Amid an overall market correction, many stocks that smart money investors were collectively bullish on tanked during the third quarter. Among them, Valeant and Micron ranked among the top 30 picks and both lost around 20%. Citigroup, which was the third most popular stock, lost 10% amid uncertainty regarding the interest rates. Nevertheless, our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.
The Walt Disney Company (NYSE:DIS) investors should pay attention to a decrease in activity from the world’s largest hedge funds lately. The Walt Disney Company (NYSE:DIS) was in 48 hedge funds’ portfolios at the end of September. There were 60 hedge funds in our database with The Walt Disney Company (NYSE:DIS) holdings at the end of the previous quarter. At the end of this article, we will also compare The Walt Disney Company (NYSE:DIS) to other stocks, including Anheuser-Busch InBev NV (ADR) (NYSE:BUD), Bank of America Corp (NYSE:BAC), and Nippon Telegraph & Telephone Corp (ADR) (NYSE:NTT) to get a better sense of its popularity.
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In the eyes of most stock holders, hedge funds are assumed to be unimportant, old investment vehicles of years past. While there are more than 8000 funds with their doors open at the moment, We hone in on the moguls of this club, about 700 funds. These money managers shepherd the majority of all hedge funds’ total capital, and by observing their unrivaled picks, Insider Monkey has uncovered a number of investment strategies that have historically surpassed the S&P 500 index. Insider Monkey’s small-cap hedge fund strategy outpaced the S&P 500 index by 12 percentage points per annum for a decade in their back tests.
Keeping this in mind, let’s view the key action surrounding The Walt Disney Company (NYSE:DIS).
Hedge fund activity in The Walt Disney Company (NYSE:DIS)
At the end of the third quarter, a total of 48 of the hedge funds tracked by Insider Monkey were long this stock, a drop of 20% from the second quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Fisher Asset Management, managed by Ken Fisher, holds the largest position in The Walt Disney Company (NYSE:DIS). Fisher Asset Management has a $869.6 million position in the stock, comprising 1.8% of its 13F portfolio. The second largest stake is held by Adage Capital Management, managed by Phill Gross and Robert Atchinson, which holds a $199 million position; the fund has 0.6% of its 13F portfolio invested in the stock. Some other members of the smart money that are bullish contain Tom Gayner’s Markel Gayner Asset Management, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.
Since The Walt Disney Company (NYSE:DIS) has faced a declining sentiment from the entirety of the hedge funds we track, it’s easy to see that there exists a select few funds that elected to cut their entire stakes in the third quarter. At the top of the heap, Clifford Fox’s Columbus Circle Investors sold off the biggest stake of all the hedgies tracked by Insider Monkey, comprising an estimated $171 million in stock, and Ken Griffin’s Citadel Investment Group was right behind this move, as the fund cut about $88.6 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest dropped by 12 funds in the third quarter.
Let’s now take a look at 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 Anheuser-Busch InBev NV (ADR) (NYSE:BUD), Bank of America Corp (NYSE:BAC), Nippon Telegraph & Telephone Corp (ADR) (NYSE:NTT), and Oracle Corporation (NYSE:ORCL). This group of stocks’ market values matches The Walt Disney Company (NYSE:DIS)’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BUD | 49 | 5338832 | 8 |
| BAC | 108 | 6448158 | 13 |
| NTT | 12 | 133784 | 4 |
| ORCL | 57 | 7270832 | -1 |
As you can see, these stocks had an average of 57 hedge funds with bullish positions and the average amount invested in these stocks was $4.80 billion. That figure was $3.37 billion in The Walt Disney Company (NYSE:DIS)’s case. Bank of America Corp (NYSE:BAC) is the most popular stock in this table. On the other hand, Nippon Telegraph & Telephone Corp (ADR) (NYSE:NTT) is the least popular one with only 12 bullish hedge fund positions. The Walt Disney Company (NYSE:DIS) 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. In this regard, Bank of America Corp (NYSE:BAC) might be a better candidate to consider a long position.
