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

At Insider Monkey, we pore over the filings of nearly 750 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of June 28. In this article, we will use that wealth of knowledge to determine whether or not Micron Technology, Inc. (NASDAQ:MU) makes for a good investment right now.

Micron Technology, Inc. (NASDAQ:MU) has seen an increase in activity from the world’s largest hedge funds recently. MU was in 62 hedge funds’ portfolios at the end of June. There were 61 hedge funds in our database with MU positions at the end of the previous quarter. Our calculations also showed that MU isn’t among the 30 most popular stocks among hedge funds (see the video at the end of this article).

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 40 percentage points since May 2014 through May 30, 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 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Daniel Sundheim D1 Capital

Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s check out the new hedge fund action encompassing Micron Technology, Inc. (NASDAQ:MU).

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

Heading into the third quarter of 2019, a total of 62 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 2% from the first quarter of 2019. The graph below displays the number of hedge funds with bullish position in MU over the last 16 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with MU Positions

Among these funds, AQR Capital Management held the most valuable stake in Micron Technology, Inc. (NASDAQ:MU), which was worth $435.2 million at the end of the second quarter. On the second spot was Renaissance Technologies which amassed $375.7 million worth of shares. Moreover, Citadel Investment Group, D1 Capital Partners, and Viking Global were also bullish on Micron Technology, Inc. (NASDAQ:MU), allocating a large percentage of their portfolios to this stock.

Consequently, key money managers were breaking ground themselves. Miller Value Partners, managed by Bill Miller, created the most outsized position in Micron Technology, Inc. (NASDAQ:MU). Miller Value Partners had $72.7 million invested in the company at the end of the quarter. Columbus Circle Investors also made a $17.3 million investment in the stock during the quarter. The following funds were also among the new MU investors: Marcelo Desio’s Lucha Capital Management, Jeffrey Talpins’s Element Capital Management, and Neal Nathani and Darren Dinneen’s Totem Point Management.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Micron Technology, Inc. (NASDAQ:MU) but similarly valued. These stocks are Phillips 66 (NYSE:PSX), Equinix, Inc. (REIT) (NASDAQ:EQIX), Telefonica S.A. (NYSE:TEF), and ABB Ltd (NYSE:ABB). This group of stocks’ market caps match MU’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PSX 39 1283214 -4
EQIX 38 1709515 0
TEF 7 44428 -3
ABB 13 325021 -2
Average 24.25 840545 -2.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 24.25 hedge funds with bullish positions and the average amount invested in these stocks was $841 million. That figure was $3048 million in MU’s case. Phillips 66 (NYSE:PSX) is the most popular stock in this table. On the other hand Telefonica S.A. (NYSE:TEF) 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 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Hedge funds were also right about betting on MU as the stock returned 11% during Q3 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
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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