Do Hedge Funds Still Love Microsoft Corporation (MSFT)?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the third quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of Microsoft Corporation (NASDAQ:MSFT) based on that data.

Microsoft Corporation (NASDAQ:MSFT) was in 234 hedge funds’ portfolios at the end of September. The all time high for this statistics is 235. MSFT investors should pay attention to an increase in activity from the world’s largest hedge funds of late. There were 222 hedge funds in our database with MSFT holdings at the end of June. Our calculations also showed that MSFT ranks #2 among the 30 most popular stocks among hedge funds (click for Q3 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In the eyes of most stock holders, hedge funds are perceived as unimportant, outdated financial tools of years past. While there are more than 8000 funds trading today, Our researchers choose to focus on the top tier of this group, approximately 850 funds. These hedge fund managers orchestrate the majority of the smart money’s total asset base, and by keeping track of their unrivaled stock picks, Insider Monkey has deciphered numerous investment strategies that have historically outstripped Mr. Market. Insider Monkey’s flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 13% since February 2017 (through November 17th) even though the market was up 65% during the same period. We just shared a list of 6 short targets in our latest quarterly update .


Boykin Curry of Eagle Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets. Tesla’s stock price skyrocketed, yet lithium prices are still below their 2019 highs. So, we are checking out this lithium stock right now. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind let’s take a gander at the key hedge fund action regarding Microsoft Corporation (NASDAQ:MSFT).

How have hedgies been trading Microsoft Corporation (NASDAQ:MSFT)?

At the end of the third quarter, a total of 234 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 5% from the previous quarter. The graph below displays the number of hedge funds with bullish position in MSFT over the last 21 quarters. With hedgies’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Fisher Asset Management, managed by Ken Fisher, holds the biggest position in Microsoft Corporation (NASDAQ:MSFT). Fisher Asset Management has a $4.7045 billion position in the stock, comprising 4.1% of its 13F portfolio. On Fisher Asset Management’s heels is Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, which holds a $3.22 billion position; 5.1% of its 13F portfolio is allocated to the stock. Other professional money managers with similar optimism consist of Boykin Curry’s Eagle Capital Management, Chase Coleman’s Tiger Global Management LLC and D. E. Shaw’s D E Shaw. In terms of the portfolio weights assigned to each position Joho Capital allocated the biggest weight to Microsoft Corporation (NASDAQ:MSFT), around 31.38% of its 13F portfolio. Skye Global Management is also relatively very bullish on the stock, setting aside 19.86 percent of its 13F equity portfolio to MSFT.

As one would reasonably expect, key hedge funds have been driving this bullishness. Renaissance Technologies, initiated the most valuable position in Microsoft Corporation (NASDAQ:MSFT). Renaissance Technologies had $276.8 million invested in the company at the end of the quarter. Dan Loeb’s Third Point also initiated a $231.4 million position during the quarter. The other funds with new positions in the stock are Eashwar Krishnan’s Tybourne Capital Management, Anand Parekh’s Alyeska Investment Group, and Charles Pollnow’s Triple Frond Partners.

Let’s go over hedge fund activity in other stocks similar to Microsoft Corporation (NASDAQ:MSFT). These stocks are, Inc. (NASDAQ:AMZN), Alphabet Inc (NASDAQ:GOOG), Alphabet Inc (NASDAQ:GOOGL), Alibaba Group Holding Limited (NYSE:BABA), Facebook Inc (NASDAQ:FB), Visa Inc (NYSE:V), and Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM). This group of stocks’ market valuations match MSFT’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AMZN 245 43745759 -3
GOOG 150 15274196 6
GOOGL 162 14713801 5
BABA 166 28833956 12
FB 230 29337247 20
V 160 18651052 6
TSM 67 7971678 9
Average 168.6 22646813 7.9

View table here if you experience formatting issues.

As you can see these stocks had an average of 168.6 hedge funds with bullish positions and the average amount invested in these stocks was $22647 million. That figure was $42105 million in MSFT’s case., Inc. (NASDAQ:AMZN) is the most popular stock in this table. On the other hand Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM) is the least popular one with only 67 bullish hedge fund positions. Microsoft Corporation (NASDAQ:MSFT) is not the most popular stock in this group but that’s because of Amazon. Our overall hedge fund sentiment score for MSFT is 99.4. 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 28.1% in 2020 through November 23rd and beat the market again by 15.4 percentage points. Unfortunately MSFT wasn’t nearly as successful as these 20 stocks and hedge funds that were betting on MSFT were disappointed as the stock returned 0.2% since the end of September (through 11/23) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the more diversified list of top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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