Analyzing the moves of the world’s biggest hedge funds during the second quarter, we have identified and reported a number of significant changes. Now that the third quarter is edging to its end, we’ve taken a look at the stocks that were dumped by the most hedge funds and how they have fared since then. So let’s take a look and see if the smart money were right to dump these stocks.
Through extensive research, we determined that imitating some of the picks of hedge funds and other institutional investors can help generate market-beating returns over the long run. The key is to focus on the small-cap picks of these investors, since they are usually less followed by the broader market and are less price-efficient. Our backtests that covered the period between 1999 and 2012, showed that following the 15 most popular small-caps among hedge funds can help a retail investor beat the market by an average of 95 basis points per month (see more details here).
Verizon Communications Inc. (NYSE:VZ) has found itself out of favor with the hedge funds followed by Insider Monkey, as the number of funds invested in this stock dropped to 52 at the end of June from 61 a quarter before. Ray Dalio‘s Bridgewater Associates was among the funds that completely sold out of this stock, having dumped the 220,065 shares it held at the end of the first quarter. Billionaire Warren Buffett was undeterred by the developments at the company and Berkshire Hathaway continues to hold a little over 15 million shares of Verizon Communications Inc. (NYSE:VZ), a position worth $837 million at the end of June. Since the end of the second quarter, the stock has been on a slide, having fallen by 5.3% through Wednesday’s closing price of $52.06 per share. The largest wireless carrier in the United States, Verizon Communications Inc. (NYSE:VZ) sports a market cap of $214 billion and pays an annual dividend of $2.31 per share, providing shareholders with a 4.14% yield. The company has increased its dividend for nine consecutive years, a testimony to its commitment to return cash to investors. In order to counteract the slump in sales, Verizon has acquired AOL and is in the process to buy Yahoo!’s core internet businesses as it looks to tap into the mobile advertising market.
#4 Noble Energy
The hedge fund sentiment towards Noble Energy, Inc. (NYSE:NBL) also took a turn for the worse, with the number of long hedge fund positions having dropped to 36 at the end of June from 46 at the end of March. Jacob Gottlieb’s Visium Asset Management sold off the 194,348 shares it reportedly held at the end of the first quarter. Noble Energy, Inc. (NYSE:NBL) is the sponsor of Noble Midstream Partners LP (NYSE:NBLX), which recently went public on the New York Stock Exchange, racking up proceeds of approximately $281 million. Noble Energy plans to use Noble Midstream Partners on its plays in the Permian Basin in Texas and the Denver-Julesburg Basin in Colorado. Shares of Noble Energy, Inc. (NYSE:NBL) are up by around 10% for the year, although they have been trading in a range since the end of April. The company pays an annual dividend of $0.40 per share, which translates into a 1.21% yield. Analysts mostly recommend this stock as a ‘Buy’ with a consensus price target of $40.24 per share.