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Is Intel Corporation (INTC) Going to Burn These Hedge Funds?

Between June 25 and October 30th the Russell 2000 ETF (IWM) lagged the larger S&P 500 ETF (SPY) by more than 14 percentage points as investors worried over the possible ramifications of rising interest rates. The hedge funds and institutional investors we track typically invest more in smaller-cap stocks than an average investor, and we have seen data that shows those funds paring back their overall exposure. Those funds cutting positions in small-caps is one reason why volatility has increased. In the following paragraphs, we take a closer look at what hedge funds and prominent investors think of Intel Corporation (NASDAQ:INTC) and see how the stock is affected by the recent hedge fund activity.

Is Intel Corporation ready to rally soon? Prominent investors are selling. The number of bullish hedge fund bets shrunk by 3 lately. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity, but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Comcast Corporation (NASDAQ:CMCSA), International Business Machines Corp. (NYSE:IBM), and Merck & Co., Inc. (NYSE:MRK) to gather more data points.

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In the eyes of most market participants, hedge funds are viewed as slow, old financial tools of yesteryear. While there are over 8000 funds trading at present, Our experts look at the bigwigs of this club, around 700 funds. These money managers shepherd the majority of the smart money’s total asset base, and by keeping track of their inimitable equity investments, Insider Monkey has spotted numerous investment strategies that have historically beaten Mr. Market. Insider Monkey’s small-cap hedge fund strategy outperformed the S&P 500 index by 12 percentage points annually for a decade in their back tests.

Now, we’re going to analyze the new action encompassing Intel Corporation (NASDAQ:INTC).

Hedge fund activity in Intel Corporation (NASDAQ:INTC)

At the end of the third quarter, a total of 45 of the hedge funds tracked by Insider Monkey were bullish on this stock, a drop of 6% from one quarter earlier. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Ken Fisher’s Fisher Asset Management has the biggest position in Intel Corporation (NASDAQ:INTC), worth close to $583.5 million, amounting to 1.2% of its total 13F portfolio. On Fisher Asset Management’s heels is Pzena Investment Management, led by Richard S. Pzena, holding a $339.5 million position; the fund has 2.2% of its 13F portfolio invested in the stock. Remaining professional money managers that hold long positions encompass Kerr Neilson’s Platinum Asset Management, Phill Gross and Robert Atchinson’s Adage Capital Management and Cliff Asness’s AQR Capital Management.

Seeing as Intel Corporation (NASDAQ:INTC) has faced falling interest from the aggregate hedge fund industry, it’s easy to see that there were a few hedge funds who were dropping their entire stakes in the third quarter. Interestingly, Christian Leone’s Luxor Capital Group said goodbye to the biggest stake of all the hedgies followed by Insider Monkey, worth about $46.9 million in stock. Gordy Holterman and Derek Dunn’s fund, Overland Advisors, also sold off its holding, about $40.6 million worth of INTC shares. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest dropped by 3 funds in the third quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Intel Corporation (NASDAQ:INTC) but similarly valued. These stocks are Comcast Corporation (NASDAQ:CMCSA), International Business Machines Corp. (NYSE:IBM), Merck & Co., Inc. (NYSE:MRK), and PepsiCo, Inc. (NYSE:PEP). This group of stocks’ market caps are similar to INTC’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CMCSA 80 8566242 4
IBM 63 13494699 4
MRK 62 2250136 -12
PEP 57 6739297 0

As you can see these stocks had an average of 66 hedge funds with bullish positions and the average amount invested in these stocks was $7.76 billion. That figure was just $3.67 billion in INTC’s case. Comcast Corporation (NASDAQ:CMCSA) is the most popular stock in this table. On the other hand PepsiCo, Inc. (NYSE:PEP) is the least popular one with only 57 bullish hedge fund positions. Compared to these stocks, Intel Corporation (NASDAQ:INTC) is even less popular than PEP. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.

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