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Hedge Funds Have Never Been This Bullish On Micron Technology (MU)

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. In this article we look at what those investors think of Micron Technology, Inc. (NASDAQ:MU).

Micron Technology, Inc. (NASDAQ:MU) investors should pay attention to an increase in activity from the world’s largest hedge funds recently. MU was in 94 hedge funds’ portfolios at the end of March. There were 89 hedge funds in our database with MU holdings at the end of the previous quarter. Our calculations also showed that MU is 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.

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 S&P 500 ETFs by 44 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.

APPALOOSA MANAGEMENT LP

David Tepper of Appaloosa Management LP

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. 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 asked astrophysicist Neil deGrasse Tyson about Tesla, Elon Musk, and his top stock picks. 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 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 look at the new hedge fund action regarding Micron Technology, Inc. (NASDAQ:MU).

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

Heading into the second quarter of 2020, a total of 94 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 6% from one quarter earlier. By comparison, 61 hedge funds held shares or bullish call options in MU a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).

Of the funds tracked by Insider Monkey, David Tepper’s Appaloosa Management LP has the biggest position in Micron Technology, Inc. (NASDAQ:MU), worth close to $372.7 million, comprising 11.4% of its total 13F portfolio. On Appaloosa Management LP’s heels is Peter Rathjens, Bruce Clarke and John Campbell of Arrowstreet Capital, with a $339.9 million position; 1% of its 13F portfolio is allocated to the stock. Other professional money managers with similar optimism contain David Goel and Paul Ferri’s Matrix Capital Management, and Andreas Halvorsen’s Viking Global. In terms of the portfolio weights assigned to each position Mohnish Pabrai allocated the biggest weight to Micron Technology, Inc. (NASDAQ:MU), around 93.95% of its 13F portfolio. Appaloosa Management LP is also relatively very bullish on the stock, dishing out 11.39 percent of its 13F equity portfolio to MU.

With a general bullishness amongst the heavyweights, some big names have been driving this bullishness. Viking Global, managed by Andreas Halvorsen, initiated the most valuable position in Micron Technology, Inc. (NASDAQ:MU). Viking Global had $282.3 million invested in the company at the end of the quarter. Daniel Sundheim’s D1 Capital Partners also made a $136.6 million investment in the stock during the quarter. The other funds with brand new MU positions are Alex Sacerdote’s Whale Rock Capital Management, Patrick Degorce’s Theleme Partners, and Fang Zheng’s Keywise Capital Management.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Micron Technology, Inc. (NASDAQ:MU) but similarly valued. We will take a look at Target Corporation (NYSE:TGT), Brookfield Asset Management Inc. (NYSE:BAM), CNOOC Limited (NYSE:CEO), and Activision Blizzard, Inc. (NASDAQ:ATVI). All of these stocks’ market caps resemble MU’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TGT 54 2208909 1
BAM 37 886441 3
CEO 11 178140 -3
ATVI 101 3053805 25
Average 50.75 1581824 6.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 50.75 hedge funds with bullish positions and the average amount invested in these stocks was $1582 million. That figure was $3991 million in MU’s case. Activision Blizzard, Inc. (NASDAQ:ATVI) is the most popular stock in this table. On the other hand CNOOC Limited (NYSE:CEO) is the least popular one with only 11 bullish hedge fund positions. Micron Technology, Inc. (NASDAQ:MU) 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. 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 7.9% in 2020 through May 22nd but beat the market by 15.6 percentage points. Unfortunately MU wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on MU were disappointed as the stock returned 6.8% during the same time 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 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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

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