The 800+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the second quarter, which unveil their equity positions as of September 30th. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards International Business Machines Corp. (NYSE:IBM).
Is IBM a good stock to buy? International Business Machines Corp. (NYSE:IBM) shares haven't seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 41 hedge funds' portfolios at the end of the third quarter of 2021. Our calculations also showed that IBM isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings). At the end of this article we will also compare IBM to other stocks including ServiceNow Inc (NYSE:NOW), Sanofi (NYSE:SNY), and American Tower Corporation (NYSE:AMT) to get a better sense of its popularity.
Peter Rathjens of Arrowstreet Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. With all of this in mind let's take a look at the key hedge fund action surrounding International Business Machines Corp. (NYSE:IBM).
Do Hedge Funds Think IBM Is A Good Stock To Buy Now?
At the end of September, a total of 41 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in IBM over the last 25 quarters. With the smart money's sentiment swirling, there exists a few key hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
The largest stake in International Business Machines Corp. (NYSE:IBM) was held by Citadel Investment Group, which reported holding $685 million worth of stock at the end of September. It was followed by Arrowstreet Capital with a $398.2 million position. Other investors bullish on the company included Masters Capital Management, Point72 Asset Management, and AQR Capital Management. In terms of the portfolio weights assigned to each position Masters Capital Management allocated the biggest weight to International Business Machines Corp. (NYSE:IBM), around 10.96% of its 13F portfolio. Breakline Capital is also relatively very bullish on the stock, earmarking 4.01 percent of its 13F equity portfolio to IBM.
Due to the fact that International Business Machines Corp. (NYSE:IBM) has faced declining sentiment from hedge fund managers, we can see that there was a specific group of money managers that slashed their positions entirely by the end of the third quarter. At the top of the heap, Renaissance Technologies dumped the biggest stake of all the hedgies followed by Insider Monkey, comprising close to $63.1 million in stock. Richard SchimeláandáLawrence Sapanski's fund, Cinctive Capital Management, also dumped its stock, about $7.6 million worth. These transactions are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as International Business Machines Corp. (NYSE:IBM) but similarly valued. These stocks are ServiceNow Inc (NYSE:NOW), Sanofi (NYSE:SNY), American Tower Corporation (NYSE:AMT), Amgen, Inc. (NASDAQ:AMGN), Toronto-Dominion Bank (NYSE:TD), Intuitive Surgical, Inc. (NASDAQ:ISRG), and Snap Inc. (NYSE:SNAP). This group of stocks' market valuations match IBM's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NOW,87,7527653,-4 SNY,19,1287779,3 AMT,61,4474779,6 AMGN,52,1448267,-1 TD,17,294336,0 ISRG,61,3536259,1 SNAP,78,6739225,14 Average,53.6,3615471,2.7 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 53.6 hedge funds with bullish positions and the average amount invested in these stocks was $3615 million. That figure was $1405 million in IBM's case. ServiceNow Inc (NYSE:NOW) is the most popular stock in this table. On the other hand Toronto-Dominion Bank (NYSE:TD) is the least popular one with only 17 bullish hedge fund positions. International Business Machines Corp. (NYSE:IBM) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for IBM is 41.7. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.6% in 2021 through November 30th and surpassed the market again by 5.6 percentage points. Unfortunately IBM wasn't nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); IBM investors were disappointed as the stock returned -10.7% since the end of September (through 11/30) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.
Get real-time email alerts: Follow International Business Machines Corp (NYSE:IBM)
Disclosure: None. This article was originally published at Insider Monkey.