The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Stocks kept going up since then. In this article we look at how hedge funds traded Johnson & Johnson (NYSE:JNJ) and determine whether the smart money was really smart about this stock.
Is Johnson & Johnson (NYSE:JNJ) a healthy stock for your portfolio? Prominent investors were becoming hopeful. The number of long hedge fund bets inched up by 12 in recent months. Our calculations also showed that JNJ ranked #26 among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). Johnson & Johnson (NYSE:JNJ) was in 94 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics was previously 85. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 82 hedge funds in our database with JNJ positions at the end of March.
Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 56 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Donald Yacktman of Yacktman Asset Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this junior gold mining stock.. We go through lists like the 10 most profitable companies in America to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. With all of this in mind let’s take a peek at the fresh hedge fund action surrounding Johnson & Johnson (NYSE:JNJ).
How have hedgies been trading Johnson & Johnson (NYSE:JNJ)?
At the end of June, a total of 94 of the hedge funds tracked by Insider Monkey were long this stock, a change of 15% from the previous quarter. By comparison, 63 hedge funds held shares or bullish call options in JNJ a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, holds the largest position in Johnson & Johnson (NYSE:JNJ). Arrowstreet Capital has a $1.1091 billion position in the stock, comprising 2% of its 13F portfolio. The second largest stake is held by AQR Capital Management, managed by Cliff Asness, which holds a $735.5 million position; the fund has 1.2% of its 13F portfolio invested in the stock. Other members of the smart money that are bullish comprise D. E. Shaw’s D E Shaw, Renaissance Technologies and Donald Yacktman’s Yacktman Asset Management. In terms of the portfolio weights assigned to each position Lucas Capital Management allocated the biggest weight to Johnson & Johnson (NYSE:JNJ), around 5.92% of its 13F portfolio. Beddow Capital Management is also relatively very bullish on the stock, earmarking 5.44 percent of its 13F equity portfolio to JNJ.
With a general bullishness amongst the heavyweights, key money managers have jumped into Johnson & Johnson (NYSE:JNJ) headfirst. Woodline Partners, managed by Michael Rockefeller and KarláKroeker, created the biggest position in Johnson & Johnson (NYSE:JNJ). Woodline Partners had $58.9 million invested in the company at the end of the quarter. Donald Sussman’s Paloma Partners also made a $32.5 million investment in the stock during the quarter. The following funds were also among the new JNJ investors: Sander Gerber’s Hudson Bay Capital Management, Dmitry Balyasny’s Balyasny Asset Management, and Zach Schreiber’s Point State Capital.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Johnson & Johnson (NYSE:JNJ) but similarly valued. We will take a look at Walmart Inc. (NYSE:WMT), Mastercard Incorporated (NYSE:MA), The Procter & Gamble Company (NYSE:PG), Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM), JPMorgan Chase & Co. (NYSE:JPM), UnitedHealth Group Inc. (NYSE:UNH), and The Home Depot, Inc. (NYSE:HD). This group of stocks’ market valuations are similar to JNJ’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| WMT | 60 | 5829223 | 5 |
| MA | 147 | 14350337 | 8 |
| PG | 73 | 9244143 | -4 |
| TSM | 58 | 5209772 | 4 |
| JPM | 123 | 8732467 | 11 |
| UNH | 96 | 8326373 | -8 |
| HD | 85 | 4642557 | -2 |
| Average | 91.7 | 8047839 | 2 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 91.7 hedge funds with bullish positions and the average amount invested in these stocks was $8 billion. That figure was $4.7 billion in JNJ’s case. Mastercard Incorporated (NYSE:MA) is the most popular stock in this table. On the other hand Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM) is the least popular one with only 58 bullish hedge fund positions. Johnson & Johnson (NYSE:JNJ) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for JNJ is 60.2. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 28.2% in 2020 through August 24th but beat the market by 20.6 percentage points. Unfortunately JNJ wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on JNJ were disappointed as the stock returned 8.9% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
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Disclosure: None. This article was originally published at Insider Monkey.
