There are several ways to beat the market, and investing in small cap stocks has historically been one of them. We like to improve the odds of beating the market further by examining what famous hedge fund operators such as Jeff Ubben, George Soros and Carl Icahn think. Those hedge fund operators make billions of dollars each year by hiring the best and the brightest to do research on stocks, including small cap stocks that big brokerage houses simply don't cover. Because of Carl Icahn and other elite funds' exemplary historical records, we pay attention to their small cap picks. In this article, we use hedge fund filing data to analyze Koninklijke Philips NV (NYSE:PHG).
Koninklijke Philips NV (NYSE:PHG) has seen a decrease in hedge fund interest lately. Our calculations also showed that PHG isn't among the 30 most popular stocks among hedge funds (see the video at the end of this article).
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 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 25.7% through September 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
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. We're going to review the fresh hedge fund action encompassing Koninklijke Philips NV (NYSE:PHG).
What have hedge funds been doing with Koninklijke Philips NV (NYSE:PHG)?
At the end of the second quarter, a total of 8 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -27% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards PHG over the last 16 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.
Of the funds tracked by Insider Monkey, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital has the number one position in Koninklijke Philips NV (NYSE:PHG), worth close to $154.3 million, accounting for 0.3% of its total 13F portfolio. Coming in second is Renaissance Technologies, managed by Jim Simons, which holds a $20.6 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Some other members of the smart money that hold long positions include John Overdeck and David Siegel's Two Sigma Advisors, Israel Englander's Millennium Management and Ed Beddow and William Tichy's Beddow Capital Management.
Due to the fact that Koninklijke Philips NV (NYSE:PHG) has witnessed declining sentiment from the aggregate hedge fund industry, logic holds that there was a specific group of fund managers that decided to sell off their entire stakes last quarter. Intriguingly, Dmitry Balyasny's Balyasny Asset Management dumped the largest position of the 750 funds followed by Insider Monkey, valued at close to $8.2 million in stock, and Martin D. Sass's MD Sass was right behind this move, as the fund cut about $4.3 million worth. These moves are important to note, as aggregate hedge fund interest dropped by 3 funds last quarter.
Let's also examine hedge fund activity in other stocks similar to Koninklijke Philips NV (NYSE:PHG). These stocks are Tesla Inc. (NASDAQ:TSLA), The Travelers Companies, Inc. (NYSE:TRV), Worldpay, Inc. (NYSE:WP), and Roper Technologies, Inc. (NYSE:ROP). This group of stocks' market caps are closest to PHG's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TSLA,37,711450,5 TRV,26,1391312,-3 WP,84,5780416,9 ROP,35,944295,13 Average,45.5,2206868,6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 45.5 hedge funds with bullish positions and the average amount invested in these stocks was $2207 million. That figure was $201 million in PHG's case. Worldpay, Inc. (NYSE:WP) is the most popular stock in this table. On the other hand The Travelers Companies, Inc. (NYSE:TRV) is the least popular one with only 26 bullish hedge fund positions. Compared to these stocks Koninklijke Philips NV (NYSE:PHG) is even less popular than TRV. Hedge funds clearly dropped the ball on PHG as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. 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. A small number of hedge funds were also right about betting on PHG as the stock returned 5.9% during the third quarter and outperformed the market by an even larger margin. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.