- Oops!Something went wrong.Please try again later.
At Insider Monkey, we pore over the filings of nearly 817 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we've gathered as a result gives us access to a wealth of collective knowledge based on these firms' portfolio holdings as of September 30. In this article, we will use that wealth of knowledge to determine whether or not Texas Instruments Incorporated (NASDAQ:TXN) makes for a good investment right now.
Is TXN a good stock to buy now? Hedge fund interest in Texas Instruments Incorporated (NASDAQ:TXN) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that TXN isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as BHP Group (NYSE:BHP), Charter Communications, Inc. (NASDAQ:CHTR), and Sanofi (NYSE:SNY) to gather more data points.
Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 66 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Ric Dillon of Diamond Hill Capital
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets. Tesla’s stock price skyrocketed, yet lithium prices are still below their 2019 highs. So, we are checking out this lithium stock right now. We go through lists like the 15 best blue chip stocks to buy to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. With all of this in mind we're going to take a look at the fresh hedge fund action encompassing Texas Instruments Incorporated (NASDAQ:TXN).
What does smart money think about Texas Instruments Incorporated (NASDAQ:TXN)?
At third quarter's end, a total of 55 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards TXN over the last 21 quarters. With the smart money's positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
Among these funds, Generation Investment Management held the most valuable stake in Texas Instruments Incorporated (NASDAQ:TXN), which was worth $527.7 million at the end of the third quarter. On the second spot was AQR Capital Management which amassed $375.3 million worth of shares. Diamond Hill Capital, Adage Capital Management, and Citadel Investment Group 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 Cavalry Asset Management allocated the biggest weight to Texas Instruments Incorporated (NASDAQ:TXN), around 6.74% of its 13F portfolio. Heathbridge Capital Management is also relatively very bullish on the stock, dishing out 5.96 percent of its 13F equity portfolio to TXN.
Since Texas Instruments Incorporated (NASDAQ:TXN) has faced declining sentiment from the aggregate hedge fund industry, logic holds that there was a specific group of hedgies that slashed their entire stakes in the third quarter. It's worth mentioning that Anand Parekh's Alyeska Investment Group dropped the largest investment of all the hedgies monitored by Insider Monkey, comprising an estimated $142.1 million in stock. Kevin Cottrell and Chris LaSusa's fund, KCL Capital, also cut its stock, about $19 million worth. These transactions are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's now take a look at hedge fund activity in other stocks similar to Texas Instruments Incorporated (NASDAQ:TXN). We will take a look at BHP Group (NYSE:BHP), Charter Communications, Inc. (NASDAQ:CHTR), Sanofi (NYSE:SNY), Lowe's Companies, Inc. (NYSE:LOW), Linde plc (NYSE:LIN), Shopify Inc (NYSE:SHOP), and Royal Dutch Shell plc (NYSE:RDS). This group of stocks' market valuations are similar to TXN's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BHP,18,710662,2 CHTR,88,11998879,-8 SNY,20,1244537,-4 LOW,83,6564097,-6 LIN,60,3554875,8 SHOP,81,7515141,24 RDS,31,853456,-3 Average,54.4,4634521,1.9 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 54.4 hedge funds with bullish positions and the average amount invested in these stocks was $4635 million. That figure was $2079 million in TXN's case. Charter Communications, Inc. (NASDAQ:CHTR) is the most popular stock in this table. On the other hand BHP Group (NYSE:BHP) is the least popular one with only 18 bullish hedge fund positions. Texas Instruments Incorporated (NASDAQ:TXN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for TXN is 58.9. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 31.6% in 2020 through December 2nd and still beat the market by 16 percentage points. Hedge funds were also right about betting on TXN as the stock returned 14.8% since the end of Q3 (through 12/2) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Get real-time email alerts: Follow Texas Instruments Inc (NASDAQ:TXN)
Disclosure: None. This article was originally published at Insider Monkey.