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Hedge Funds Were Dumping Intel Corporation (INTC) Even Before Coronavirus

Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published this article and predicted that US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. With the first-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the second quarter. One of these stocks was Intel Corporation (NASDAQ:INTC).

Intel Corporation (NASDAQ:INTC) investors should pay attention to a decrease in hedge fund interest of late. Our calculations also showed that INTC isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to 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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 41 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 35.3% through March 3rd. 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

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 read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. In January, we recommended a long position in one of the most shorted stocks in the market, and that stock returned more than 50% despite the large losses in the market since our recommendation. Now we’re going to take a peek at the key hedge fund action surrounding Intel Corporation (NASDAQ:INTC).

What have hedge funds been doing with Intel Corporation (NASDAQ:INTC)?

At Q4’s end, a total of 58 of the hedge funds tracked by Insider Monkey were long this stock, a change of -9% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards INTC over the last 18 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Intel Corporation (NASDAQ:INTC) was held by Fisher Asset Management, which reported holding $1616 million worth of stock at the end of September. It was followed by Arrowstreet Capital with a $1135.7 million position. Other investors bullish on the company included AQR Capital Management, Citadel Investment Group, and GLG Partners. In terms of the portfolio weights assigned to each position MFP Investors allocated the biggest weight to Intel Corporation (NASDAQ:INTC), around 16.9% of its 13F portfolio. Platinum Asset Management is also relatively very bullish on the stock, dishing out 5.49 percent of its 13F equity portfolio to INTC.

Judging by the fact that Intel Corporation (NASDAQ:INTC) has witnessed declining sentiment from the aggregate hedge fund industry, it’s safe to say that there lies a certain “tier” of money managers that elected to cut their entire stakes in the third quarter. Intriguingly, Paul Marshall and Ian Wace’s Marshall Wace LLP cut the largest investment of the 750 funds tracked by Insider Monkey, worth about $19.3 million in stock, and Ray Dalio’s Bridgewater Associates was right behind this move, as the fund said goodbye to about $11.1 million worth. These bearish behaviors are important to note, as total hedge fund interest was cut by 6 funds in the third quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Intel Corporation (NASDAQ:INTC) but similarly valued. We will take a look at Verizon Communications Inc. (NYSE:VZ), The Home Depot, Inc. (NYSE:HD), The Coca-Cola Company (NYSE:KO), and Merck & Co., Inc. (NYSE:MRK). This group of stocks’ market valuations are closest to INTC’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
VZ 65 1885232 1
HD 91 4996321 21
KO 51 23797078 -5
MRK 77 5164143 -3
Average 71 8960694 3.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 71 hedge funds with bullish positions and the average amount invested in these stocks was $8961 million. That figure was $6147 million in INTC’s case. The Home Depot, Inc. (NYSE:HD) is the most popular stock in this table. On the other hand The Coca-Cola Company (NYSE:KO) is the least popular one with only 51 bullish hedge fund positions. Intel Corporation (NASDAQ:INTC) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.9% in 2020 through March 9th but managed to beat the market by 1.9 percentage points. A small number of hedge funds were also right about betting on INTC, though not to the same extent, as the stock returned -14.6% during the same time period and outperformed the market.

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

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