Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the first quarter. You can find articles about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Xerox Holdings Corporation (NYSE:XRX) based on that data.
Xerox Holdings Corporation (NYSE:XRX) was in 41 hedge funds' portfolios at the end of the first quarter of 2020. XRX investors should be aware of an increase in hedge fund interest in recent months. There were 39 hedge funds in our database with XRX holdings at the end of the previous quarter. Our calculations also showed that XRX isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 44 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
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Paul Marshall of Marshall Wace[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we are still not out of the woods in terms of the coronavirus pandemic. So, we checked out this successful trader’s “corona catalyst plays“. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let's take a peek at the recent hedge fund action regarding Xerox Holdings Corporation (NYSE:XRX).
How are hedge funds trading Xerox Holdings Corporation (NYSE:XRX)?
Heading into the second quarter of 2020, a total of 41 of the hedge funds tracked by Insider Monkey were long this stock, a change of 5% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards XRX over the last 18 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Icahn Capital LP held the most valuable stake in Xerox Holdings Corporation (NYSE:XRX), which was worth $444.3 million at the end of the third quarter. On the second spot was AQR Capital Management which amassed $162.7 million worth of shares. TOMS Capital, TIG Advisors, and HBK Investments 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 Mason Capital Management allocated the biggest weight to Xerox Holdings Corporation (NYSE:XRX), around 6.78% of its 13F portfolio. Icahn Capital LP is also relatively very bullish on the stock, designating 2.47 percent of its 13F equity portfolio to XRX.
With a general bullishness amongst the heavyweights, some big names were leading the bulls' herd. Mason Capital Management, managed by Kenneth Mario Garschina, established the most valuable position in Xerox Holdings Corporation (NYSE:XRX). Mason Capital Management had $21.3 million invested in the company at the end of the quarter. Steve Cohen's Point72 Asset Management also made a $13.1 million investment in the stock during the quarter. The other funds with new positions in the stock are Joseph Samuels's Islet Management, Paul Marshall and Ian Wace's Marshall Wace LLP, and Robert Emil Zoellner's Alpine Associates.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Xerox Holdings Corporation (NYSE:XRX) but similarly valued. We will take a look at Autoliv Inc. (NYSE:ALV), Black Hills Corporation (NYSE:BKH), Virtu Financial Inc (NASDAQ:VIRT), and Herbalife Nutrition Ltd. (NYSE:HLF). This group of stocks' market values resemble XRX's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ALV,15,366576,-6 BKH,18,170302,-6 VIRT,17,72830,2 HLF,31,2056361,-1 Average,20.25,666517,-2.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.25 hedge funds with bullish positions and the average amount invested in these stocks was $667 million. That figure was $873 million in XRX's case. Herbalife Nutrition Ltd. (NYSE:HLF) is the most popular stock in this table. On the other hand Autoliv Inc. (NYSE:ALV) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks Xerox Holdings Corporation (NYSE:XRX) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May and still beat the market by 13.2 percentage points. Unfortunately XRX wasn't nearly as popular as these 10 stocks and hedge funds that were betting on XRX were disappointed as the stock returned -16.2% during the second quarter (through the end of May) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Disclosure: None. This article was originally published at Insider Monkey.