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Did Hedge Funds Make The Right Call On Corning Incorporated (GLW) ?

We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Corning Incorporated (NYSE:GLW) and determine whether hedge funds skillfully traded this stock.

Corning Incorporated (NYSE:GLW) was in 30 hedge funds’ portfolios at the end of the first quarter of 2020. GLW investors should pay attention to a decrease in support from the world’s most elite money managers in recent months. There were 35 hedge funds in our database with GLW holdings at the end of the previous quarter. Our calculations also showed that GLW 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.

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 monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Donald Yacktman of Yacktman Asset Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now let’s analyze the new hedge fund action regarding Corning Incorporated (NYSE:GLW).

How have hedgies been trading Corning Incorporated (NYSE:GLW)?

At Q1’s end, a total of 30 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -14% from the previous quarter. By comparison, 37 hedge funds held shares or bullish call options in GLW a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Citadel Investment Group was the largest shareholder of Corning Incorporated (NYSE:GLW), with a stake worth $25.8 million reported as of the end of September. Trailing Citadel Investment Group was Yacktman Asset Management, which amassed a stake valued at $25 million. Citadel Investment Group, Adage Capital Management, and Gotham Asset Management 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 Beech Hill Partners allocated the biggest weight to Corning Incorporated (NYSE:GLW), around 2.67% of its 13F portfolio. Birch Run Capital is also relatively very bullish on the stock, setting aside 1.08 percent of its 13F equity portfolio to GLW.

Judging by the fact that Corning Incorporated (NYSE:GLW) has witnessed a decline in interest from the aggregate hedge fund industry, it’s safe to say that there is a sect of money managers that decided to sell off their full holdings by the end of the first quarter. Intriguingly, Renaissance Technologies dumped the largest position of all the hedgies followed by Insider Monkey, comprising about $47.7 million in stock, and John A. Levin’s Levin Capital Strategies was right behind this move, as the fund dropped about $14 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest dropped by 5 funds by the end of the first quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Corning Incorporated (NYSE:GLW) but similarly valued. We will take a look at Arista Networks Inc (NYSE:ANET), Arthur J. Gallagher & Co. (NYSE:AJG), Stanley Black & Decker, Inc. (NYSE:SWK), and Marathon Petroleum Corp (NYSE:MPC). All of these stocks’ market caps are closest to GLW’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ANET 24 470614 -2
AJG 28 373347 -3
SWK 36 907916 -5
MPC 57 996652 -12
Average 36.25 687132 -5.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 36.25 hedge funds with bullish positions and the average amount invested in these stocks was $687 million. That figure was $106 million in GLW’s case. Marathon Petroleum Corp (NYSE:MPC) is the most popular stock in this table. On the other hand Arista Networks Inc (NYSE:ANET) is the least popular one with only 24 bullish hedge fund positions. Corning Incorporated (NYSE:GLW) 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 GLW as the stock returned 27.3% 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.