Were Hedge Funds Right About Snapping Up Microsoft Corporation (MSFT)?
We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn't mean that they don't have occasional colossal losses; they do (like Melvin Capital's recent GameStop losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Microsoft Corporation (NASDAQ:MSFT).
Is Microsoft Corporation (NASDAQ:MSFT) going to take off soon? Hedge funds were getting more bullish. The number of long hedge fund positions advanced by 24 recently. Microsoft Corporation (NASDAQ:MSFT) was in 258 hedge funds' portfolios at the end of December. The all time high for this statistic was previously 235. This means the bullish number of hedge fund positions in this stock reached a brand new all time high. Our calculations also showed that MSFT ranked #2 among the 30 most popular stocks among hedge funds (click for Q4 rankings). There were 234 hedge funds in our database with MSFT holdings at the end of September.
Ken Fisher of Fisher Asset Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the CBD market is growing at a 33% annualized rate, so we are taking a closer look at this under-the-radar hemp stock. We go through lists like the 10 best biotech stocks under $10 to identify the next stock with 10x upside potential. 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. Keeping this in mind let's take a glance at the recent hedge fund action encompassing Microsoft Corporation (NASDAQ:MSFT).
Do Hedge Funds Think MSFT Is A Good Stock To Buy Now?
At the end of the fourth quarter, a total of 258 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 10% from the third quarter of 2020. Below, you can check out the change in hedge fund sentiment towards MSFT over the last 22 quarters. With hedge funds' capital changing hands, there exists a select group of noteworthy hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).
The largest stake in Microsoft Corporation (NASDAQ:MSFT) was held by Fisher Asset Management, which reported holding $5203.3 million worth of stock at the end of December. It was followed by Fundsmith LLP with a $2685.1 million position. Other investors bullish on the company included Tiger Global Management LLC, Viking Global, and Eagle Capital Management. In terms of the portfolio weights assigned to each position Joho Capital allocated the biggest weight to Microsoft Corporation (NASDAQ:MSFT), around 28.95% of its 13F portfolio. Skye Global Management is also relatively very bullish on the stock, dishing out 25.68 percent of its 13F equity portfolio to MSFT.
Now, key money managers were breaking ground themselves. Harvard Management Co, managed by Rick Slocum, assembled the most outsized position in Microsoft Corporation (NASDAQ:MSFT). Harvard Management Co had $182.6 million invested in the company at the end of the quarter. Dmitry Balyasny's Balyasny Asset Management also made a $166.3 million investment in the stock during the quarter. The other funds with new positions in the stock are Jeffrey Talpins's Element Capital Management, Leon Shaulov's Maplelane Capital, and Brennan Diaz's Fernbridge Capital Management.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Microsoft Corporation (NASDAQ:MSFT) but similarly valued. We will take a look at Amazon.com, Inc. (NASDAQ:AMZN), Alphabet Inc (NASDAQ:GOOGL), Facebook Inc (NASDAQ:FB), Tesla Inc. (NASDAQ:TSLA), Alibaba Group Holding Limited (NYSE:BABA), Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM), and Berkshire Hathaway Inc. (NYSE:BRK-B). All of these stocks' market caps resemble MSFT's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AMZN,273,51531301,28 GOOGL,179,21902583,17 FB,242,38233910,12 TSLA,68,12308025,1 BABA,156,17892090,-10 TSM,72,11843403,5 BRK-B,110,20795968,1 Average,157.1,24929611,7.7 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 157.1 hedge funds with bullish positions and the average amount invested in these stocks was $24930 million. That figure was $52899 million in MSFT's case. Amazon.com, Inc. (NASDAQ:AMZN) is the most popular stock in this table. On the other hand Tesla Inc. (NASDAQ:TSLA) is the least popular one with only 68 bullish hedge fund positions. Microsoft Corporation (NASDAQ:MSFT) is not the most popular stock in this group but that's because of Amazon. Our overall hedge fund sentiment score for MSFT is 99.5. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.3% in 2021 through April 19th and still beat the market by 0.9 percentage points. Hedge funds were also right about betting on MSFT as the stock returned 16.6% since the end of Q4 (through 4/19) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.
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