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Hedge Funds Are Betting On Medtronic, Inc. (MDT)

A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended September 30, so let’s proceed with the discussion of the hedge fund sentiment on Medtronic, Inc. (NYSE:MDT).

Is Medtronic, Inc. (NYSE:MDT) a buy here? The smart money is becoming more confident. The number of long hedge fund positions advanced by 18 in recent months. Our calculations also showed that MDT isn’t among the 30 most popular stocks among hedge funds. MDT was in 53 hedge funds’ portfolios at the end of September. There were 35 hedge funds in our database with MDT holdings at the end of the previous quarter.

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’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

RENAISSANCE TECHNOLOGIES

Let’s take a look at the fresh hedge fund action surrounding Medtronic, Inc. (NYSE:MDT).

How have hedgies been trading Medtronic, Inc. (NYSE:MDT)?

At the end of the third quarter, a total of 53 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 51% from the previous quarter. By comparison, 47 hedge funds held shares or bullish call options in MDT heading into this year. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with MDT Positions

Among these funds, Diamond Hill Capital held the most valuable stake in Medtronic, Inc. (NYSE:MDT), which was worth $382.3 million at the end of the third quarter. On the second spot was Millennium Management which amassed $344.2 million worth of shares. Moreover, Citadel Investment Group, GLG Partners, and Renaissance Technologies were also bullish on Medtronic, Inc. (NYSE:MDT), allocating a large percentage of their portfolios to this stock.

With a general bullishness amongst the heavyweights, specific money managers were leading the bulls’ herd. Renaissance Technologies, managed by Jim Simons, initiated the largest position in Medtronic, Inc. (NYSE:MDT). Renaissance Technologies had $171.2 million invested in the company at the end of the quarter. Jeffrey Talpins’s Element Capital Management also initiated a $48.5 million position during the quarter. The other funds with brand new MDT positions are Stanley Druckenmiller’s Duquesne Capital, Matthew Tewksbury’s Stevens Capital Management, and Brad Dunkley and Blair Levinsky’s Waratah Capital Advisors.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Medtronic plc (NYSE:MDT) but similarly valued. We will take a look at BHP Group Limited (NYSE:BHP), Adobe Inc. (NASDAQ:ADBE), McDonald’s Corporation (NYSE:MCD), and Abbott Laboratories (NYSE:ABT). This group of stocks’ market caps match MDT’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BHP 19 617958 7
ADBE 79 7922225 12
MCD 38 1160776 -6
ABT 53 1698396 -1
Average 47.25 2849839 3

View table here if you experience formatting issues.

As you can see these stocks had an average of 47.25 hedge funds with bullish positions and the average amount invested in these stocks was $2.85 billion. That figure was $2.51 billion in MDT’s case. Adobe Systems Incorporated (NASDAQ:ADBE) is the most popular stock in this table. On the other hand BHP Billiton Limited (NYSE:BHP) is the least popular one with only 19 bullish hedge fund positions. Medtronic, Inc. (NYSE:MDT) 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. In this regard ADBE might be a better candidate to consider a long position.

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

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