At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Corning Incorporated (NYSE:GLW).
Is Corning Incorporated (NYSE:GLW) a bargain? Hedge funds are in a bearish mood. The number of long hedge fund positions were trimmed by 5 lately. Our calculations also showed that GLW isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 58 percentage points since March 2017 (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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like these. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s take a glance at the fresh hedge fund action surrounding Corning Incorporated (NYSE:GLW).
How have hedgies been trading Corning Incorporated (NYSE:GLW)?
At Q1’s end, a total of 30 of the hedge funds tracked by Insider Monkey were long this stock, a change of -14% from the fourth quarter of 2019. By comparison, 37 hedge funds held shares or bullish call options in GLW a year ago. With hedge funds’ sentiment swirling, there exists a select group of notable hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).
More specifically, Citadel Investment Group was the largest shareholder of Corning Incorporated (NYSE:GLW), with a stake worth $25.8 million reported as of the end of September. Trailing Citadel Investment Group was Yacktman Asset Management, which amassed a stake valued at $25 million. Citadel Investment Group, Adage Capital Management, and Gotham Asset Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Beech Hill Partners allocated the biggest weight to Corning Incorporated (NYSE:GLW), around 2.67% of its 13F portfolio. Birch Run Capital is also relatively very bullish on the stock, earmarking 1.08 percent of its 13F equity portfolio to GLW.
Judging by the fact that Corning Incorporated (NYSE:GLW) has witnessed falling interest from the aggregate hedge fund industry, logic holds that there exists a select few fund managers that elected to cut their full holdings heading into Q4. Intriguingly, Renaissance Technologies said goodbye to the largest investment of all the hedgies watched by Insider Monkey, valued at close to $47.7 million in stock, and John A. Levin’s Levin Capital Strategies was right behind this move, as the fund said goodbye to about $14 million worth. These moves are important to note, as total hedge fund interest fell by 5 funds heading into Q4.
Let’s now review hedge fund activity in other stocks similar to Corning Incorporated (NYSE:GLW). These stocks are Arista Networks Inc (NYSE:ANET), Arthur J. Gallagher & Co. (NYSE:AJG), Stanley Black & Decker, Inc. (NYSE:SWK), and Marathon Petroleum Corp (NYSE:MPC). All of these stocks’ market caps are similar to GLW’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 36.25 hedge funds with bullish positions and the average amount invested in these stocks was $687 million. That figure was $106 million in GLW’s case. Marathon Petroleum Corp (NYSE:MPC) is the most popular stock in this table. On the other hand Arista Networks Inc (NYSE:ANET) is the least popular one with only 24 bullish hedge fund positions. Corning Incorporated (NYSE:GLW) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May and surpassed the market by 13.2 percentage points. Unfortunately GLW wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); GLW investors were disappointed as the stock returned 12% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Disclosure: None. This article was originally published at Insider Monkey.