Is Texas Instruments Incorporated (TXN) A Good Stock To Buy?

Before we spend days researching a stock idea we’d like to take a look at how hedge funds and billionaire investors recently traded that stock. S&P 500 Index returned about 7.6% during the last 12 months ending November 21, 2016. Most investors don’t notice that less than 49% of the stocks in the index outperformed the index. This means you (or a monkey throwing a dart) have less than an even chance of beating the market by randomly picking a stock. On the other hand, the top 30 mid-cap stocks among the best performing hedge funds had an average return of 18% during the same period. Hedge funds had bad stock picks like everyone else. We are sure you have read about their worst picks, like Valeant, in the media over the past year. So, taking cues from hedge funds isn’t a foolproof strategy, but it seems to work on average. In this article, we will take a look at what hedge funds think about Texas Instruments Incorporated (NASDAQ:TXN).

Texas Instruments Incorporated (NASDAQ:TXN) investors should be aware of an increase in hedge fund sentiment in recent months. TXN was in 37 hedge funds’ portfolios at the end of September. There were 31 hedge funds in our database with TXN holdings at the end of the previous quarter. 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 Canon Inc. (ADR) (NYSE:CAJ), Priceline.com Inc (NASDAQ:PCLN), and Goldman Sachs Group, Inc. (NYSE:GS) to gather more data points.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

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Keeping this in mind, let’s take a peek at the new action surrounding Texas Instruments Incorporated (NASDAQ:TXN).

Hedge fund activity in Texas Instruments Incorporated (NASDAQ:TXN)

At the end of the third quarter, a total of 37 of the hedge funds tracked by Insider Monkey held long positions in this stock, up 19% from the previous quarter. With the smart money’s positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were upping their stakes considerably (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Cliff Asness’s AQR Capital Management has the largest position in Texas Instruments Incorporated (NASDAQ:TXN), worth close to $190.9 million and comprising 0.3% of its total 13F portfolio. The second largest stake is held by Arrowstreet Capital, led by Peter Rathjens, Bruce Clarke and John Campbell, holding a $112.1 million position; 0.4% of its 13F portfolio is allocated to the company. Some other hedge funds and institutional investors that are bullish include Jim Simons’s Renaissance Technologies, Phill Gross and Robert Atchinson’s Adage Capital Management and Israel Englander’s Millennium Management.

With a general bullishness amongst the heavyweights, some big names have been driving this bullishness. Jim Simons’ Renaissance Technologies established the most outsized position in Texas Instruments Incorporated (NASDAQ:TXN). Renaissance Technologies had $105.3 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also made a $66 million investment in the stock during the quarter. The other funds with new positions in the stock are Ken Griffin’s Citadel Investment Group, Matthew Tewksbury’s Stevens Capital Management, and Ernest Chow and Jonathan Howe’s Sensato Capital Management.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Texas Instruments Incorporated (NASDAQ:TXN) but similarly valued. These stocks are Canon Inc. (ADR) (NYSE:CAJ), Priceline.com Inc (NASDAQ:PCLN), Goldman Sachs Group, Inc. (NYSE:GS), and Broadcom Ltd (NASDAQ:AVGO). All of these stocks’ market caps are closest to TXN’s market cap.

As you can see these stocks had an average of 61 hedge funds with bullish positions and the average amount invested in these stocks was $5.32 billion. That figure was $944 million in TXN’s case. Priceline.com Inc (NASDAQ:PCLN) is the most popular stock in this table. On the other hand Canon Inc. (ADR) (NYSE:CAJ) is the least popular one with only 5 bullish hedge fund positions. Texas Instruments Incorporated (NASDAQ:TXN) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard PCLN might be a better candidate to consider a long position.