Did The Smart Get The Walt Disney Company (DIS) Right?

We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards The Walt Disney Company (NYSE:DIS) and determine whether hedge funds skillfully traded this stock.

The Walt Disney Company (NYSE:DIS) shareholders have witnessed a decrease in activity from the world’s largest hedge funds recently. The Walt Disney Company (NYSE:DIS) was in 101 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 144. There were 112 hedge funds in our database with DIS positions at the end of the second quarter. Our calculations also showed that DIS ranked 16th among the 30 most popular stocks among hedge funds (click for Q3 rankings).

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. Now we’re going to view the latest hedge fund action surrounding The Walt Disney Company (NYSE:DIS).

Dan Loeb of Third Point

Do Hedge Funds Think DIS Is A Good Stock To Buy Now?

At Q3’s end, a total of 101 of the hedge funds tracked by Insider Monkey were long this stock, a change of -10% from the second quarter of 2021. Below, you can check out the change in hedge fund sentiment towards DIS over the last 25 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Fisher Asset Management was the largest shareholder of The Walt Disney Company (NYSE:DIS), with a stake worth $1878.7 million reported as of the end of September. Trailing Fisher Asset Management was Coatue Management, which amassed a stake valued at $989.7 million. Matrix Capital Management, Third Point, and Eagle Capital Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Fosse Capital Partners allocated the biggest weight to The Walt Disney Company (NYSE:DIS), around 22.05% of its 13F portfolio. Crake Asset Management is also relatively very bullish on the stock, designating 14.07 percent of its 13F equity portfolio to DIS.

Due to the fact that The Walt Disney Company (NYSE:DIS) has experienced bearish sentiment from the smart money, it’s easy to see that there is a sect of money managers that elected to cut their positions entirely in the third quarter. It’s worth mentioning that Matthew Stadelman’s Diamond Hill Capital dumped the largest position of the 750 funds tracked by Insider Monkey, valued at close to $653.5 million in stock. Renaissance Technologies, also cut its stock, about $310.8 million worth. These bearish behaviors are important to note, as total hedge fund interest dropped by 11 funds in the third quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as The Walt Disney Company (NYSE:DIS) but similarly valued. These stocks are Paypal Holdings Inc (NASDAQ:PYPL), Adobe Inc. (NASDAQ:ADBE), Netflix, Inc. (NASDAQ:NFLX), salesforce.com, inc. (NYSE:CRM), Comcast Corporation (NASDAQ:CMCSA), Shell plc (NYSE:RDS), and Exxon Mobil Corporation (NYSE:XOM). This group of stocks’ market values match DIS’s market value.

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As you can see these stocks had an average of 87.9 hedge funds with bullish positions and the average amount invested in these stocks was $10066 million. That figure was $9416 million in DIS’s case. Paypal Holdings Inc (NASDAQ:PYPL) is the most popular stock in this table. On the other hand Shell plc (NYSE:RDS) is the least popular one with only 33 bullish hedge fund positions. The Walt Disney Company (NYSE:DIS) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for DIS is 73.8. 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 positive signal but 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 29.6% in 2021 and beat the market again by 3.6 percentage points. Unfortunately, DIS wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on DIS were disappointed as the stock returned -15.5% since the end of September (through 1/31) 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 all of these stocks already outperformed the market since 2019.

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