Is U.S. Bancorp (USB) A Good Stock To Buy?

Investing in small cap stocks has historically been a way to outperform the market, as small cap companies typically grow faster on average than the blue chips. That outperformance comes with a price, however, as there are occasional periods of higher volatility. The time period between June 25 and the end of October was one of those periods, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by more than 14 percentage points. Given that the funds we track tend to have a disproportionate amount of their portfolios in smaller cap stocks, they have seen some volatility in their portfolios too. Actually, their moves are potentially one of the factors that contributed to this volatility. In this article, we use our extensive database of hedge fund holdings to find out what the smart money thinks of U.S. Bancorp (NYSE:USB).

Hedge fund interest in U.S. Bancorp (NYSE:USB) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article, we will also compare U.S. Bancorp (NYSE:USB) to other stocks, including UBS Group AG (USA) (NYSE:UBS), Biogen Inc. (NASDAQ:BIIB), and Mondelez International Inc (NASDAQ:MDLZ) to get a better sense of its popularity.

To the average investor, there are a lot of indicators market participants put to use to appraise stocks. A couple of the most useful indicators are hedge fund and insider trading indicators. Our experts have shown that, historically, those who follow the top picks of the elite fund managers can trounce the market by a solid margin (see the details here).

With all of this in mind, let’s take a peek at the latest action encompassing U.S. Bancorp (NYSE:USB).

How have hedgies been trading U.S. Bancorp (NYSE:USB)?

At the end of the third quarter, a total of 43 of the hedge funds tracked by Insider Monkey were bullish on this stock, unchanged from the previous quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Berkshire Hathaway has the biggest position in U.S. Bancorp (NYSE:USB), worth close to $3.49 billion, corresponding to 2.7% of its total 13F portfolio. The second largest stake is held by Donald Yacktman of Yacktman Asset Management, with a $364 million position; 2.4% of its 13F portfolio is allocated to the stock. Some other members of the smart money with similar optimism include Phill Gross and Robert Atchinson’s Adage Capital Management, Ross Margolies’ Stelliam Investment Management, and Cliff Asness’ AQR Capital Management.

Since U.S. Bancorp (NYSE:USB) has witnessed a bearish sentiment from hedge fund managers, logic holds that there lies a certain “tier” of funds that elected to cut their full holdings heading into Q4. It’s worth mentioning that Renaissance Technologies cut the largest stake of all the hedgies followed by Insider Monkey, totaling close to $25.8 million in call options., and Daniel S. Och’s OZ Management was right behind this move, as the fund dumped about $23.9 million worth. These moves are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s also examine hedge fund activity in other stocks similar to U.S. Bancorp (NYSE:USB). We will take a look at UBS Group AG (USA) (NYSE:UBS), Biogen Inc. (NASDAQ:BIIB), Mondelez International Inc (NASDAQ:MDLZ), and NTT Docomo Inc (ADR) (NYSE:DCM). All of these stocks’ market caps are similar to U.S. Bancorp (NYSE:USB)’s market cap.

As you can see, these stocks had an average of 37 hedge funds with bullish positions and the average amount invested in these stocks was $2.73 billion. That figure was $5.10 billion in U.S. Bancorp (NYSE:USB)’s case. Mondelez International Inc (NASDAQ:MDLZ) is the most popular stock in this table. On the other hand, NTT Docomo Inc (ADR) (NYSE:DCM) is the least popular one with only 7 bullish hedge fund positions. U.S. Bancorp (NYSE:USB) 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. In this regard, Mondelez International Inc (NASDAQ:MDLZ) might be a better candidate to consider a long position.