Is STMicroelectronics N.V. (NYSE:STM) a good equity to bet on right now? We like to check what the smart money thinks first before doing extensive research. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It's not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Is STMicroelectronics N.V. (NYSE:STM) a healthy stock for your portfolio? Investors who are in the know are in an optimistic mood. The number of long hedge fund positions rose by 3 lately. Our calculations also showed that STM isn't among the 30 most popular stocks among hedge funds.
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 30.9% through May 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let's check out the latest hedge fund action regarding STMicroelectronics N.V. (NYSE:STM).
How are hedge funds trading STMicroelectronics N.V. (NYSE:STM)?
At Q1's end, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a change of 27% from one quarter earlier. On the other hand, there were a total of 12 hedge funds with a bullish position in STM a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Arrowstreet Capital held the most valuable stake in STMicroelectronics N.V. (NYSE:STM), which was worth $66.8 million at the end of the first quarter. On the second spot was KCL Capital which amassed $18.6 million worth of shares. Moreover, Renaissance Technologies, Sensato Capital Management, and Citadel Investment Group were also bullish on STMicroelectronics N.V. (NYSE:STM), allocating a large percentage of their portfolios to this stock.
Now, key hedge funds were leading the bulls' herd. KCL Capital, managed by Kevin Cottrell and Chris LaSusa, assembled the largest position in STMicroelectronics N.V. (NYSE:STM). KCL Capital had $18.6 million invested in the company at the end of the quarter. Joe DiMenna's ZWEIG DIMENNA PARTNERS also initiated a $1.9 million position during the quarter. The following funds were also among the new STM investors: Matthew Tewksbury's Stevens Capital Management, Dmitry Balyasny's Balyasny Asset Management, and Mike Vranos's Ellington.
Let's go over hedge fund activity in other stocks similar to STMicroelectronics N.V. (NYSE:STM). These stocks are The J.M. Smucker Company (NYSE:SJM), Telecom Italia S.p.A. (NYSE:TI), Godaddy Inc (NYSE:GDDY), and Citrix Systems, Inc. (NASDAQ:CTXS). This group of stocks' market caps resemble STM's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SJM,26,574357,6 TI,1,4809,-2 GDDY,48,2821575,5 CTXS,34,2131744,-2 Average,27.25,1383121,1.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 27.25 hedge funds with bullish positions and the average amount invested in these stocks was $1383 million. That figure was $120 million in STM's case. Godaddy Inc (NYSE:GDDY) is the most popular stock in this table. On the other hand Telecom Italia S.p.A. (NYSE:TI) is the least popular one with only 1 bullish hedge fund positions. STMicroelectronics N.V. (NYSE:STM) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. A small number of hedge funds were also right about betting on STM as the stock returned 12.1% during the same time frame and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.