Here is What Hedge Funds Think About JPMorgan Chase & Co. (JPM)

While the market driven by short-term sentiment influenced by the accommodative interest rate environment in the US, virus news and stimulus spending, many smart money investors are starting to get cautious towards the current bull run since March, 2020 and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding JPMorgan Chase & Co. (NYSE:JPM).

Is JPMorgan Chase & Co. (NYSE:JPM) a buy here? Hedge funds were becoming less confident. The number of bullish hedge fund bets retreated by 3 lately. JPMorgan Chase & Co. (NYSE:JPM) was in 108 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 123. Our calculations also showed that JPM ranked 16th among the 30 most popular stocks among hedge funds (click for Q2 rankings).

In the financial world there are dozens of indicators stock traders use to value publicly traded companies. A duo of the most underrated indicators are hedge fund and insider trading interest. Our experts have shown that, historically, those who follow the best picks of the best hedge fund managers can outclass their index-focused peers by a significant amount (see the details here). Also, our monthly newsletter’s portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website .

Phillip Gross of Adage Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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. You can subscribe to our free daily newsletter on our homepage. Now let’s take a look at the latest hedge fund action encompassing JPMorgan Chase & Co. (NYSE:JPM).

Do Hedge Funds Think JPM Is A Good Stock To Buy Now?

At the end of the second quarter, a total of 108 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -3% from the first quarter of 2020. The graph below displays the number of hedge funds with bullish position in JPM over the last 24 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Fisher Asset Management, managed by Ken Fisher, holds the most valuable position in JPMorgan Chase & Co. (NYSE:JPM). Fisher Asset Management has a $1.0739 billion position in the stock, comprising 0.7% of its 13F portfolio. Sitting at the No. 2 spot is Citadel Investment Group, led by Ken Griffin, holding a $869.8 million call position; 0.2% of its 13F portfolio is allocated to the stock. Some other professional money managers with similar optimism include Phill Gross and Robert Atchinson’s Adage Capital Management, Tom Russo’s Gardner Russo & Gardner and Cliff Asness’s AQR Capital Management. In terms of the portfolio weights assigned to each position Global Frontier Investments allocated the biggest weight to JPMorgan Chase & Co. (NYSE:JPM), around 28.78% of its 13F portfolio. Brave Warrior Capital is also relatively very bullish on the stock, designating 9.86 percent of its 13F equity portfolio to JPM.

Seeing as JPMorgan Chase & Co. (NYSE:JPM) has experienced declining sentiment from the entirety of the hedge funds we track, logic holds that there was a specific group of hedge funds who were dropping their entire stakes last quarter. At the top of the heap, Marcio Appel’s Adam Capital dumped the biggest investment of all the hedgies followed by Insider Monkey, worth about $171.1 million in stock, and Ric Dillon’s Diamond Hill Capital was right behind this move, as the fund dropped about $152.4 million worth. These transactions are important to note, as total hedge fund interest fell by 3 funds last quarter.

Let’s now take a look at hedge fund activity in other stocks similar to JPMorgan Chase & Co. (NYSE:JPM). These stocks are Johnson & Johnson (NYSE:JNJ), Walmart Inc. (NYSE:WMT), UnitedHealth Group Inc. (NYSE:UNH), Mastercard Incorporated (NYSE:MA), Bank of America Corporation (NYSE:BAC), Paypal Holdings Inc (NASDAQ:PYPL), and The Home Depot, Inc. (NYSE:HD). This group of stocks’ market valuations are closest to JPM’s market valuation.

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As you can see these stocks had an average of 102 hedge funds with bullish positions and the average amount invested in these stocks was $16057 million. That figure was $4928 million in JPM’s case. Mastercard Incorporated (NYSE:MA) is the most popular stock in this table. On the other hand The Home Depot, Inc. (NYSE:HD) is the least popular one with only 64 bullish hedge fund positions. JPMorgan Chase & Co. (NYSE:JPM) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for JPM is 65.3. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24.1% in 2021 through September 20th and beat the market again by 6.9 percentage points. Unfortunately JPM wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on JPM were disappointed as the stock returned -1.1% since the end of June (through 9/20) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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Disclosure: None. This article was originally published at Insider Monkey.