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 Cisco Systems, Inc. (NASDAQ:CSCO).
Is Cisco Systems, Inc. (NASDAQ:CSCO) undervalued? The best stock pickers are getting more bullish. The number of long hedge fund bets moved up by 10 lately. Our calculations also showed that CSCO isn’t among the 30 most popular stocks among hedge funds. CSCO was in 55 hedge funds’ portfolios at the end of June. There were 45 hedge funds in our database with CSCO holdings at the end of the previous quarter.
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’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (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 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s take a look at the recent hedge fund action surrounding Cisco Systems, Inc. (NASDAQ:CSCO).
Hedge fund activity in Cisco Systems, Inc. (NASDAQ:CSCO)
At the end of the second quarter, a total of 55 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 22% from the first quarter of 2019. The graph below displays the number of hedge funds with bullish position in CSCO over the last 16 quarters. With the smart money’s sentiment swirling, there exists a select group of notable hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).
The largest stake in Cisco Systems, Inc. (NASDAQ:CSCO) was held by Fisher Asset Management, which reported holding $1624.3 million worth of stock at the end of March. It was followed by AQR Capital Management with a $904.5 million position. Other investors bullish on the company included Adage Capital Management, Millennium Management, and Yacktman Asset Management.
Now, key money managers were breaking ground themselves. Renaissance Technologies, managed by Jim Simons, created the biggest position in Cisco Systems, Inc. (NASDAQ:CSCO). Renaissance Technologies had $125.3 million invested in the company at the end of the quarter. Paul Tudor Jones’s Tudor Investment Corp also made a $20.9 million investment in the stock during the quarter. The other funds with new positions in the stock are Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Richard Chilton’s Chilton Investment Company, and Paul Marshall and Ian Wace’s Marshall Wace LLP.
Let’s now take a look at hedge fund activity in other stocks similar to Cisco Systems, Inc. (NASDAQ:CSCO). We will take a look at Chevron Corporation (NYSE:CVX), UnitedHealth Group Incorporated (NYSE:UNH), The Home Depot, Inc. (NYSE:HD), and The Coca-Cola Company (NYSE:KO). All of these stocks’ market caps resemble CSCO’s market cap.
|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 53.25 hedge funds with bullish positions and the average amount invested in these stocks was $8575 million. That figure was $4202 million in CSCO’s case. UnitedHealth Group Incorporated (NYSE:UNH) is the most popular stock in this table. On the other hand Chevron Corporation (NYSE:CVX) is the least popular one with only 44 bullish hedge fund positions. Cisco Systems, Inc. (NASDAQ:CSCO) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately CSCO wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on CSCO were disappointed as the stock returned -9.2% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.