Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the fourth quarter. You can find articles about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of International Business Machines Corp. (NYSE:IBM) based on that data.
Is IBM stock a buy or sell? Money managers were getting more optimistic. The number of bullish hedge fund positions went up by 11 lately. International Business Machines Corp. (NYSE:IBM) was in 51 hedge funds' portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 63. Our calculations also showed that IBM isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings). There were 40 hedge funds in our database with IBM positions at the end of the third quarter.
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' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 124 percentage points since March 2017 (see the details here).
TUDOR INVESTMENT CORP
Paul Tudor Jones of Tudor Investment Corp
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. Recently Oregon became the first state to legalize psychedelic mushrooms which are shown to have promising results in treating depression, addiction, and PTSD in early stage academic studies. So, we are checking out this psychedelic drug stock idea right now. We go through lists like the 10 best biotech stocks to invest in to pick the next stock that will deliver a 10x return. 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 homepage (or at the end of this article).With all of this in mind we're going to check out the fresh hedge fund action encompassing International Business Machines Corp. (NYSE:IBM).
Do Hedge Funds Think IBM Is A Good Stock To Buy Now?
Heading into the first quarter of 2021, a total of 51 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 28% from the third quarter of 2020. By comparison, 50 hedge funds held shares or bullish call options in IBM a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Arrowstreet Capital was the largest shareholder of International Business Machines Corp. (NYSE:IBM), with a stake worth $345 million reported as of the end of December. Trailing Arrowstreet Capital was AQR Capital Management, which amassed a stake valued at $185.5 million. Adage Capital Management, Millennium Management, and Voleon Capital 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 Voleon Capital allocated the biggest weight to International Business Machines Corp. (NYSE:IBM), around 4.72% of its 13F portfolio. Beddow Capital Management is also relatively very bullish on the stock, setting aside 3.6 percent of its 13F equity portfolio to IBM.
As industrywide interest jumped, specific money managers have been driving this bullishness. Voleon Capital, managed by Michael Kharitonov and Jon David McAuliffe, established the biggest position in International Business Machines Corp. (NYSE:IBM). Voleon Capital had $44.2 million invested in the company at the end of the quarter. Renaissance Technologies also made a $35.1 million investment in the stock during the quarter. The other funds with brand new IBM positions are Mikal Patel's Oribel Capital Management, Nicholas Bagnall's Te Ahumairangi Investment Management, and Paul Tudor Jones's Tudor Investment Corp.
Let's now take a look at hedge fund activity in other stocks similar to International Business Machines Corp. (NYSE:IBM). We will take a look at Advanced Micro Devices, Inc. (NASDAQ:AMD), TOTAL SE (NYSE:TOT), BlackRock, Inc. (NYSE:BLK), Raytheon Technologies Corp (NYSE:RTX), ServiceNow Inc (NYSE:NOW), HSBC Holdings plc (NYSE:HSBC), and Intuit Inc. (NASDAQ:INTU). This group of stocks' market caps match IBM's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AMD,74,6688629,3 TOT,14,980330,-4 BLK,53,1155646,14 RTX,59,2728602,4 NOW,96,6849288,14 HSBC,14,330089,4 INTU,68,4693235,14 Average,54,3346546,7 [/table]
As you can see these stocks had an average of 54 hedge funds with bullish positions and the average amount invested in these stocks was $3347 million. That figure was $998 million in IBM's case. ServiceNow Inc (NYSE:NOW) is the most popular stock in this table. On the other hand TOTAL SE (NYSE:TOT) is the least popular one with only 14 bullish hedge fund positions. International Business Machines Corp. (NYSE:IBM) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for IBM is 56.8. 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. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. 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 5.3% in 2021 through March 19th and surpassed the market again by 0.8 percentage points. Unfortunately IBM wasn't nearly as popular as these 30 stocks (hedge fund sentiment was quite bearish); IBM investors were disappointed as the stock returned 3.8% since the end of December (through 3/19) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.
