The elite funds run by legendary investors such as David Tepper and Jeff Ubben make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small cap stocks that big investment banks don’t follow. Because of their pay structures, they have strong incentives to do the research necessary to beat the market. That’s why we pay close attention to what they think in small cap stocks. In this article, we take a closer look at a bigger fish: Microsoft Corporation (NASDAQ:MSFT).
Microsoft Corporation (NASDAQ:MSFT) has seen an increase in hedge fund interest lately. MSFT was in 174 hedge funds’ portfolios at the end of the fourth quarter of 2018. There were 170 hedge funds in our database with MSFT holdings at the end of the previous quarter. Our calculations also showed that MSFT is the number one stock among the 30 most popular stocks among hedge funds.
Why do we pay any attention at all to hedge fund sentiment? 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 review the recent hedge fund action encompassing Microsoft Corporation (NASDAQ:MSFT).
What have hedge funds been doing with Microsoft Corporation (NASDAQ:MSFT)?
At the end of the forth quarter, a total of 174 of the hedge funds tracked by Insider Monkey were long this stock, a change of 2% from the second quarter of 2018. Below, you can check out the change in hedge fund sentiment towards MSFT over the last 14 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, AQR Capital Management held the most valuable stake in Microsoft Corporation (NASDAQ:MSFT), which was worth $2048.9 million at the end of the third quarter. On the second spot was Fisher Asset Management which amassed $1974.7 million worth of shares. Moreover, Eagle Capital Management, Bill & Melinda Gates Foundation Trust, and Viking Global were also bullish on Microsoft Corporation (NASDAQ:MSFT), allocating a large percentage of their portfolios to this stock.
As aggregate interest increased, key money managers were breaking ground themselves. SCGE Management, managed by Christopher Lyle, created the most valuable position in Microsoft Corporation (NASDAQ:MSFT). SCGE Management had $90.4 million invested in the company at the end of the quarter. Michael Kharitonov and Jon David McAuliffe’s Voleon Capital also initiated a $77.2 million position during the quarter. The other funds with new positions in the stock are Edmond M. Safra’s EMS Capital, Jeffrey Altman’s Owl Creek Asset Management, and Ryan Caldwell’s Chiron Investment Management.
Let’s check out hedge fund activity in other mega-cap technology stocks. These stocks are Apple Inc. (NASDAQ:AAPL), Amazon.com, Inc. (NASDAQ:AMZN), Alphabet Inc (NASDAQ:GOOGL), and Alphabet Inc (NASDAQ:GOOG). This group of stocks’ market valuations resemble MSFT’s market valuation.
[table]
Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position
AAPL,116,48320385,4
AMZN,168,19024781,18
GOOGL,146,12470388,9
GOOG,141,12831961,11
Average,142.75,23161879,10.5
[/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 142.75 hedge funds with bullish positions and the average amount invested in these stocks was $23162 million. That figure was $24667 million in MSFT’s case. Amazon.com, Inc. (NASDAQ:AMZN) is the most popular stock in this table. On the other hand Apple Inc. (NASDAQ:AAPL) is the least popular one with only 116 bullish hedge fund positions. All of these stocks are actually very popular among hedge funds. 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. Hedge funds were also right about betting on Microsoft as the stock returned 14.6% and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.