Hedge Funds Are Dumping Intel Corporation (INTC)

We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money 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 (like Melvin Capital’s recent GameStop losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Intel Corporation (NASDAQ:INTC).

Is Intel Corporation (NASDAQ:INTC) a bargain? Investors who are in the know were cutting their exposure. The number of long hedge fund bets went down by 5 in recent months. Intel Corporation (NASDAQ:INTC) was in 78 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 83. Our calculations also showed that INTC isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 83 hedge funds in our database with INTC holdings at the end of March.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

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At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. 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. 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 homepage. Now we’re going to take a gander at the latest hedge fund action encompassing Intel Corporation (NASDAQ:INTC).

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

At the end of the second quarter, a total of 78 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -6% from one quarter earlier. By comparison, 78 hedge funds held shares or bullish call options in INTC a year ago. 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 Intel Corporation (NASDAQ:INTC) was held by Fisher Asset Management, which reported holding $1763.7 million worth of stock at the end of June. It was followed by Baupost Group with a $1220.8 million position. Other investors bullish on the company included Third Point, D E Shaw, and Citadel Investment Group. In terms of the portfolio weights assigned to each position MFP Investors allocated the biggest weight to Intel Corporation (NASDAQ:INTC), around 12.52% of its 13F portfolio. Pennant Capital Management is also relatively very bullish on the stock, designating 11.17 percent of its 13F equity portfolio to INTC.

Since Intel Corporation (NASDAQ:INTC) has witnessed declining sentiment from the smart money, it’s safe to say that there lies a certain “tier” of money managers that slashed their full holdings heading into Q3. Interestingly, David Goel and Paul Ferri’s Matrix Capital Management dumped the biggest position of the “upper crust” of funds watched by Insider Monkey, totaling an estimated $193.4 million in stock, and Dmitry Balyasny’s Balyasny Asset Management was right behind this move, as the fund dropped about $109.9 million worth. These moves are important to note, as total hedge fund interest was cut by 5 funds heading into Q3.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Intel Corporation (NASDAQ:INTC) but similarly valued. We will take a look at salesforce.com, inc. (NYSE:CRM), Cisco Systems, Inc. (NASDAQ:CSCO), Eli Lilly and Company (NYSE:LLY), Pfizer Inc. (NYSE:PFE), Oracle Corporation (NYSE:ORCL), Abbott Laboratories (NYSE:ABT), and AT&T Inc. (NYSE:T). This group of stocks’ market caps are similar to INTC’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CRM 108 11767293 17
CSCO 60 4219112 1
LLY 64 2994849 9
PFE 67 2356906 2
ORCL 55 2889687 3
ABT 61 4367607 -4
T 68 2896412 5
Average 69 4498838 4.7

View table here if you experience formatting issues.

As you can see these stocks had an average of 69 hedge funds with bullish positions and the average amount invested in these stocks was $4499 million. That figure was $6764 million in INTC’s case. salesforce.com, inc. (NYSE:CRM) is the most popular stock in this table. On the other hand Oracle Corporation (NASDAQ:ORCL) is the least popular one with only 55 bullish hedge fund positions. Intel Corporation (NASDAQ:INTC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for INTC is 49.9. 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 positive signal but 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 24.1% in 2021 through September 20th and beat the market again by 6.9 percentage points. Unfortunately INTC wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on INTC were disappointed as the stock returned -5% since the end of June (through 9/20) 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 many of these stocks already outperformed the market since 2019.

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