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Were Hedge Funds Right About Micron Technology, Inc. (MU)?

We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).

In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Keeping this in mind, let’s take a look at whether Micron Technology, Inc. (NASDAQ:MU) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

Is Micron Technology, Inc. (NASDAQ:MU) a safe investment today? The best stock pickers are in a bullish mood. The number of long hedge fund bets moved up by 17 lately. Our calculations also showed that MU ranked 24th among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings). MU was in 89 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 72 hedge funds in our database with MU holdings at the end of the previous quarter.

To most shareholders, hedge funds are viewed as unimportant, outdated investment vehicles of the past. While there are over 8000 funds with their doors open today, Our researchers look at the moguls of this club, about 850 funds. These hedge fund managers direct bulk of the hedge fund industry’s total asset base, and by following their top investments, Insider Monkey has deciphered numerous investment strategies that have historically defeated the market. Insider Monkey’s flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 35.3% since February 2017 (through March 3rd) even though the market was up more than 35% during the same period. We just shared a list of 7 short targets in our latest quarterly update .

We leave no stone unturned when looking for the next great investment idea. For example, this trader is claiming triple digit returns, so we check out his latest trade recommendations We are probably at the peak of the COVID-19 pandemic, so we check out this biotech investor’s coronavirus picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences (by the way watch this video if you want to hear one of the best healthcare hedge fund manager’s coronavirus analysis). Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s go over the key hedge fund action regarding Micron Technology, Inc. (NASDAQ:MU).

How are hedge funds trading Micron Technology, Inc. (NASDAQ:MU)?

At the end of the fourth quarter, a total of 89 of the hedge funds tracked by Insider Monkey were long this stock, a change of 24% from the previous quarter. On the other hand, there were a total of 61 hedge funds with a bullish position in MU a year ago. With hedgies’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).

Among these funds, AQR Capital Management held the most valuable stake in Micron Technology, Inc. (NASDAQ:MU), which was worth $487.3 million at the end of the third quarter. On the second spot was Appaloosa Management LP which amassed $435.6 million worth of shares. Arrowstreet Capital, Citadel Investment Group, and D E Shaw 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 Mohnish Pabrai allocated the biggest weight to Micron Technology, Inc. (NASDAQ:MU), around 36.25% of its 13F portfolio. Kadensa Capital is also relatively very bullish on the stock, earmarking 17.56 percent of its 13F equity portfolio to MU.

As aggregate interest increased, key money managers were leading the bulls’ herd. Woodline Partners, managed by Michael Rockefeller and Karl Kroeker, assembled the most outsized position in Micron Technology, Inc. (NASDAQ:MU). Woodline Partners had $52.5 million invested in the company at the end of the quarter. John Overdeck and David Siegel’s Two Sigma Advisors also made a $36.9 million investment in the stock during the quarter. The other funds with brand new MU positions are Ken Heebner’s Capital Growth Management, Doug Silverman and Alexander Klabin’s Senator Investment Group, and Leung Chi Kit’s Kadensa Capital.

Let’s go over hedge fund activity in other stocks similar to Micron Technology, Inc. (NASDAQ:MU). We will take a look at Westpac Banking Corporation (NYSE:WBK), Crown Castle International Corp. (NYSE:CCI), Colgate-Palmolive Company (NYSE:CL), and Northrop Grumman Corporation (NYSE:NOC). This group of stocks’ market caps are closest to MU’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
WBK 7 49339 3
CCI 38 1723851 -3
CL 52 2086840 7
NOC 44 1320442 -2
Average 35.25 1295118 1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 35.25 hedge funds with bullish positions and the average amount invested in these stocks was $1295 million. That figure was $4566 million in MU’s case. Colgate-Palmolive Company (NYSE:CL) is the most popular stock in this table. On the other hand Westpac Banking Corporation (NYSE:WBK) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Micron Technology, Inc. (NASDAQ:MU) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 1.0% in 2020 through April 20th and still beat the market by 11 percentage points. Unfortunately MU wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on MU were disappointed as the stock returned -19.3% during the three months of 2020 (through April 20th) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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

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