Were Hedge Funds Illusioned With Morgan Stanley (MS)?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the third quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 6 years and analyze what the smart money thinks of Morgan Stanley (NYSE:MS) based on that data and determine whether they were really smart about the stock.

Morgan Stanley (NYSE:MS) investors should pay attention to a decrease in hedge fund interest recently. Morgan Stanley (NYSE:MS) was in 65 hedge funds’ portfolios at the end of September. The all time high for this statistic is 79. There were 69 hedge funds in our database with MS holdings at the end of June. Our calculations also showed that MS isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. With all of this in mind we’re going to view the recent hedge fund action regarding Morgan Stanley (NYSE:MS).

Do Hedge Funds Think MS Is A Good Stock To Buy Now?

At Q3’s end, a total of 65 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -6% from the second quarter of 2021. On the other hand, there were a total of 70 hedge funds with a bullish position in MS a year ago. With the smart money’s sentiment swirling, there exists a few key hedge fund managers who were upping their holdings substantially (or already accumulated large positions).

More specifically, Eagle Capital Management was the largest shareholder of Morgan Stanley (NYSE:MS), with a stake worth $1460.7 million reported as of the end of September. Trailing Eagle Capital Management was Fisher Asset Management, which amassed a stake valued at $970.6 million. GQG Partners, Citadel Investment Group, and Millennium 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 Bridger Management allocated the biggest weight to Morgan Stanley (NYSE:MS), around 4.74% of its 13F portfolio. Eagle Capital Management is also relatively very bullish on the stock, earmarking 4.29 percent of its 13F equity portfolio to MS.

Judging by the fact that Morgan Stanley (NYSE:MS) has witnessed declining sentiment from the aggregate hedge fund industry, it’s easy to see that there were a few fund managers who sold off their full holdings last quarter. It’s worth mentioning that Matthew Stadelman’s Diamond Hill Capital cut the biggest investment of all the hedgies monitored by Insider Monkey, worth close to $347 million in stock, and Doug Silverman and Alexander Klabin’s Senator Investment Group was right behind this move, as the fund sold off about $68.8 million worth. These moves are important to note, as aggregate hedge fund interest dropped by 4 funds last quarter.

Let’s go over hedge fund activity in other stocks similar to Morgan Stanley (NYSE:MS). We will take a look at Texas Instruments Incorporated (NASDAQ:TXN), Sea Limited (NYSE:SE), Shopify Inc (NYSE:SHOP), Medtronic plc (NYSE:MDT), T-Mobile US, Inc. (NASDAQ:TMUS), SAP SE (NYSE:SAP), and United Parcel Service, Inc. (NYSE:UPS). This group of stocks’ market caps resemble MS’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 62.6 hedge funds with bullish positions and the average amount invested in these stocks was $5647 million. That figure was $4991 million in MS’s case. Sea Limited (NYSE:SE) is the most popular stock in this table. On the other hand SAP SE (NYSE:SAP) is the least popular one with only 15 bullish hedge fund positions. Morgan Stanley (NYSE:MS) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for MS is 50.2. 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. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 29.6% in 2021 and still beat the market by 3.6 percentage points. Hedge funds were also right about betting on MS as the stock returned 6.8% since the end of Q3 (through 1/31) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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Disclosure: None. This article was originally published at Insider Monkey.