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Hedge Funds Starting Cashing Out Of QUALCOMM, Incorporated (QCOM)

In this article we will take a look at whether hedge funds think QUALCOMM, Incorporated (NASDAQ:QCOM) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

Is QUALCOMM, Incorporated (NASDAQ:QCOM) the right investment to pursue these days? Investors who are in the know are getting less bullish. The number of long hedge fund bets were cut by 7 recently. Our calculations also showed that QCOM 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.

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.

Stan Druckenmiller DUQUESNE CAPITAL

Stanley Druckenmiller of Duquesne Capital

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 checked out this European marijuana stock pitch. Also, we are still not out of the woods in terms of the coronavirus pandemic. So, we checked out this analyst’s “corona catalyst plays“.  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. Now we’re going to take a gander at the recent hedge fund action surrounding QUALCOMM, Incorporated (NASDAQ:QCOM).

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

At Q1’s end, a total of 60 of the hedge funds tracked by Insider Monkey were long this stock, a change of -10% from the fourth quarter of 2019. By comparison, 45 hedge funds held shares or bullish call options in QCOM a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in QUALCOMM, Incorporated (NASDAQ:QCOM) was held by AQR Capital Management, which reported holding $227.3 million worth of stock at the end of September. It was followed by D E Shaw with a $222.6 million position. Other investors bullish on the company included Citadel Investment Group, Matrix Capital Management, and GLG Partners. In terms of the portfolio weights assigned to each position Think Investments allocated the biggest weight to QUALCOMM, Incorporated (NASDAQ:QCOM), around 11.35% of its 13F portfolio. Impala Asset Management is also relatively very bullish on the stock, dishing out 7.03 percent of its 13F equity portfolio to QCOM.

Due to the fact that QUALCOMM, Incorporated (NASDAQ:QCOM) has experienced falling interest from the entirety of the hedge funds we track, it’s easy to see that there exists a select few hedge funds that decided to sell off their entire stakes by the end of the third quarter. Intriguingly, Rajiv Jain’s GQG Partners dumped the largest stake of all the hedgies monitored by Insider Monkey, worth an estimated $93.5 million in stock, and Bill Miller’s Miller Value Partners was right behind this move, as the fund dumped about $44.7 million worth. These moves are important to note, as total hedge fund interest dropped by 7 funds by the end of the third quarter.

Let’s go over 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 Starbucks Corporation (NASDAQ:SBUX), The Toronto-Dominion Bank (NYSE:TD), BHP Group (NYSE:BBL), and Fidelity National Information Services Inc. (NYSE:FIS). This group of stocks’ market values resemble QCOM’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SBUX 68 3229437 2
TD 19 154160 2
BBL 21 802817 -3
FIS 105 8378290 0
Average 53.25 3141176 0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 53.25 hedge funds with bullish positions and the average amount invested in these stocks was $3141 million. That figure was $1621 million in QCOM’s case. Fidelity National Information Services Inc. (NYSE:FIS) is the most popular stock in this table. On the other hand The Toronto-Dominion Bank (NYSE:TD) is the least popular one with only 19 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 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 still beat the market by 15.6 percentage points. Hedge funds were also right about betting on QCOM, though not to the same extent, as the stock returned 16.3% during the first two months of the second quarter (through May 22nd) and outperformed the market as well.

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