Were Hedge Funds Right About Morgan Stanley (MS)?

We can judge whether Morgan Stanley (NYSE:MS) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market when we factor in known risk factors.

Morgan Stanley (NYSE:MS) was in 57 hedge funds’ portfolios at the end of December. MS shareholders have witnessed an increase in activity from the world’s largest hedge funds lately. There were 51 hedge funds in our database with MS positions at the end of the previous quarter. Our calculations also showed that MS isn’t among the 30 most popular stocks among hedge funds.

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’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.5% through March 12, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.


We’re going to take a peek at the new hedge fund action regarding Morgan Stanley (NYSE:MS).

How are hedge funds trading Morgan Stanley (NYSE:MS)?

Heading into the first quarter of 2019, a total of 57 of the hedge funds tracked by Insider Monkey were long this stock, a change of 12% from one quarter earlier. By comparison, 52 hedge funds held shares or bullish call options in MS a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.


Among these funds, ValueAct Capital held the most valuable stake in Morgan Stanley (NYSE:MS), which was worth $1040 million at the end of the third quarter. On the second spot was Eagle Capital Management which amassed $605.6 million worth of shares. Moreover, Pzena Investment Management, Citadel Investment Group, and GLG Partners were also bullish on Morgan Stanley (NYSE:MS), allocating a large percentage of their portfolios to this stock.

Consequently, specific money managers have jumped into Morgan Stanley (NYSE:MS) headfirst. Samlyn Capital, managed by Robert Pohly, established the largest position in Morgan Stanley (NYSE:MS). Samlyn Capital had $71 million invested in the company at the end of the quarter. The other funds with brand new MS positions are Benjamin A. Smith’s Laurion Capital Management, Dmitry Balyasny’s Balyasny Asset Management, and Daniel Johnson’s Gillson Capital.

Let’s also examine hedge fund activity in other stocks similar to Morgan Stanley (NYSE:MS). These stocks are Vale SA (NYSE:VALE), Anthem Inc (NYSE:ANTM), CME Group Inc (NASDAQ:CME), and ASML Holding N.V. (NASDAQ:ASML). This group of stocks’ market values are similar to MS’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
VALE 33 2037385 -2
ANTM 67 5828271 4
CME 50 1411367 -3
ASML 16 650607 3
Average 41.5 2481908 0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 41.5 hedge funds with bullish positions and the average amount invested in these stocks was $2482 million. That figure was $4019 million in MS’s case. Anthem Inc (NYSE:ANTM) is the most popular stock in this table. On the other hand ASML Holding N.V. (NASDAQ:ASML) is the least popular one with only 16 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 15 most popular stocks among hedge funds returned 19.7% through March 15th and outperformed the S&P 500 ETF (SPY) by 6.6 percentage points. Unfortunately Morgan Stanley wasn’t in this group. Hedge funds that bet on MS were disappointed as the stock returned 10.1% and underperformed the market. If you are interested in investing in large cap stocks, you should check out the top 15 hedge fund stocks as 13 of these outperformed the market.

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