ASML Holding N.V. (ASML): Are Hedge Funds Right About This Stock?

Reputable billionaire investors such as Jim Simons, Cliff Asness 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 some of these small companies, which makes it hard for an individual investor to pin down a winner within the small-cap space. 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 vast 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.

ASML Holding N.V. (NASDAQ:ASML) investors should be aware of a decrease in hedge fund interest recently. Our calculations also showed that ASML isn’t among the 30 most popular stocks among hedge funds (see the video at the end of this article).

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Dmitry Balyasny

Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s take a look at the key hedge fund action regarding ASML Holding N.V. (NASDAQ:ASML).

What have hedge funds been doing with ASML Holding N.V. (NASDAQ:ASML)?

At the end of the second quarter, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -20% from one quarter earlier. By comparison, 12 hedge funds held shares or bullish call options in ASML a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with ASML Positions

Among these funds, Fisher Asset Management held the most valuable stake in ASML Holding N.V. (NASDAQ:ASML), which was worth $531.1 million at the end of the second quarter. On the second spot was Renaissance Technologies which amassed $57.7 million worth of shares. Moreover, D E Shaw, Balyasny Asset Management, and ZWEIG DIMENNA PARTNERS were also bullish on ASML Holding N.V. (NASDAQ:ASML), allocating a large percentage of their portfolios to this stock.

Since ASML Holding N.V. (NASDAQ:ASML) has witnessed a decline in interest from the aggregate hedge fund industry, logic holds that there exists a select few money managers that decided to sell off their full holdings heading into Q3. Interestingly, Sander Gerber’s Hudson Bay Capital Management cut the largest stake of the “upper crust” of funds followed by Insider Monkey, totaling an estimated $13.2 million in stock, and Israel Englander’s Millennium Management was right behind this move, as the fund dropped about $7.1 million worth. These moves are intriguing to say the least, as total hedge fund interest fell by 3 funds heading into Q3.

Let’s now review hedge fund activity in other stocks similar to ASML Holding N.V. (NASDAQ:ASML). These stocks are Charter Communications, Inc. (NASDAQ:CHTR), Banco Santander (Brasil) SA (NYSE:BSBR), United Parcel Service, Inc. (NYSE:UPS), and Gilead Sciences, Inc. (NASDAQ:GILD). All of these stocks’ market caps are closest to ASML’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CHTR 66 7511059 -1
BSBR 11 179610 1
UPS 36 1051684 -1
GILD 57 3863121 -1
Average 42.5 3151369 -0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 42.5 hedge funds with bullish positions and the average amount invested in these stocks was $3151 million. That figure was $699 million in ASML’s case. Charter Communications, Inc. (NASDAQ:CHTR) is the most popular stock in this table. On the other hand Banco Santander (Brasil) SA (NYSE:BSBR) is the least popular one with only 11 bullish hedge fund positions. ASML Holding N.V. (NASDAQ:ASML) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on ASML as the stock returned 19.5% during the same time frame and outperformed the market by an even larger margin.
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.