Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published this article and predicted that US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. At Insider Monkey, we pore over the filings of nearly 835 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of December 31. In this article, we will use that wealth of knowledge to determine whether or not U.S. Bancorp (NYSE:USB) makes for a good investment right now.
Is U.S. Bancorp (NYSE:USB) the right pick for your portfolio? Prominent investors are getting more optimistic. The number of long hedge fund positions advanced by 3 lately. Our calculations also showed that USB isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings). USB was in 50 hedge funds’ portfolios at the end of December. There were 47 hedge funds in our database with USB positions at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 41 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 35.3% through March 3rd. 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
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 read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. In January, we recommended a long position in one of the most shorted stocks in the market, and that stock returned more than 50% despite the large losses in the market since our recommendation. With all of this in mind let’s take a glance at the recent hedge fund action encompassing U.S. Bancorp (NYSE:USB).
How have hedgies been trading U.S. Bancorp (NYSE:USB)?
At the end of the fourth quarter, a total of 50 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 6% from the third quarter of 2019. Below, you can check out the change in hedge fund sentiment towards USB over the last 18 quarters. With the smart money’s capital changing hands, there exists a few key hedge fund managers who were upping their holdings substantially (or already accumulated large positions).
More specifically, Berkshire Hathaway was the largest shareholder of U.S. Bancorp (NYSE:USB), with a stake worth $7853.5 million reported as of the end of September. Trailing Berkshire Hathaway was Yacktman Asset Management, which amassed a stake valued at $267.5 million. AQR Capital Management, Millennium Management, and Basswood Capital 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 Basswood Capital allocated the biggest weight to U.S. Bancorp (NYSE:USB), around 4.76% of its 13F portfolio. Hi-Line Capital Management is also relatively very bullish on the stock, designating 4.14 percent of its 13F equity portfolio to USB.
Now, specific money managers were breaking ground themselves. Bridgewater Associates, managed by Ray Dalio, assembled the largest position in U.S. Bancorp (NYSE:USB). Bridgewater Associates had $19.3 million invested in the company at the end of the quarter. Peter Seuss’s Prana Capital Management also made a $3.5 million investment in the stock during the quarter. The following funds were also among the new USB investors: John Nevin Jr’s Ayrshire Capital Management, Matthew Tewksbury’s Stevens Capital Management, and Brandon Haley’s Holocene Advisors.
Let’s now take a look at hedge fund activity in other stocks similar to U.S. Bancorp (NYSE:USB). These stocks are Lowe’s Companies, Inc. (NYSE:LOW), Booking Holdings Inc. (NASDAQ:BKNG), Fidelity National Information Services Inc. (NYSE:FIS), and Sony Corporation (NYSE:SNE). This group of stocks’ market caps resemble USB’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| LOW | 77 | 5412801 | 1 |
| BKNG | 74 | 5578745 | -13 |
| FIS | 105 | 8073588 | 10 |
| SNE | 26 | 761509 | -1 |
| Average | 70.5 | 4956661 | -0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 70.5 hedge funds with bullish positions and the average amount invested in these stocks was $4957 million. That figure was $8686 million in USB’s case. Fidelity National Information Services Inc. (NYSE:FIS) is the most popular stock in this table. On the other hand Sony Corporation (NYSE:SNE) is the least popular one with only 26 bullish hedge fund positions. U.S. Bancorp (NYSE:USB) is not the least popular stock in this group but hedge fund interest is still below average. 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 10.1 percentage points. These stocks lost 12.9% in 2020 through March 9th but beat the market by 1.9 percentage points. Unfortunately USB wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); USB investors were disappointed as the stock returned -38.7% 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 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in Q1.
Disclosure: None. This article was originally published at Insider Monkey.
