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Hedge Fund Sentiment Is Stagnant On Micron Technology, Inc. (MU)

Billionaire hedge fund managers such as David Abrams, Steve Cohen and Stan Druckenmiller can generate millions or even billions of dollars every year by pinning down high-potential small-cap stocks and pouring cash into these candidates. Small-cap stocks are overlooked by most investors, brokerage houses, and financial services hubs, while the unlimited research abilities of the big players within the hedge fund industry can easily identify the undervalued and high-potential stocks that reside the ignored corners of equity markets. There are numerous small-cap stocks that have turned out to be great winners, which is one of the main reasons the Insider Monkey team pays close attention to the hedge fund activity in relation to these stocks.

Hedge fund interest in Micron Technology, Inc. (NASDAQ:MU) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare MU to other stocks including Illumina, Inc. (NASDAQ:ILMN), Prologis Inc (NYSE:PLD), and China Telecom Corporation Limited (NYSE:CHA) to get a better sense of its popularity.

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 flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

David Tepper

Let’s check out the latest hedge fund action encompassing Micron Technology, Inc. (NASDAQ:MU).

How are hedge funds trading Micron Technology, Inc. (NASDAQ:MU)?

At Q1’s end, a total of 61 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. On the other hand, there were a total of 76 hedge funds with a bullish position in MU a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

MU_jun2019

Among these funds, AQR Capital Management held the most valuable stake in Micron Technology, Inc. (NASDAQ:MU), which was worth $796.1 million at the end of the first quarter. On the second spot was Appaloosa Management LP which amassed $795.6 million worth of shares. Moreover, Citadel Investment Group, Lansdowne Partners, and Renaissance Technologies were also bullish on Micron Technology, Inc. (NASDAQ:MU), allocating a large percentage of their portfolios to this stock.

Due to the fact that Micron Technology, Inc. (NASDAQ:MU) has witnessed a decline in interest from the smart money, logic holds that there was a specific group of fund managers who sold off their full holdings last quarter. It’s worth mentioning that Andrew Weiss’s Weiss Asset Management sold off the largest stake of all the hedgies monitored by Insider Monkey, comprising an estimated $40.3 million in stock, and Herb Wagner’s FinePoint Capital was right behind this move, as the fund cut about $38.9 million worth. These moves are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Micron Technology, Inc. (NASDAQ:MU) but similarly valued. These stocks are Illumina, Inc. (NASDAQ:ILMN), Prologis Inc (NYSE:PLD), China Telecom Corporation Limited (NYSE:CHA), and Kinder Morgan Inc (NYSE:KMI). This group of stocks’ market caps are closest to MU’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ILMN 42 1065266 -2
PLD 25 454133 -5
CHA 8 26501 0
KMI 36 1728965 -12
Average 27.75 818716 -4.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 27.75 hedge funds with bullish positions and the average amount invested in these stocks was $819 million. That figure was $3472 million in MU’s case. Illumina, Inc. (NASDAQ:ILMN) is the most popular stock in this table. On the other hand China Telecom Corporation Limited (NYSE:CHA) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Micron Technology, Inc. (NASDAQ:MU) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately MU wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on MU were disappointed as the stock returned -19.4% during the same period 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 13 of these stocks already outperformed the market in Q2.

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

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