Coronavirus is probably the #1 concern in investors’ minds right now. It should be. We estimate that COVID-19 will kill around 5 million people worldwide and there is a 3.3% probability that Donald Trump will die from the new coronavirus (read the details.). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The 800+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the fourth quarter, which unveil their equity positions as of December 31. 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 The Home Depot, Inc. (NYSE:HD).
The Home Depot, Inc. (NYSE:HD) was in 91 hedge funds’ portfolios at the end of the fourth quarter of 2019. HD has seen an increase in activity from the world’s largest hedge funds in recent months. There were 70 hedge funds in our database with HD holdings at the end of the previous quarter. Our calculations also showed that HD ranks 23rd among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Today there are a large number of indicators shareholders can use to value stocks. A duo of the most innovative indicators are hedge fund and insider trading moves. Our researchers have shown that, historically, those who follow the top picks of the top fund managers can outpace the market by a solid amount (see the details here).
Phill Gross of Adage Capital Management
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. In January, we recommended a long position in one of the most shorted stocks in the market, and that stock returned nearly 50% despite the large losses in the market since our recommendation. Keeping this in mind we’re going to view the latest hedge fund action regarding The Home Depot, Inc. (NYSE:HD).
Hedge fund activity in The Home Depot, Inc. (NYSE:HD)
Heading into the first quarter of 2020, a total of 91 of the hedge funds tracked by Insider Monkey were long this stock, a change of 30% from the third quarter of 2019. By comparison, 58 hedge funds held shares or bullish call options in HD a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in The Home Depot, Inc. (NYSE:HD) was held by Fisher Asset Management, which reported holding $1333.6 million worth of stock at the end of September. It was followed by AQR Capital Management with a $563.2 million position. Other investors bullish on the company included Two Sigma Advisors, Citadel Investment Group, and Adage Capital Management. In terms of the portfolio weights assigned to each position Chilton Investment Company allocated the biggest weight to The Home Depot, Inc. (NYSE:HD), around 5.58% of its 13F portfolio. Kehrs Ridge Capital is also relatively very bullish on the stock, setting aside 5.31 percent of its 13F equity portfolio to HD.
With a general bullishness amongst the heavyweights, key money managers have been driving this bullishness. Point72 Asset Management, managed by Steve Cohen, assembled the most outsized position in The Home Depot, Inc. (NYSE:HD). Point72 Asset Management had $80.4 million invested in the company at the end of the quarter. Gregg Moskowitz’s Interval Partners also initiated a $54.4 million position during the quarter. The following funds were also among the new HD investors: Josh Donfeld and David Rogers’s Castle Hook Partners, Jack Woodruff’s Candlestick Capital Management, and Frank Brosens’s Taconic Capital.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as The Home Depot, Inc. (NYSE:HD) but similarly valued. We will take a look at The Coca-Cola Company (NYSE:KO), Merck & Co., Inc. (NYSE:MRK), Chevron Corporation (NYSE:CVX), and Wells Fargo & Company (NYSE:WFC). This group of stocks’ market caps resemble HD’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| KO | 51 | 23797078 | -5 |
| MRK | 77 | 5164143 | -3 |
| CVX | 47 | 2391610 | -6 |
| WFC | 79 | 23878918 | 12 |
| Average | 63.5 | 13807937 | -0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 63.5 hedge funds with bullish positions and the average amount invested in these stocks was $13808 million. That figure was $4996 million in HD’s case. Wells Fargo & Company (NYSE:WFC) is the most popular stock in this table. On the other hand Chevron Corporation (NYSE:CVX) is the least popular one with only 47 bullish hedge fund positions. Compared to these stocks The Home Depot, Inc. (NYSE:HD) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks also gained 0.1% in 2020 through March 2nd and beat the market by 4.1 percentage points. Hedge funds were also right about betting on HD as the stock returned 5.3% so far in Q1 (through March 2nd) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.
