Concerns over rising interest rates and expected further rate increases have hit several stocks hard during the fourth quarter of 2018. Trends reversed 180 degrees during the first half of 2019 amid Powell's pivot and optimistic expectations towards a trade deal with China. Hedge funds and institutional investors tracked by Insider Monkey usually invest a disproportionate amount of their portfolios in smaller cap stocks. We have been receiving indications that hedge funds were increasing their overall exposure in the second quarter and this is one of the factors behind the recent movements in major indices. In this article, we will take a closer look at hedge fund sentiment towards Corning Incorporated (NYSE:GLW).
Corning Incorporated (NYSE:GLW) investors should pay attention to a decrease in hedge fund interest recently. GLW was in 26 hedge funds' portfolios at the end of the second quarter of 2019. There were 37 hedge funds in our database with GLW positions at the end of the previous quarter. Our calculations also showed that GLW isn't among the 30 most popular stocks among hedge funds. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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' 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 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 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.
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. Let's go over the new hedge fund action encompassing Corning Incorporated (NYSE:GLW).
What does smart money think about Corning Incorporated (NYSE:GLW)?
At the end of the second quarter, a total of 26 of the hedge funds tracked by Insider Monkey were long this stock, a change of -30% from the first quarter of 2019. Below, you can check out the change in hedge fund sentiment towards GLW over the last 16 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Corning Incorporated (NYSE:GLW) was held by Two Sigma Advisors, which reported holding $97.7 million worth of stock at the end of March. It was followed by Yacktman Asset Management with a $40.6 million position. Other investors bullish on the company included Adage Capital Management, Citadel Investment Group, and Winton Capital Management.
Due to the fact that Corning Incorporated (NYSE:GLW) has faced a decline in interest from hedge fund managers, we can see that there exists a select few hedgies that elected to cut their positions entirely in the second quarter. Interestingly, Renaissance Technologies dumped the biggest stake of the "upper crust" of funds monitored by Insider Monkey, comprising close to $66.5 million in stock, and Ken Griffin's Citadel Investment Group was right behind this move, as the fund dumped about $40.1 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest was cut by 11 funds in the second quarter.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Corning Incorporated (NYSE:GLW) but similarly valued. We will take a look at Wipro Limited (NYSE:WIT), Brown-Forman Corporation (NYSE:BF), First Data Corporation (NYSE:FDC), and SBA Communications Corporation (NASDAQ:SBAC). All of these stocks' market caps match GLW's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WIT,14,145135,3 BF,28,698333,4 FDC,56,3664439,-1 SBAC,31,1594237,2 Average,32.25,1525536,2 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 32.25 hedge funds with bullish positions and the average amount invested in these stocks was $1526 million. That figure was $279 million in GLW's case. First Data Corporation (NYSE:FDC) is the most popular stock in this table. On the other hand Wipro Limited (NYSE:WIT) is the least popular one with only 14 bullish hedge fund positions. Corning Incorporated (NYSE:GLW) 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately GLW wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); GLW investors were disappointed as the stock returned -13.5% 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 in 2019.
Disclosure: None. This article was originally published at Insider Monkey.