A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended September 30, so let’s proceed with the discussion of the hedge fund sentiment on Johnson & Johnson (NYSE:JNJ).
Johnson & Johnson (NYSE:JNJ) was in 82 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 94. JNJ has experienced a decrease in support from the world’s most elite money managers of late. There were 94 hedge funds in our database with JNJ positions at the end of the second quarter. Our calculations also showed that JNJ isn’t among the 30 most popular stocks among hedge funds (click for Q3 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.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a 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, we believe electric vehicles and energy storage are set to become giant markets. Tesla’s stock price skyrocketed, yet lithium prices are still below their 2019 highs. So, we are checking out this lithium stock right now. We go through lists like the 15 best blue chip stocks to buy 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. You can subscribe to our free daily newsletter on our website. With all of this in mind let’s analyze the recent hedge fund action encompassing Johnson & Johnson (NYSE:JNJ).
How are hedge funds trading Johnson & Johnson (NYSE:JNJ)?
At the end of the third quarter, a total of 82 of the hedge funds tracked by Insider Monkey were long this stock, a change of -13% from the previous quarter. On the other hand, there were a total of 84 hedge funds with a bullish position in JNJ a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Johnson & Johnson (NYSE:JNJ) was held by Arrowstreet Capital, which reported holding $1151.5 million worth of stock at the end of September. It was followed by AQR Capital Management with a $705.8 million position. Other investors bullish on the company included D E Shaw, Yacktman Asset Management, and Renaissance Technologies. In terms of the portfolio weights assigned to each position Lucas Capital Management allocated the biggest weight to Johnson & Johnson (NYSE:JNJ), around 6.15% of its 13F portfolio. Sphera Global Healthcare Fund is also relatively very bullish on the stock, setting aside 5.56 percent of its 13F equity portfolio to JNJ.
Judging by the fact that Johnson & Johnson (NYSE:JNJ) has faced bearish sentiment from hedge fund managers, it’s safe to say that there lies a certain “tier” of hedgies that elected to cut their entire stakes heading into Q4. Intriguingly, John Murphy’s Levin Easterly Partners dropped the biggest position of the 750 funds tracked by Insider Monkey, comprising about $40.5 million in stock. Sander Gerber’s fund, Hudson Bay Capital Management, also said goodbye to its stock, about $26.7 million worth. These transactions are important to note, as total hedge fund interest was cut by 12 funds heading into Q4.
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 The Procter & Gamble Company (NYSE:PG), Mastercard Incorporated (NYSE:MA), NVIDIA Corporation (NASDAQ:NVDA), The Home Depot, Inc. (NYSE:HD), UnitedHealth Group Inc. (NYSE:UNH), JPMorgan Chase & Co. (NYSE:JPM), and Verizon Communications Inc. (NYSE:VZ). This group of stocks’ market values are closest to JNJ’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PG | 75 | 10091350 | 2 |
| MA | 133 | 15645517 | -14 |
| NVDA | 82 | 7672045 | -10 |
| HD | 73 | 4957355 | -12 |
| UNH | 89 | 8963458 | -7 |
| JPM | 118 | 6058434 | -5 |
| VZ | 65 | 2759911 | -3 |
| Average | 90.7 | 8021153 | -7 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 90.7 hedge funds with bullish positions and the average amount invested in these stocks was $8021 million. That figure was $4882 million in JNJ’s case. Mastercard Incorporated (NYSE:MA) is the most popular stock in this table. On the other hand Verizon Communications Inc. (NYSE:VZ) is the least popular one with only 65 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 31.7. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through November 27th and surpassed the market again by 16.1 percentage points. Unfortunately JNJ wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); JNJ investors were disappointed as the stock returned -2.6% since the end of September (through 11/27) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.
