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Hedge Funds Are Selling These 10 Large-Caps, Part 2

After delineating the importance of keeping an eye on stocks that hedge funds are losing interest in and listing five such large-cap companies, we are back with the other five companies from our list of ten large-cap stocks that the elite investors tracked by Insider Monkey were collectively selling in the third quarter. When so many top investors see the same warning signs in a stock, that should certainly be cause for concern for any investors holding or considering a position in the company. Let’s see which five companies investors were warning about last quarter.

But why do we track hedge fund activity? From one point of view we can argue that hedge funds are consistently underperforming when it comes to net returns over the last three years, when compared to the S&P 500. But that doesn’t mean that we should completely neglect their activity. There are various reasons behind the low hedge fund returns. Our research indicated that hedge funds’ long positions actually beat the market. In our back-tests covering the 1999-2012 period hedge funds’ top small-cap stocks edged the S&P 500 index by double digits annually. The 15 most popular small-cap stock picks among hedge funds also bested passive index funds by around 53 percentage points over the 38-month period beginning from September 2012, returning 102% (read the details here).

Thermo Fisher Scientific Inc. (NYSE:TMO)

 – Investors with Long Positions (as of September 30): 52

 – Aggregate Value of Investors’ Holdings (as of September 30): $3.83 Billion

The total number of hedge funds having Thermo Fisher Scientific Inc. (NYSE:TMO) in their equity portfolios slid by 14 during the third trimester, while the aggregate value of their holdings declined by about $604 million. The stock price of the medical equipment company fell by 6.67% during this period. However, shares are still up by nearly 8% on a year-to-date basis. Larry Robbins‘ Glenview Capital is the largest stockholder of Thermo Fisher Scientific Inc. (NYSE:TMO) within our database, holding about 8.51 million shares.

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Baidu Inc (ADR) (NASDAQ:BIDU)

 – Investors with Long Positions (as of September 30): 52

 – Aggregate Value of Investors’ Holdings (as of September 30): $3.40 Billion

During the third quarter, the stock of the Chinese-language search engine dropped by more than 30%, and is currently trading down by about 14% since the start of this year. The number of hedge funds backing Baidu Inc (ADR) (NASDAQ:BIDU) dropped by 18 during the third trimester, with the subsequent value of their aggregate holdings diminishing by $1.58 billion. Although the company’s business model seems solid, with extensive growth opportunities in the future, Baidu has fallen victim to investor concerns around the Chinese economy as a whole. Matt Sirovich and Jeremy Mindich‘s Scopia Capital is also looking at the big picture and discounting the short-term volatility in the stock, having hiked its stake in Baidu Inc (ADR) (NASDAQ:BIDU) by 45% during the third quarter to 2.74 million shares.

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United Parcel Service, Inc. (NYSE:UPS)

 – Investors with Long Positions (as of September 30): 40

 – Aggregate Value of Investors’ Holdings (as of September 30): $2.40 Billion

The number of investors in our database with long positions in United Parcel Service, Inc. (NYSE:UPS) dropped by 12 during the July-to-September period, with the aggregate value of these holdings dipping by $255 million, even as shares rose by 1.7% during the quarter. Edgar Wachenheim‘s Greenhaven Associates tops our list of United Parcel Service, Inc. (NYSE:UPS)’s investors, as it owns nearly 4.63 million shares of the company.

Alibaba Group Holding Ltd (NYSE:BABA)

 – Investors with Long Positions (as of September 30): 60

 – Aggregate Value of Investors’ Holdings (as of September 30): $3.79 Billion

The e-commerce business might be the largest contributor to Alibaba’s top line, but that certainly doesn’t mean that the company is not expanding its empire into other disparate segments. Recently, the Chinese company announced signing a definitive agreement to acquire the South China Morning Post, an English-language newspaper based in Hong Kong. However, hedgies were extremely bearish towards Alibaba Group Holding Ltd (NYSE:BABA) during the third trimester, with the amount of them having exposure to the company dropping by 25 and the aggregate value of their holdings taking a $979 million hit. Boykin Curry‘s Eagle Capital Management is still bullish on Alibaba Group Holding Ltd (NYSE:BABA), as it boosted its stake to 8.08 million shares during the July-to-September period.

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Walt Disney Co (NYSE:DIS)

 – Investors with Long Positions (as of September 30): 48

 – Aggregate Value of Investors’ Holdings (as of September 30): $3.37 Billion

While Walt Disney Co (NYSE:DIS) shares dropped by nearly 11% in the third quarter, they are still up by nearly 16% so far this year. However, the investors within our database seem to be more inclined towards the continuation of the downtrend, as the total number of funds that we track which were invested in the company dwindled by 12 during the third quarter, with the total value of their holdings also declining by $1.05 billion. In its financial results for the fourth quarter of fiscal year 2015, Walt Disney Co (NYSE:DIS) delivered EPS of $1.20, which was $0.06 ahead of estimates. However, quarterly revenue of $13.51 billion missed expectations by $40 million. Lansdowne Partners, which is managed by Alex Snow, owns about 8.68 million shares of the company.

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Disclosure: None

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