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Did Hedge Funds Make The Right Call On ASML Holding N.V. (ASML) ?

At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards ASML Holding N.V. (NASDAQ:ASML) at the end of the first quarter and determine whether the smart money was really smart about this stock.

ASML Holding N.V. (NASDAQ:ASML) investors should pay attention to an increase in support from the world’s most elite money managers lately. Our calculations also showed that ASML isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 58 percentage points since March 2017 (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 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Discovery Capital Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so we are checking out this tiny lithium stock. Keeping this in mind we’re going to take a gander at the latest hedge fund action regarding ASML Holding N.V. (NASDAQ:ASML).

How are hedge funds trading ASML Holding N.V. (NASDAQ:ASML)?

At the end of the first quarter, a total of 30 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 36% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards ASML over the last 18 quarters. With the smart money’s sentiment swirling, there exists an “upper tier” of key hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).

Is ASML A Good Stock To Buy?

Among these funds, Fisher Asset Management held the most valuable stake in ASML Holding N.V. (NASDAQ:ASML), which was worth $903.6 million at the end of the third quarter. On the second spot was Alkeon Capital Management which amassed $146.4 million worth of shares. Citadel Investment Group, D E Shaw, and Arrowstreet 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 Keywise Capital Management allocated the biggest weight to ASML Holding N.V. (NASDAQ:ASML), around 8.05% of its 13F portfolio. Albar Capital is also relatively very bullish on the stock, earmarking 3.04 percent of its 13F equity portfolio to ASML.

Now, specific money managers were leading the bulls’ herd. Alkeon Capital Management, managed by Panayotis Takis Sparaggis, initiated the most outsized position in ASML Holding N.V. (NASDAQ:ASML). Alkeon Capital Management had $146.4 million invested in the company at the end of the quarter. Fang Zheng’s Keywise Capital Management also made a $29.7 million investment in the stock during the quarter. The other funds with brand new ASML positions are Steve Cohen’s Point72 Asset Management, Rob Citrone’s Discovery Capital Management, and Mark Coe’s Intrinsic Edge Capital.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as ASML Holding N.V. (NASDAQ:ASML) but similarly valued. We will take a look at Sanofi (NYSE:SNY), Accenture Plc (NYSE:ACN), Charter Communications, Inc. (NASDAQ:CHTR), and International Business Machines Corp. (NYSE:IBM). All of these stocks’ market caps resemble ASML’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SNY 15 970814 -16
ACN 49 1003250 8
CHTR 104 9914920 39
IBM 41 902956 -9
Average 52.25 3197985 5.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 52.25 hedge funds with bullish positions and the average amount invested in these stocks was $3198 million. That figure was $1505 million in ASML’s case. Charter Communications, Inc. (NASDAQ:CHTR) is the most popular stock in this table. On the other hand Sanofi (NYSE:SNY) is the least popular one with only 15 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th and still beat the market by 15.5 percentage points. A small number of hedge funds were also right about betting on ASML as the stock returned 41.4% during the second quarter and outperformed the market by an even larger margin.

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