We at Insider Monkey have gone over 821 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, near the height of the coronavirus market crash. In this article, we look at what those funds think of Johnson & Johnson (NYSE:JNJ) based on that data.
Johnson & Johnson (NYSE:JNJ) has seen a decrease in support from the world’s most elite money managers recently. JNJ was in 82 hedge funds’ portfolios at the end of March. There were 85 hedge funds in our database with JNJ positions at the end of the previous quarter. Our calculations also showed that JNJ isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
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 44 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 36% through May 18th. 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 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 believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we asked astrophysicist Neil deGrasse Tyson about Tesla, Elon Musk, and his top stock picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to take a peek at the recent hedge fund action encompassing Johnson & Johnson (NYSE:JNJ).
What have hedge funds been doing with Johnson & Johnson (NYSE:JNJ)?
At the end of the first quarter, a total of 82 of the hedge funds tracked by Insider Monkey were long this stock, a change of -4% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in JNJ over the last 18 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, holds the largest position in Johnson & Johnson (NYSE:JNJ). Arrowstreet Capital has a $926.8 million position in the stock, comprising 2.6% of its 13F portfolio. Coming in second is AQR Capital Management, led by Cliff Asness, holding a $792.3 million position; the fund has 1.3% of its 13F portfolio invested in the stock. Other peers that hold long positions contain 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 Senator Investment Group allocated the biggest weight to Johnson & Johnson (NYSE:JNJ), around 11.16% of its 13F portfolio. Pennant Capital Management is also relatively very bullish on the stock, dishing out 6.56 percent of its 13F equity portfolio to JNJ.
Because Johnson & Johnson (NYSE:JNJ) has witnessed bearish sentiment from the entirety of the hedge funds we track, we can see that there was a specific group of fund managers that elected to cut their entire stakes in the third quarter. It’s worth mentioning that Arthur B Cohen and Joseph Healey’s Healthcor Management LP sold off the biggest position of the “upper crust” of funds followed by Insider Monkey, totaling about $100.4 million in stock, and Frank Brosens’s Taconic Capital was right behind this move, as the fund said goodbye to about $72.9 million worth. These transactions are important to note, as aggregate hedge fund interest was cut by 3 funds in the third quarter.
Let’s check out hedge fund activity in other stocks similar to Johnson & Johnson (NYSE:JNJ). We will take a look at Walmart Inc. (NYSE:WMT), JPMorgan Chase & Co. (NYSE:JPM), The Procter & Gamble Company (NYSE:PG), and Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM). This group of stocks’ market values resemble JNJ’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| WMT | 55 | 4887227 | 3 |
| JPM | 112 | 9730557 | 14 |
| PG | 77 | 9519275 | -2 |
| TSM | 54 | 4298613 | -9 |
| Average | 74.5 | 7108918 | 1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 74.5 hedge funds with bullish positions and the average amount invested in these stocks was $7109 million. That figure was $5454 million in JNJ’s case. JPMorgan Chase & Co. (NYSE:JPM) 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 54 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. 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 7.9% in 2020 through May 22nd but beat the market by 15.6 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 10.9% 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.
Disclosure: None. This article was originally published at Insider Monkey.
