Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed over the past few years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets, hoping that they will outperform the broader market. Our research shows that hedge funds do have great stock picking skills, so let’s take a glance at the smart money sentiment towards Wells Fargo & Co (NYSE:WFC).
Wells Fargo & Co (NYSE:WFC) was in 85 hedge funds’ portfolios at the end of September. Wells Fargo & Co (NYSE:WFC) shareholders have witnessed a decrease in support from the world’s most elite money managers lately. There were 91 hedge funds in our database with Wells Fargo & Co (NYSE:WFC) positions at the end of the previous quarter. At the end of this article, we will also compare Wells Fargo & Co (NYSE:WFC) to other stocks, including Johnson & Johnson (NYSE:JNJ), General Electric Company (NYSE:GE), and Facebook Inc (NASDAQ:FB) to get a better sense of its popularity.
Follow Wells Fargo & Company (NYSE:WFC)
Follow Wells Fargo & Company (NYSE:WFC)
In the eyes of most traders, hedge funds are viewed as worthless, old investment vehicles of yesteryear. While there are over 8000 funds with their doors open at present, our researchers look at the moguls of this group, about 700 funds. These money managers command the lion’s share of all hedge funds’ total capital, and by monitoring their best investments, Insider Monkey has determined many investment strategies that have historically defeated the S&P 500 index. Insider Monkey’s small-cap hedge fund strategy surpassed the S&P 500 index by 12 percentage points a year for a decade in their back tests.
Now, let’s review the latest action regarding Wells Fargo & Co (NYSE:WFC).
How have hedgies been trading Wells Fargo & Co (NYSE:WFC)?
At the end of September, a total of 85 of the hedge funds tracked by Insider Monkey were long this stock, a decline of 7% from the second quarter. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Berkshire Hathaway has the most valuable position in Wells Fargo & Co (NYSE:WFC), worth close to $24.15 billion, comprising 19% of its total 13F portfolio. The second largest stake is held by Ken Fisher of Fisher Asset Management, with a $965.8 million position; 2% of its 13F portfolio is allocated to the stock. Remaining peers that hold long positions encompass Tom Russo’s Gardner Russo & Gardner, Patrick Degorce’s Theleme Partners, and Cliff Asness’ AQR Capital Management.
Since Wells Fargo & Co (NYSE:WFC) has experienced a declining sentiment from the smart money, it’s safe to say that there is a sect of money managers that decided to sell off their entire stakes last quarter. At the top of the heap, John Armitage’s Egerton Capital Limited said goodbye to the largest stake of all the hedgies monitored by Insider Monkey, valued at close to $157.7 million in CALL options, and Anand Parekh’s Alyeska Investment Group was right behind this move, as the fund dumped about $109.7 million worth of CALL options. These moves are important to note, as total hedge fund interest was cut by 6 funds last quarter.
Let’s also examine hedge fund activity in other stocks similar to Wells Fargo & Co (NYSE:WFC). These stocks are Johnson & Johnson (NYSE:JNJ), General Electric Company (NYSE:GE), Facebook Inc (NASDAQ:FB), and China Mobile Ltd. (ADR) (NYSE:CHL). This group of stocks’ market valuations is closest to Wells Fargo & Co (NYSE:WFC)’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| JNJ | 74 | 3938813 | -4 |
| GE | 74 | 5951572 | 4 |
| FB | 128 | 8955439 | -5 |
| CHL | 20 | 213813 | -7 |
As you can see, these stocks had an average of 74 hedge funds with bullish positions and the average amount invested in these stocks was $4.77 billion. That figure was $30.86 billion in Wells Fargo & Co (NYSE:WFC)’s case. Facebook Inc (NASDAQ:FB) is the most popular stock in this table. On the other hand, China Mobile Ltd. (ADR) (NYSE:CHL) is the least popular one with only 20 bullish hedge fund positions. Wells Fargo & Co (NYSE:WFC) is not the most popular stock in this group, but hedge fund interest is still above average. This is a slightly positive signal, but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard, Facebook Inc (NASDAQ:FB) might be a better candidate to consider a long position.
