Were Hedge Funds Right About 3M Company (MMM)?

We at Insider Monkey have gone over 873 13F filings that hedge funds and prominent investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 30th. In this article, we look at what those funds think of 3M Company (NYSE:MMM) based on that data.

3M Company (NYSE:MMM) shareholders have witnessed an increase in hedge fund interest of late. 3M Company (NYSE:MMM) was in 42 hedge funds’ portfolios at the end of June. The all time high for this statistic is 56. There were 41 hedge funds in our database with MMM holdings at the end of March. Our calculations also showed that MMM isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

If you’d ask most investors, hedge funds are perceived as underperforming, outdated investment tools of years past. While there are greater than 8000 funds in operation today, Our experts look at the top tier of this club, approximately 850 funds. It is estimated that this group of investors preside over bulk of the smart money’s total asset base, and by watching their best picks, Insider Monkey has identified various investment strategies that have historically outperformed Mr. Market. Insider Monkey’s flagship short hedge fund strategy outpaced the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Also, our monthly newsletter’s portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website.

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 are checking out stock pitches like this emerging lithium stock. 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. 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 homepage. Keeping this in mind we’re going to view the fresh hedge fund action regarding 3M Company (NYSE:MMM).

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

At the end of June, a total of 42 of the hedge funds tracked by Insider Monkey were long this stock, a change of 2% from the previous quarter. By comparison, 42 hedge funds held shares or bullish call options in MMM 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.

The largest stake in 3M Company (NYSE:MMM) was held by Fisher Asset Management, which reported holding $1071.2 million worth of stock at the end of June. It was followed by AQR Capital Management with a $235.5 million position. Other investors bullish on the company included Citadel Investment Group, Citadel Investment Group, and D E Shaw. In terms of the portfolio weights assigned to each position Hourglass Capital allocated the biggest weight to 3M Company (NYSE:MMM), around 1.27% of its 13F portfolio. Arjuna Capital is also relatively very bullish on the stock, earmarking 0.88 percent of its 13F equity portfolio to MMM.

Now, key money managers have been driving this bullishness. Centiva Capital, managed by Karim Abbadi and Edward McBride, initiated the most outsized position in 3M Company (NYSE:MMM). Centiva Capital had $3 million invested in the company at the end of the quarter. Gregg Moskowitz’s Interval Partners also initiated a $3 million position during the quarter. The other funds with new positions in the stock are Karim Abbadi and Edward McBride’s Centiva Capital, Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors, and David Costen Haley’s HBK Investments.

Let’s now take a look at hedge fund activity in other stocks similar to 3M Company (NYSE:MMM). We will take a look at Advanced Micro Devices, Inc. (NASDAQ:AMD), Zoom Video Communications, Inc. (NASDAQ:ZM), Diageo plc (NYSE:DEO), Square, Inc. (NYSE:SQ), Deere & Company (NYSE:DE), CVS Health Corporation (NYSE:CVS), and Intuitive Surgical, Inc. (NASDAQ:ISRG). This group of stocks’ market valuations match MMM’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 59.3 hedge funds with bullish positions and the average amount invested in these stocks was $4474 million. That figure was $1583 million in MMM’s case. Square, Inc. (NYSE:SQ) is the most popular stock in this table. On the other hand Diageo plc (NYSE:DEO) is the least popular one with only 20 bullish hedge fund positions. 3M Company (NYSE:MMM) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for MMM is 43.4. 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 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 through November 5th and surpassed the market again by 3.1 percentage points. Unfortunately MMM wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); MMM investors were disappointed as the stock returned -7.8% since the end of June (through 11/5) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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