money investors were collectively bullish on surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. That's why we weren't surprised when hedge funds’ top 20 large-cap stock picks generated a return of 37.6% in 2019 (through the end of November) and outperformed the broader market benchmark by 9.9 percentage points.This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.
Is Motorola Solutions Inc (NYSE:MSI) an attractive investment right now? Investors who are in the know are taking an optimistic view. The number of bullish hedge fund positions advanced by 8 in recent months. Our calculations also showed that MSI isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). MSI was in 33 hedge funds' portfolios at the end of September. There were 25 hedge funds in our database with MSI 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.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
[caption id="attachment_364882" align="aligncenter" width="450"]
Mark Kingdon of Kingdon 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 take a look at the latest hedge fund action surrounding Motorola Solutions Inc (NYSE:MSI).
How are hedge funds trading Motorola Solutions Inc (NYSE:MSI)?
Heading into the fourth quarter of 2019, a total of 33 of the hedge funds tracked by Insider Monkey were long this stock, a change of 32% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards MSI over the last 17 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Coatue Management held the most valuable stake in Motorola Solutions Inc (NYSE:MSI), which was worth $271.3 million at the end of the third quarter. On the second spot was Holocene Advisors which amassed $155.6 million worth of shares. Millennium Management, D E Shaw, and Newbrook Capital Advisors were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Clearfield Capital allocated the biggest weight to Motorola Solutions Inc (NYSE:MSI), around 8.83% of its portfolio. Newbrook Capital Advisors is also relatively very bullish on the stock, designating 4.38 percent of its 13F equity portfolio to MSI.
Now, specific money managers have jumped into Motorola Solutions Inc (NYSE:MSI) headfirst. Newbrook Capital Advisors, managed by Robert Boucai, assembled the most valuable position in Motorola Solutions Inc (NYSE:MSI). Newbrook Capital Advisors had $56.3 million invested in the company at the end of the quarter. Mark Kingdon's Kingdon Capital also initiated a $20.9 million position during the quarter. The following funds were also among the new MSI investors: James Dinan's York Capital Management, Philip Hilal's Clearfield Capital, and Simon Sadler's Segantii Capital.
Let's also examine hedge fund activity in other stocks similar to Motorola Solutions Inc (NYSE:MSI). We will take a look at Nokia Corporation (NYSE:NOK), Zimmer Biomet Holdings Inc (NYSE:ZBH), Cintas Corporation (NASDAQ:CTAS), and HP Inc. (NYSE:HPQ). 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 NOK,23,417397,-1 ZBH,44,1473799,2 CTAS,37,931398,10 HPQ,38,2031394,6 Average,35.5,1213497,4.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 35.5 hedge funds with bullish positions and the average amount invested in these stocks was $1213 million. That figure was $933 million in MSI's case. Zimmer Biomet Holdings Inc (NYSE:ZBH) is the most popular stock in this table. On the other hand Nokia Corporation (NYSE:NOK) is the least popular one with only 23 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 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. Unfortunately MSI wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); MSI investors were disappointed as the stock returned -1.8% during the first two months of the fourth 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 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
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