Hedge Fund Consensus Stocks vs. 3M Company (MMM) In 2019

We are still in an overall bull market and many stocks that smart money investors were piling into surged in 2019. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained more than 57% each. Hedge funds’ top 3 stock picks returned 44.6% this year and beat the S&P 500 ETFs by almost 14 percentage points. That’s a big deal. This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.

3M Company (NYSE:MMM) shareholders have witnessed an increase in hedge fund interest in recent months. Our calculations also showed that MMM isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.


Cliff Asness of AQR Capital Management

We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. Keeping this in mind we’re going to go over the new hedge fund action surrounding 3M Company (NYSE:MMM).

What does smart money think about 3M Company (NYSE:MMM)?

At Q3’s end, a total of 45 of the hedge funds tracked by Insider Monkey were long this stock, a change of 13% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards MMM over the last 17 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in 3M Company (NYSE:MMM) was held by Two Sigma Advisors, which reported holding $270.4 million worth of stock at the end of September. It was followed by D E Shaw with a $99.8 million position. Other investors bullish on the company included AQR Capital Management, Citadel Investment Group, and Millennium Management. In terms of the portfolio weights assigned to each position Ratan Capital Group allocated the biggest weight to 3M Company (NYSE:MMM), around 1% of its 13F portfolio. Stevens Capital Management is also relatively very bullish on the stock, designating 0.9 percent of its 13F equity portfolio to MMM.

As industrywide interest jumped, some big names have jumped into 3M Company (NYSE:MMM) headfirst. Stevens Capital Management, managed by Matthew Tewksbury, established the most outsized position in 3M Company (NYSE:MMM). Stevens Capital Management had $10 million invested in the company at the end of the quarter. Benjamin A. Smith’s Laurion Capital Management also initiated a $7.4 million position during the quarter. The following funds were also among the new MMM investors: Benjamin A. Smith’s Laurion Capital Management, Brandon Haley’s Holocene Advisors, and Kenneth Tropin’s Graham Capital Management.

Let’s now take a look at hedge fund activity in other stocks similar to 3M Company (NYSE:MMM). These stocks are Petroleo Brasileiro S.A. – Petrobras (NYSE:PBR), PetroChina Company Limited (NYSE:PTR), QUALCOMM, Incorporated (NASDAQ:QCOM), and Charter Communications, Inc. (NASDAQ:CHTR). This group of stocks’ market caps are similar to MMM’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PBR 30 2022999 -2
PTR 11 106487 2
QCOM 55 1817218 -6
CHTR 63 8306950 -3
Average 39.75 3063414 -2.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 39.75 hedge funds with bullish positions and the average amount invested in these stocks was $3063 million. That figure was $826 million in MMM’s case. Charter Communications, Inc. (NASDAQ:CHTR) is the most popular stock in this table. On the other hand PetroChina Company Limited (NYSE:PTR) is the least popular one with only 11 bullish hedge fund positions. 3M Company (NYSE:MMM) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Unfortunately MMM wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on MMM were disappointed as the stock returned -3.2% in 2019 (through December 23rd) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
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.