Did The Smart Money Play ASML Holding N.V. (ASML) Correctly?

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 ASML Holding N.V. (NASDAQ:ASML) and determine whether hedge funds skillfully traded this stock.

Is ASML Holding N.V. (NASDAQ:ASML) worth your attention right now? The smart money was in a bearish mood. The number of long hedge fund positions retreated by 3 lately. ASML Holding N.V. (NASDAQ:ASML) was in 41 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 44. Our calculations also showed that ASML isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings). There were 44 hedge funds in our database with ASML holdings at the end of June.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. With all of this in mind we’re going to check out the fresh hedge fund action encompassing ASML Holding N.V. (NASDAQ:ASML).

Do Hedge Funds Think ASML Is A Good Stock To Buy Now?

At the end of the third quarter, a total of 41 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -7% from the previous quarter. By comparison, 23 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.

According to Insider Monkey’s hedge fund database, Ken Fisher’s Fisher Asset Management has the number one position in ASML Holding N.V. (NASDAQ:ASML), worth close to $3.0558 billion, accounting for 1.9% of its total 13F portfolio. Sitting at the No. 2 spot is Arrowstreet Capital, led by Peter Rathjens, Bruce Clarke and John Campbell, holding a $949.1 million position; 1.2% of its 13F portfolio is allocated to the company. Other hedge funds and institutional investors that hold long positions consist of Ken Griffin’s Citadel Investment Group, Gabriel Plotkin’s Melvin Capital Management and Josh Resnick’s Jericho Capital Asset Management. In terms of the portfolio weights assigned to each position Unio Capital allocated the biggest weight to ASML Holding N.V. (NASDAQ:ASML), around 4.56% of its 13F portfolio. Alight Capital is also relatively very bullish on the stock, designating 3.7 percent of its 13F equity portfolio to ASML.

Seeing as ASML Holding N.V. (NASDAQ:ASML) has faced declining sentiment from the aggregate hedge fund industry, logic holds that there lies a certain “tier” of money managers that decided to sell off their entire stakes heading into Q4. It’s worth mentioning that Brandon Haley’s Holocene Advisors sold off the biggest investment of all the hedgies watched by Insider Monkey, totaling an estimated $54.9 million in stock, and Leon Shaulov’s Maplelane Capital was right behind this move, as the fund cut about $24.9 million worth. These bearish behaviors are important to note, as total hedge fund interest dropped by 3 funds heading into Q4.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as ASML Holding N.V. (NASDAQ:ASML) but similarly valued. These stocks are The Walt Disney Company (NYSE:DIS), Paypal Holdings Inc (NASDAQ:PYPL), Adobe Inc. (NASDAQ:ADBE), Netflix, Inc. (NASDAQ:NFLX), salesforce.com, inc. (NYSE:CRM), Comcast Corporation (NASDAQ:CMCSA), and Shell plc (NYSE:RDS). This group of stocks’ market caps resemble ASML’s market cap.

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As you can see these stocks had an average of 93.1 hedge funds with bullish positions and the average amount invested in these stocks was $10749 million. That figure was $4858 million in ASML’s case. Paypal Holdings Inc (NASDAQ:PYPL) is the most popular stock in this table. On the other hand Royal Dutch Shell plc (NYSE:RDS) is the least popular one with only 33 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 overall hedge fund sentiment score for ASML is 34.4. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 29.6% in 2021 and surpassed the market again by 3.6 percentage points. Unfortunately, ASML wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); ASML investors were disappointed as the stock returned -8.9% since the end of September (through 1/31) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as all of these stocks already outperformed the market since 2019.

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