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

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. We are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article we look at how hedge funds traded Micron Technology, Inc. (NASDAQ:MU) and determine whether the smart money was really smart about this stock.

Is Micron Technology, Inc. (NASDAQ:MU) a marvelous investment right now? The best stock pickers were taking an optimistic view in March. The number of bullish hedge fund bets rose by 5. Our calculations also showed that MU ranked 26th among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). MU was in 94 hedge funds’ portfolios at the end of the first quarter of 2020. There were 89 hedge funds in our database with MU positions at the end of the previous quarter.

Video: Watch our video about the top 5 most popular hedge fund stocks.

Today there are dozens of tools market participants put to use to analyze publicly traded companies. A couple of the most innovative tools are hedge fund and insider trading moves. Our researchers have shown that, historically, those who follow the top picks of the elite hedge fund managers can outclass the S&P 500 by a superb amount (see the details here).

APPALOOSA MANAGEMENT LP

David Tepper of Appaloosa Management LP

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to take a look at the new hedge fund action encompassing Micron Technology, Inc. (NASDAQ:MU).

How have hedgies been trading Micron Technology, Inc. (NASDAQ:MU)?

Heading into the second quarter of 2020, a total of 94 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 6% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in MU over the last 18 quarters. With hedgies’ sentiment swirling, there exists a select group of key hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).

The largest stake in Micron Technology, Inc. (NASDAQ:MU) was held by Appaloosa Management LP, which reported holding $372.7 million worth of stock at the end of September. It was followed by Arrowstreet Capital with a $339.9 million position. Other investors bullish on the company included Matrix Capital Management, Citadel Investment Group, and Viking Global. In terms of the portfolio weights assigned to each position Mohnish Pabrai allocated the biggest weight to Micron Technology, Inc. (NASDAQ:MU), around 93.95% of its 13F portfolio. Appaloosa Management LP is also relatively very bullish on the stock, dishing out 11.39 percent of its 13F equity portfolio to MU.

Consequently, specific money managers were breaking ground themselves. Viking Global, managed by Andreas Halvorsen, initiated the biggest position in Micron Technology, Inc. (NASDAQ:MU). Viking Global had $282.3 million invested in the company at the end of the quarter. Daniel Sundheim’s D1 Capital Partners also initiated a $136.6 million position during the quarter. The other funds with brand new MU positions are Alex Sacerdote’s Whale Rock Capital Management, Patrick Degorce’s Theleme Partners, and Fang Zheng’s Keywise Capital Management.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Micron Technology, Inc. (NASDAQ:MU) but similarly valued. These stocks are Target Corporation (NYSE:TGT), Brookfield Asset Management Inc. (NYSE:BAM), CNOOC Limited (NYSE:CEO), and Activision Blizzard, Inc. (NASDAQ:ATVI). This group of stocks’ market values are similar to MU’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TGT 54 2208909 1
BAM 37 886441 3
CEO 11 178140 -3
ATVI 101 3053805 25
Average 50.75 1581824 6.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 50.75 hedge funds with bullish positions and the average amount invested in these stocks was $1582 million. That figure was $3991 million in MU’s case. Activision Blizzard, Inc. (NASDAQ:ATVI) is the most popular stock in this table. On the other hand CNOOC Limited (NYSE:CEO) is the least popular one with only 11 bullish hedge fund positions. Micron Technology, Inc. (NASDAQ:MU) 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 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 gained 13.3% in 2020 through June 25th but beat the market by 16.8 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 17% during the same time period 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 many of these stocks already outperformed the market so far this year.

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