The Insider Monkey team has completed processing the quarterly 13F filings for the March quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Johnson & Johnson (NYSE:JNJ).
Is JNJ a good stock to buy? Hedge fund interest in Johnson & Johnson (NYSE:JNJ) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that JNJ isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Walmart Inc. (NYSE:WMT), Mastercard Incorporated (NYSE:MA), and UnitedHealth Group Inc. (NYSE:UNH) to gather more data points.
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 115 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Peter Rathjens of Arrowstreet Capital
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, advertising technology one of the fastest growing industries right now, so we are checking out stock pitches like this under-the-radar adtech stock that can deliver 10x gains. We go through lists like the 10 best hydrogen fuel cell 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. With all of this in mind we’re going to take a peek at the recent hedge fund action encompassing Johnson & Johnson (NYSE:JNJ).
Do Hedge Funds Think JNJ Is A Good Stock To Buy Now?
At the end of March, a total of 81 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. On the other hand, there were a total of 82 hedge funds with a bullish position in JNJ a year ago. With the smart money’s capital changing hands, there exists an “upper tier” of key hedge fund managers who were upping their holdings substantially (or already accumulated large positions).
More specifically, Arrowstreet Capital was the largest shareholder of Johnson & Johnson (NYSE:JNJ), with a stake worth $1480 million reported as of the end of March. Trailing Arrowstreet Capital was Fundsmith LLP, which amassed a stake valued at $1091.4 million. AQR Capital Management, Citadel Investment Group, and Two Sigma Advisors were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Tri Locum Partners allocated the biggest weight to Johnson & Johnson (NYSE:JNJ), around 6.87% of its 13F portfolio. Sphera Global Healthcare Fund is also relatively very bullish on the stock, designating 5.72 percent of its 13F equity portfolio to JNJ.
Judging by the fact that Johnson & Johnson (NYSE:JNJ) has witnessed falling interest from the entirety of the hedge funds we track, we can see that there is a sect of fund managers that decided to sell off their full holdings in the first quarter. At the top of the heap, Arthur B Cohen and Joseph Healey’s Healthcor Management LP cut the biggest investment of the 750 funds tracked by Insider Monkey, valued at about $68.5 million in stock, and Bhagwan Jay Rao’s Integral Health Asset Management was right behind this move, as the fund dumped about $5.5 million worth. These moves are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s now review hedge fund activity in other stocks similar to Johnson & Johnson (NYSE:JNJ). These stocks are Walmart Inc. (NYSE:WMT), Mastercard Incorporated (NYSE:MA), UnitedHealth Group Inc. (NYSE:UNH), The Walt Disney Company (NYSE:DIS), Bank of America Corporation (NYSE:BAC), The Procter & Gamble Company (NYSE:PG), and NVIDIA Corporation (NASDAQ:NVDA). This group of stocks’ market values match JNJ’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| WMT | 58 | 5881223 | -12 |
| MA | 151 | 17097200 | -3 |
| UNH | 89 | 12091302 | -2 |
| DIS | 134 | 12552763 | -10 |
| BAC | 97 | 45321286 | -2 |
| PG | 70 | 8539030 | -13 |
| NVDA | 80 | 6204940 | -8 |
| Average | 97 | 15383963 | -7.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 97 hedge funds with bullish positions and the average amount invested in these stocks was $15384 million. That figure was $6913 million in JNJ’s case. Mastercard Incorporated (NYSE:MA) is the most popular stock in this table. On the other hand Walmart Inc. (NYSE:WMT) is the least popular one with only 58 bullish hedge fund positions. Johnson & Johnson (NYSE:JNJ) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for JNJ is 43.2. 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 negative signal and 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 17.2% in 2021 through June 11th and surpassed the market again by 3.3 percentage points. Unfortunately JNJ wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); JNJ investors were disappointed as the stock returned 1% since the end of March (through 6/11) 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 most of these stocks already outperformed the market in 2021.
Follow Johnson & Johnson (NYSE:JNJ)
Follow Johnson & Johnson (NYSE:JNJ)
Disclosure: None. This article was originally published at Insider Monkey.
