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Hedge Funds Have Never Been This Bullish On QUALCOMM (QCOM)

We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional 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. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards QUALCOMM, Incorporated (NASDAQ:QCOM) and determine whether hedge funds skillfully traded this stock.

Is QUALCOMM, Incorporated (NASDAQ:QCOM) ready to rally soon? The best stock pickers were becoming hopeful. The number of bullish hedge fund positions moved up by 14 recently. Our calculations also showed that QCOM isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks).QUALCOMM, Incorporated (NASDAQ:QCOM) was in 74 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 70. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 60 hedge funds in our database with QCOM positions at the end of the previous quarter.

Video: Watch our video about the top 5 most popular hedge fund stocks.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 56 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Noam Gottesman GLG Partners

Noam Gottesman of GLG Partners

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Currently, investors are pessimistic about commercial real estate investments. So, we are checking out this contrarian play to diversify our market exposure. We go through lists like the 10 most profitable companies in America to pick the best large-cap stocks to buy. 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. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Now let’s take a look at the new hedge fund action regarding QUALCOMM, Incorporated (NASDAQ:QCOM).

How have hedgies been trading QUALCOMM, Incorporated (NASDAQ:QCOM)?

At second quarter’s end, a total of 74 of the hedge funds tracked by Insider Monkey were long this stock, a change of 23% from the first quarter of 2020. The graph below displays the number of hedge funds with bullish position in QCOM over the last 20 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Matrix Capital Management was the largest shareholder of QUALCOMM, Incorporated (NASDAQ:QCOM), with a stake worth $404.3 million reported as of the end of September. Trailing Matrix Capital Management was D E Shaw, which amassed a stake valued at $279 million. Citadel Investment Group, AQR Capital Management, and GLG Partners 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 Valueworks LLC allocated the biggest weight to QUALCOMM, Incorporated (NASDAQ:QCOM), around 8.27% of its 13F portfolio. Think Investments is also relatively very bullish on the stock, dishing out 6.97 percent of its 13F equity portfolio to QCOM.

As industrywide interest jumped, key money managers were breaking ground themselves. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, initiated the largest position in QUALCOMM, Incorporated (NASDAQ:QCOM). Marshall Wace LLP had $48.9 million invested in the company at the end of the quarter. Spencer M. Waxman’s Shannon River Fund Management also made a $33.2 million investment in the stock during the quarter. The following funds were also among the new QCOM investors: Kevin Cottrell and Chris LaSusa’s KCL Capital, Julian Robertson’s Tiger Management, and Michael Gelband’s ExodusPoint Capital.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as QUALCOMM, Incorporated (NASDAQ:QCOM) but similarly valued. We will take a look at Lockheed Martin Corporation (NYSE:LMT), GlaxoSmithKline plc (NYSE:GSK), Lowe’s Companies, Inc. (NYSE:LOW), Honeywell International Inc. (NYSE:HON), TOTAL SE (NYSE:TOT), Gilead Sciences, Inc. (NASDAQ:GILD), and Royal Bank of Canada (NYSE:RY). This group of stocks’ market caps are closest to QCOM’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
LMT 53 1553657 -2
GSK 28 2068711 1
LOW 89 6589304 18
HON 50 1447569 6
TOT 19 861496 7
GILD 68 2286230 -8
RY 16 237643 0
Average 46.1 2149230 3.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 46.1 hedge funds with bullish positions and the average amount invested in these stocks was $2149 million. That figure was $2203 million in QCOM’s case. Lowe’s Companies, Inc. (NYSE:LOW) is the most popular stock in this table. On the other hand Royal Bank of Canada (NYSE:RY) is the least popular one with only 16 bullish hedge fund positions. QUALCOMM, Incorporated (NASDAQ:QCOM) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for QCOM is 79.7. 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. 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 28.2% in 2020 through August 24th but still beat the market by 20.6 percentage points. Hedge funds were also right about betting on QCOM as the stock returned 27.1% since Q2 and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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