Is Microsoft Corporation (NASDAQ:MSFT) a good investment right now? We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Microsoft Corporation (NASDAQ:MSFT) investors should be aware of a decrease in hedge fund sentiment in recent months. Nevertheless, our calculations also showed that MSFT still ranks #2 among the 30 most popular stocks among hedge funds.
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. Now we're going to go over the recent hedge fund action regarding Microsoft Corporation (NASDAQ:MSFT).
[caption id="attachment_189616" align="aligncenter" width="450"] Bill Gates[/caption]
What have hedge funds been doing with Microsoft Corporation (NASDAQ:MSFT)?
Heading into the third quarter of 2019, a total of 167 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -2% from one quarter earlier. On the other hand, there were a total of 161 hedge funds with a bullish position in MSFT a year ago. With the smart money's positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).
The largest stake in Microsoft Corporation (NASDAQ:MSFT) was held by Fisher Asset Management, which reported holding $2789.3 million worth of stock at the end of March. It was followed by Eagle Capital Management with a $2515.4 million position. Other investors bullish on the company included AQR Capital Management, Tiger Global Management LLC, and Adage Capital Management.
Due to the fact that Microsoft Corporation (NASDAQ:MSFT) has witnessed bearish sentiment from hedge fund managers, it's easy to see that there were a few hedge funds that slashed their full holdings by the end of the third quarter. Interestingly, Michael Larson's Bill & Melinda Gates Foundation Trust dumped the largest position of the 700 funds watched by Insider Monkey, totaling close to $943.5 million in stock. Zach Schreiber's fund, Point State Capital, also said goodbye to its stock, about $333.9 million worth. These transactions are interesting, as total hedge fund interest fell by 3 funds by the end of the second quarter.
Let's also examine hedge fund activity in other stocks similar to Microsoft Corporation (NASDAQ:MSFT). We will take a look at Amazon.com, Inc. (NASDAQ:AMZN), Apple Inc. (NASDAQ:AAPL), Alphabet Inc (NASDAQ:GOOGL), and Alphabet Inc (NASDAQ:GOOG). This group of stocks' market caps are similar to MSFT's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AMZN,163,24196806,-3 AAPL,95,57822722,-3 GOOGL,129,10109482,-18 GOOG,126,11503332,-7 Average,128.25,25908086,-7.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 128.25 hedge funds with bullish positions and the average amount invested in these stocks was $25908 million. That figure was $25831 million in MSFT's case. Amazon.com, Inc. (NASDAQ:AMZN) is the most popular stock in this table. On the other hand Apple Inc. (NASDAQ:AAPL) is the least popular one with only 95 bullish hedge fund positions. Compared to these stocks Microsoft Corporation (NASDAQ:MSFT) is more popular among hedge funds. 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. Hedge funds were also right about betting on MSFT as the stock returned 4.1% during the third quarter and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.