Microsoft Corporation (NASDAQ:MSFT)’s stock has gained over 2% so far today after Cowen Group analysts upgraded the st0ck to ‘Outperform’ from ‘Market Perform’. The analysts believe that the market “overreacted” to Microsoft’s recent quarterly earnings and added that increasing sales of the Office suite and Cloud business remain the strengths of Microsoft, and they are likely to give double digit returns to the company in the next 12 months. Hedge funds seem to have the same opinion of Microsoft, which is one of the most popular stock, based on the data from the latest round of 13F filings.
You probably know from experience that there is not as much information on small-cap companies as there is on large companies. Of course, this makes it really hard and difficult for individual investors to make proper and accurate analysis of certain small-cap companies. However, well-known and successful hedge fund investors like Carl Icahn and George Soros hold the necessary resources and abilities to conduct an extensive stock analysis on small-cap stocks, which enable them to make millions of dollars by identifying potential winners within the small-cap galaxy of stocks. This represents the main reason why Insider Monkey takes notice of the hedge fund activity in these overlooked stocks.
Microsoft Corporation (NASDAQ:MSFT) was in 144 hedge funds’ portfolios at the end of the first quarter of 2016. MSFT has experienced an increase in support from the world’s most elite money managers of late, since there were 140 hedge funds in our database with MSFT 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 Berkshire Hathaway Inc. (NYSE:BRK-B), Exxon Mobil Corporation (NYSE:XOM), and Facebook Inc (NASDAQ:FB) to gather more data points.
According to most market participants, hedge funds are assumed to be slow, old investment vehicles of yesteryear. While there are more than 8000 funds trading at present, Our researchers choose to focus on the masters of this club, about 700 funds. These hedge fund managers administer bulk of the hedge fund industry’s total capital, and by keeping an eye on their best stock picks, Insider Monkey has revealed a number of investment strategies that have historically defeated Mr. Market. Insider Monkey’s small-cap hedge fund strategy beat the S&P 500 index by 12 percentage points annually for a decade in their back tests.
When looking at the institutional investors followed by Insider Monkey, ValueAct Capital, managed by Jeffrey Ubben, holds the most valuable position in Microsoft Corporation (NASDAQ:MSFT). ValueAct Capital has a $3.1273 billion position in the stock, comprising 31.2% of its 13F portfolio. On ValueAct Capital’s heels is Eagle Capital Management, led by Boykin Curry, holding a $1.7013 billion position; 7.1% of its 13F portfolio is allocated to the stock. Some other professional money managers with similar optimism consist of Stephen Mandel’s Lone Pine Capital, Ken Fisher’s Fisher Asset Management, and David Blood and Al Gore’s Generation Investment Management.
On the next page, we are going to take a closer look at some funds that initiated stakes in Microsoft between January and March.
Now, specific money managers were leading the bulls’ herd. Brookside Capital, managed by Bain Capital, assembled the biggest position in Microsoft Corporation (NASDAQ:MSFT). Brookside Capital had $84.1 million invested in the company at the end of the first quarter. Richard Gerson and Navroz D. Udwadia’s Falcon Edge Capital also made a $73 million investment in the stock during the quarter. The following funds were also among the new MSFT investors: Alex Sacerdote’s Whale Rock Capital Management, Alok Agrawal’s Bloom Tree Partners, and David Stemerman’s Conatus Capital Management.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Microsoft Corporation (NASDAQ:MSFT) but similarly valued. We will take a look at Berkshire Hathaway Inc. (NYSE:BRK-B), Exxon Mobil Corporation (NYSE:XOM), Facebook Inc (NASDAQ:FB), and Johnson & Johnson (NYSE:JNJ). All of these stocks’ market caps are closest to MSFT’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 93 hedge funds with bullish positions and the average amount invested in these stocks was $10466 million. That figure was $20831 million in MSFT’s case. Facebook Inc (NASDAQ:FB) is the most popular stock in this table. On the other hand Exxon Mobil Corporation (NYSE:XOM) is the least popular one with only 60 bullish hedge fund positions. Microsoft Corporation (NASDAQ:MSFT) 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. In this regard FB might be a better candidate to consider a long position.