With the third-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 fourth quarter. One of these stocks was Medtronic plc (NYSE:MDT).
Is MDT a good stock to buy now? Medtronic plc (NYSE:MDT) has experienced an increase in enthusiasm from smart money recently. Medtronic plc (NYSE:MDT) was in 62 hedge funds’ portfolios at the end of September. The all time high for this statistics is 66. There were 58 hedge funds in our database with MDT holdings at the end of June. Our calculations also showed that MDT isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 66 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 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 5 best cheap stocks to buy according to Ray Dalio to identify stocks with upside potential. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. With all of this in mind we’re going to check out the fresh hedge fund action regarding Medtronic plc (NYSE:MDT).
What does smart money think about Medtronic plc (NYSE:MDT)?
Heading into the fourth quarter of 2020, a total of 62 of the hedge funds tracked by Insider Monkey were long this stock, a change of 7% from the second quarter of 2020. On the other hand, there were a total of 56 hedge funds with a bullish position in MDT a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Diamond Hill Capital held the most valuable stake in Medtronic plc (NYSE:MDT), which was worth $380 million at the end of the third quarter. On the second spot was Citadel Investment Group which amassed $287.6 million worth of shares. D E Shaw, Two Sigma Advisors, and Adage 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 Tamarack Capital Management allocated the biggest weight to Medtronic plc (NYSE:MDT), around 8.01% of its 13F portfolio. Healthcor Management LP is also relatively very bullish on the stock, dishing out 5.83 percent of its 13F equity portfolio to MDT.
With a general bullishness amongst the heavyweights, some big names were leading the bulls’ herd. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, created the largest position in Medtronic plc (NYSE:MDT). Marshall Wace LLP had $86.1 million invested in the company at the end of the quarter. Aaron Cowen’s Suvretta Capital Management also initiated a $84.7 million position during the quarter. The other funds with new positions in the stock are Michael Rockefeller and KarláKroeker’s Woodline Partners, John Murphy’s Levin Easterly Partners, and Justin John Ferayorni’s Tamarack Capital Management.
Let’s go over hedge fund activity in other stocks similar to Medtronic plc (NYSE:MDT). We will take a look at NextEra Energy, Inc. (NYSE:NEE), Bristol Myers Squibb Company (NYSE:BMY), Chevron Corporation (NYSE:CVX), Zoom Video Communications, Inc. (NASDAQ:ZM), Union Pacific Corporation (NYSE:UNP), QUALCOMM, Incorporated (NASDAQ:QCOM), and China Mobile Limited (NYSE:CHL). This group of stocks’ market valuations are similar to MDT’s market valuation.
|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 65.4 hedge funds with bullish positions and the average amount invested in these stocks was $4025 million. That figure was $2976 million in MDT’s case. Bristol Myers Squibb Company (NYSE:BMY) is the most popular stock in this table. On the other hand China Mobile Limited (NYSE:CHL) is the least popular one with only 10 bullish hedge fund positions. Medtronic plc (NYSE:MDT) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for MDT is 60. 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. This is a slightly negative signal and 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 31.6% in 2020 through December 2nd and surpassed the market again by 16 percentage points. Unfortunately MDT wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); MDT investors were disappointed as the stock returned 9.3% since the end of September (through 12/2) 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 most of these stocks already outperformed the market in 2020.
Follow Medtronic Inc (Old Filings) (NYSE:MDT)
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Disclosure: None. This article was originally published at Insider Monkey.