Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don’t make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards Broadcom Inc (NASDAQ:AVGO) to find out whether there were any major changes in hedge funds’ views.
Is AVGO stock a buy or sell? Hedge fund interest in Broadcom Inc (NASDAQ:AVGO) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that AVGO isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings). At the end of this article we will also compare AVGO to other stocks including Exxon Mobil Corporation (NYSE:XOM), Accenture Plc (NYSE:ACN), and QUALCOMM, Incorporated (NASDAQ:QCOM) to get a better sense of its popularity.
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Do Hedge Funds Think AVGO Is A Good Stock To Buy Now?
At the end of December, a total of 59 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the third quarter of 2020. The graph below displays the number of hedge funds with bullish position in AVGO over the last 22 quarters. With the smart money’s capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
The largest stake in Broadcom Inc (NASDAQ:AVGO) was held by Cantillon Capital Management, which reported holding $505.7 million worth of stock at the end of December. It was followed by Citadel Investment Group with a $424 million position. Other investors bullish on the company included First Pacific Advisors LLC, Lyrical Asset Management, and Farallon Capital. In terms of the portfolio weights assigned to each position First Pacific Advisors LLC allocated the biggest weight to Broadcom Inc (NASDAQ:AVGO), around 5.43% of its 13F portfolio. 40 North Management is also relatively very bullish on the stock, earmarking 5.08 percent of its 13F equity portfolio to AVGO.
Since Broadcom Inc (NASDAQ:AVGO) has faced declining sentiment from the entirety of the hedge funds we track, logic holds that there were a few hedge funds that elected to cut their positions entirely by the end of the fourth quarter. It’s worth mentioning that Renaissance Technologies said goodbye to the biggest position of the “upper crust” of funds followed by Insider Monkey, comprising about $81.8 million in stock, and Highbridge Capital Management was right behind this move, as the fund cut about $23.5 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s also examine hedge fund activity in other stocks similar to Broadcom Inc (NASDAQ:AVGO). These stocks are Exxon Mobil Corporation (NYSE:XOM), Accenture Plc (NYSE:ACN), QUALCOMM, Incorporated (NASDAQ:QCOM), T-Mobile US, Inc. (NYSE:TMUS), Costco Wholesale Corporation (NASDAQ:COST), BHP Group (NYSE:BHP), and Novo Nordisk A/S (NYSE:NVO). This group of stocks’ market values are closest to AVGO’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 57.9 hedge funds with bullish positions and the average amount invested in these stocks was $3438 million. That figure was $3342 million in AVGO’s case. T-Mobile US, Inc. (NYSE:TMUS) is the most popular stock in this table. On the other hand BHP Group (NYSE:BHP) is the least popular one with only 20 bullish hedge fund positions. Broadcom Inc (NASDAQ:AVGO) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for AVGO is 49.8. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 5.3% in 2021 through March 19th and still beat the market by 0.8 percentage points. Hedge funds were also right about betting on AVGO as the stock returned 9.2% since the end of Q4 (through 3/19) 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.