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Were Hedge Funds Right About Souring On QUALCOMM, Incorporated (QCOM)?

After several tireless days we have finished crunching the numbers from nearly 750 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms’ equity portfolios as of December 31. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards QUALCOMM, Incorporated (NASDAQ:QCOM).

Is QUALCOMM, Incorporated (NASDAQ:QCOM) a buy, sell, or hold? The best stock pickers are becoming more confident. The number of long hedge fund bets increased by 3 recently though the overall trend is still negative. Our calculations also showed that QCOM isn’t among the 30 most popular stocks among hedge funds. QCOM was in 51 hedge funds’ portfolios at the end of the fourth quarter of 2018. There were 48 hedge funds in our database with QCOM holdings at the end of the previous quarter.

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’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

COATUE MANAGEMENT

Let’s view the key hedge fund action encompassing QUALCOMM, Incorporated (NASDAQ:QCOM).

What does the smart money think about QUALCOMM, Incorporated (NASDAQ:QCOM)?

At Q4’s end, a total of 51 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 6% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards QCOM over the last 14 quarters. With hedgies’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).

QCOM_mar2019

More specifically, D E Shaw was the largest shareholder of QUALCOMM, Incorporated (NASDAQ:QCOM), with a stake worth $454.9 million reported as of the end of September. Trailing D E Shaw was Millennium Management, which amassed a stake valued at $401.7 million. Coatue Management, Point72 Asset Management, and Laurion Capital Management were also very fond of the stock, giving the stock large weights in their portfolios.

Now, specific money managers were leading the bulls’ herd. PEAK6 Capital Management, managed by Matthew Hulsizer, established the biggest position in QUALCOMM, Incorporated (NASDAQ:QCOM). PEAK6 Capital Management had $11.6 million invested in the company at the end of the quarter. Clint Carlson’s Carlson Capital also made a $11.4 million investment in the stock during the quarter. The other funds with brand new QCOM positions are Kevin Cottrell and Chris LaSusa’s KCL Capital, Dmitry Balyasny’s Balyasny Asset Management, and Paul Hondros’s AlphaOne Capital Partners.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as QUALCOMM, Incorporated (NASDAQ:QCOM) but similarly valued. We will take a look at Morgan Stanley (NYSE:MS), Vale SA (NYSE:VALE), Anthem Inc (NYSE:ANTM), and CME Group Inc (NASDAQ:CME). This group of stocks’ market values match QCOM’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MS 57 4019419 6
VALE 33 2037385 -2
ANTM 67 5828271 4
CME 50 1411367 -3
Average 51.75 3324111 1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 51.75 hedge funds with bullish positions and the average amount invested in these stocks was $3324 million. That figure was $2269 million in QCOM’s case. Anthem Inc (NYSE:ANTM) is the most popular stock in this table. On the other hand Vale SA (NYSE:VALE) is the least popular one with only 33 bullish hedge fund positions. QUALCOMM, Incorporated (NASDAQ:QCOM) is not the least popular stock in this group but hedge fund interest is still below average. 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 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 QCOM wasn’t in this group. Hedge funds that bet on QCOM were disappointed as the stock returned 0.6% 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.

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