It’s the beginning of a new week and shares of The Boeing Company (NYSE:BA), General Electric Company (NYSE:GE), Advanced Micro Devices Inc. (NASDAQ:AMD), Tesla Inc. (NASDAQ:TSLA), and Apple Inc. (NASDAQ:AAPL) are in the spotlight. Let’s take a closer look at why each are trending and see how elite funds are positioned among them.
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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’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
The Boeing Company (NYSE:BA) shares are down 4% after analysts at Bank of America Merrill Lynch cut their price target to $420 from the previous $480. Although that’s still higher than Boeing’s current price, the analysts attributed the cut to the 737 Max situation being worse than expected with potentially longer delays of 6-9 months rather than the original 3-6 month forecast. At Q4’s end, a total of 67 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 26% from the previous quarter.
General Electric Company (NYSE:GE) is down around 3% after analysts at JP Morgan cut their rating to ‘Underweight’ from ‘Neutral’. Specifically analyst Stephen Tusa has a $5 price target, off from the previous $6 citing the challenges and ‘underlying risks’ at GE. Shares of the stock have rallied from December due to better sentiment, but there are still some doubters. Mark Weissman, Adam Cohen And David Coleto’s Caspian Capital Partners established a new position of 2.75 million shares in Q4.
Advanced Micro Devices Inc. (NASDAQ:AMD) is 1.7% in the red despite Bank of America Merrill Lynch raising its target price to $35 from $30. The analyst likes AMD’s expected gross margin expansion and potential for ‘bening price competition’ with bigger competitor Intel. The analyst also likes that AMD has new products on the way. At the end of the fourth quarter, a total of 28 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier.
Tesla Inc. (NASDAQ:TSLA) is on watch after Jefferies trimmed its price target to $400 from $450. The investment bank cites weakness in the first quarter mix as one reason for its cut. Tesla’s demand has not been as strong as expected and competition for the company is rising. Many elite funds are short Tesla given its short float of 23%.
Apple Inc. (NASDAQ:AAPL) is on watch after the stock moved closer to the psychological $200 level. A potential trade settlement talks with China could also reduce the threat of retaliation from the Chinese government and ensure that iPhone import costs from China to America don’t skyrocket. Warren Buffett’s Berkshire Hathaway is a big holder of Apple.
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