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How Did Micron Technology, Inc. (MU) Perform In Comparison to Hedge Fund Favorites in 2019?

It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The Standard and Poor’s 500 Total Return Index ETFs returned approximately 31% in 2019 (through December 23rd). Conversely, hedge funds’ top 20 large-cap stock picks generated a return of 41.1% during the same period, with the majority of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds’ consensus stock picks generate superior risk-adjusted returns. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Micron Technology, Inc. (NASDAQ:MU).

Is Micron Technology, Inc. (NASDAQ:MU) a buy here? The best stock pickers are getting more bullish. The number of long hedge fund bets moved up by 5 in recent months. Our calculations also showed that MU isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).

To most investors, hedge funds are perceived as worthless, outdated financial tools of yesteryear. While there are over 8000 funds in operation at present, Our researchers hone in on the bigwigs of this club, approximately 750 funds. Most estimates calculate that this group of people control bulk of the smart money’s total capital, and by following their first-class stock picks, Insider Monkey has brought to light a few investment strategies that have historically outperformed the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points per year since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .

COATUE MANAGEMENT

Philippe Laffont of Coatue Management

We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. With all of this in mind we’re going to view the recent hedge fund action regarding Micron Technology, Inc. (NASDAQ:MU).

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

At Q3’s end, a total of 67 of the hedge funds tracked by Insider Monkey were long this stock, a change of 8% from one quarter earlier. On the other hand, there were a total of 59 hedge funds with a bullish position in MU a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Renaissance Technologies was the largest shareholder of Micron Technology, Inc. (NASDAQ:MU), with a stake worth $537.9 million reported as of the end of September. Trailing Renaissance Technologies was AQR Capital Management, which amassed a stake valued at $492.6 million. Citadel Investment Group, D E Shaw, and Matrix Capital 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 Pabrai Funds allocated the biggest weight to Micron Technology, Inc. (NASDAQ:MU), around 29.42% of its 13F portfolio. Appaloosa Management is also relatively very bullish on the stock, designating 7.53 percent of its 13F equity portfolio to MU.

Consequently, specific money managers were leading the bulls’ herd. Jericho Capital Asset Management, managed by Josh Resnick, established the largest position in Micron Technology, Inc. (NASDAQ:MU). Jericho Capital Asset Management had $47.7 million invested in the company at the end of the quarter. Richard Driehaus’s Driehaus Capital also initiated a $19.5 million position during the quarter. The following funds were also among the new MU investors: Kevin Cottrell and Chris LaSusa’s KCL Capital, Kevin Cottrell and Chris LaSusa’s KCL Capital, and Philippe Laffont’s Coatue Management.

Let’s also examine 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 Schlumberger Limited. (NYSE:SLB), Bank of Montreal (NYSE:BMO), Exelon Corporation (NASDAQ:EXC), and Sumitomo Mitsui Financial Grp, Inc. (NYSE:SMFG). This group of stocks’ market values match MU’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SLB 49 1246666 8
BMO 14 393078 1
EXC 34 2029376 2
SMFG 10 553308 -4
Average 26.75 1055607 1.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 26.75 hedge funds with bullish positions and the average amount invested in these stocks was $1056 million. That figure was $3621 million in MU’s case. Schlumberger Limited. (NYSE:SLB) is the most popular stock in this table. On the other hand Sumitomo Mitsui Financial Grp, Inc. (NYSE:SMFG) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Micron Technology, Inc. (NASDAQ:MU) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Hedge funds were also right about betting on MU as the stock returned 74.6% so far in 2019 (through 12/23) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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

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