2019 Review: Most Favored Hedge Fund Stocks vs. QUALCOMM, Incorporated (QCOM)

Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 750 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about QUALCOMM, Incorporated (NASDAQ:QCOM) and compare its performance to hedge funds’ consensus picks in 2019.

Is QUALCOMM, Incorporated (NASDAQ:QCOM) a healthy stock for your portfolio? The best stock pickers are turning less bullish. The number of bullish hedge fund positions retreated by 6 recently. Our calculations also showed that QCOM isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.


Cliff Asness of AQR Capital Management

We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. Keeping this in mind we’re going to analyze the new hedge fund action surrounding QUALCOMM, Incorporated (NASDAQ:QCOM).

How are hedge funds trading QUALCOMM, Incorporated (NASDAQ:QCOM)?

Heading into the fourth quarter of 2019, a total of 55 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -10% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards QCOM over the last 17 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).

Is QCOM A Good Stock To Buy?

The largest stake in QUALCOMM, Incorporated (NASDAQ:QCOM) was held by AQR Capital Management, which reported holding $355.3 million worth of stock at the end of September. It was followed by Two Sigma Advisors with a $314.9 million position. Other investors bullish on the company included Matrix Capital Management, Polar Capital, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Think Investments allocated the biggest weight to QUALCOMM, Incorporated (NASDAQ:QCOM), around 9.51% of its 13F portfolio. Valueworks LLC is also relatively very bullish on the stock, dishing out 6.92 percent of its 13F equity portfolio to QCOM.

Since QUALCOMM, Incorporated (NASDAQ:QCOM) has experienced falling interest from hedge fund managers, we can see that there exists a select few hedge funds who sold off their full holdings last quarter. Intriguingly, Christopher James’s Partner Fund Management said goodbye to the largest investment of the “upper crust” of funds tracked by Insider Monkey, totaling an estimated $117.1 million in stock. Doug Silverman and Alexander Klabin’s fund, Senator Investment Group, also said goodbye to its stock, about $76.1 million worth. These transactions are intriguing to say the least, as total hedge fund interest dropped by 6 funds last quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as QUALCOMM, Incorporated (NASDAQ:QCOM) but similarly valued. We will take a look at Charter Communications, Inc. (NASDAQ:CHTR), Rio Tinto plc (NYSE:RIO), U.S. Bancorp (NYSE:USB), and Lowe’s Companies, Inc. (NYSE:LOW). All of these stocks’ market caps resemble QCOM’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CHTR 63 8306950 -3
RIO 21 1491441 -3
USB 42 8308441 3
LOW 69 5706061 6
Average 48.75 5953223 0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 48.75 hedge funds with bullish positions and the average amount invested in these stocks was $5953 million. That figure was $1817 million in QCOM’s case. Lowe’s Companies, Inc. (NYSE:LOW) is the most popular stock in this table. On the other hand Rio Tinto plc (NYSE:RIO) is the least popular one with only 21 bullish hedge fund positions. QUALCOMM, Incorporated (NASDAQ:QCOM) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Hedge funds were also right about betting on QCOM as the stock returned 61.2% in 2019 (through December 23rd) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

Disclosure: None. This article was originally published at Insider Monkey.