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Does Motorola Solutions Inc (MSI) Represent a Good Investment?

Reputable billionaire investors such as Nelson Peltz and David Tepper generate exorbitant profits for their wealthy accredited investors (a minimum of $1 million in investable assets would be required to invest in a hedge fund and most successful hedge funds won’t accept your savings unless you commit at least $5 million) by pinpointing winning small-cap stocks. There is little or no publicly-available information at all on small companies, which makes it hard for an individual investor to pin down a ‘winner’ within the small-cap collection of stocks. However, hedge funds and other big asset managers can do the due diligence and analysis for you instead, thanks to their highly-skilled research teams and unlimited resources to conduct an appropriate evaluation process. Looking for potential winners within the small-cap galaxy of stocks? We believe following the smart money is a good starting point.

Motorola Solutions Inc (NYSE:MSI) investors should be aware of a decrease in the activity from the world’s largest hedge funds of late. 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 CenturyLink, Inc. (NYSE:CTL), Tyco International PLC (NYSE:TYC), and Pearson PLC (ADR) (NYSE:PSO) to gather more data points.

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In the eyes of most market participants, hedge funds are assumed to be worthless, outdated investment tools of the past. While there are over 8000 funds trading at the moment, our experts choose to focus on the upper echelon of this club, around 700 funds. These hedge fund managers control most of the hedge fund industry’s total capital, and by shadowing their finest picks, Insider Monkey has spotted a number of investment strategies that have historically outstripped the market. Insider Monkey’s small-cap hedge fund strategy outperformed the S&P 500 index by 12 percentage points per year for a decade in their back tests.

Now, let’s take a look at the recent action regarding Motorola Solutions Inc (NYSE:MSI).

What does the smart money think about Motorola Solutions Inc (NYSE:MSI)?

At the end of Q3, a total of 27 of the hedge funds tracked by Insider Monkey were bullish in this stock, a decline of 13% from the previous quarter. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).

When looking at the hedgies followed by Insider Monkey, ValueAct Capital, managed by Jeffrey Ubben, holds the biggest position in Motorola Solutions Inc (NYSE:MSI). ValueAct Capital has a $1.20 billion position in the stock, comprising 7% of its 13F portfolio. On ValueAct Capital’s heels is Orbis Investment Management, managed by William B. Gray, which held a $1.01 billion position; the fund has 8.6% of its 13F portfolio invested in the stock. Remaining peers that hold long positions comprise Leon Cooperman’s Omega Advisors, Christopher Lord’s Criterion Capital and Ken Griffin’s Citadel Investment Group.

Since Motorola Solutions Inc (NYSE:MSI) has experienced bearish sentiment from the entirety of the hedge funds we track, logic holds that there exists a select few fund managers who sold off their positions entirely at the end of the third quarter. Interestingly, Eric Mindich’s Eton Park Capital said goodbye to the largest position of the “upper crust” of funds monitored by Insider Monkey, worth close to $56.5 million in stock. First Eagle Investment Management also cut its stock, about $49.8 million worth. These moves are interesting, as total hedge fund interest was cut by 4 funds at the end of the third quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Motorola Solutions Inc (NYSE:MSI) but similarly valued. We will take a look at CenturyLink, Inc. (NYSE:CTL), Tyco International Ltd. (NYSE:TYC), Pearson PLC (ADR) (NYSE:PSO), and Weyerhaeuser Company (NYSE:WY). This group of stocks’ market valuations resemble Motorola Solutions Inc (NYSE:MSI)’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CTL 24 297012 -7
TYC 35 1009794 -4
PSO 4 22557 -5
WY 30 1054935 1

As you can see these stocks had an average of 23 hedge funds with bullish positions and the average amount invested in these stocks was $596 million.That figure was $3.00 billion in Motorola Solutions Inc (NYSE:MSI)’s case. Tyco International Ltd. (NYSE:TYC) is the most popular stock in this table. On the other hand Pearson PLC (ADR) (NYSE:PSO) is the least popular one with only 4 bullish hedge fund positions. Motorola Solutions Inc (NYSE:MSI) is not the most popular stock in this group, but hedge fund interest is still above average and the decline in the number of funds with long positions is also smaller than for most of the stocks from the table. This could suggest that Motorola Solutions might be an interesting investment, but a further analysis is required before making a decision regarding the stock.

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