Is Walmart (WMT) Stock A Buy or Sell?

With the fourth-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the first quarter of 2021. One of these stocks was Walmart Inc. (NYSE:WMT).

Is WMT stock a buy or sell? Walmart Inc. (NYSE:WMT) investors should be aware of an increase in hedge fund sentiment of late. Walmart Inc. (NYSE:WMT) was in 70 hedge funds’ portfolios at the end of December. The all time high for this statistic is 71. Our calculations also showed that WMT isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

Ray Dalio of Bridgewater Associates

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. Recently Oregon became the first state to legalize psychedelic mushrooms which are shown to have promising results in treating depression, addiction, and PTSD in early stage academic studies. So, we are checking out this psychedelic drug stock idea right now. 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 (or at the end of this article). With all of this in mind let’s take a gander at the new hedge fund action encompassing Walmart Inc. (NYSE:WMT).

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

At the end of December, a total of 70 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 1% from the third quarter of 2020. On the other hand, there were a total of 52 hedge funds with a bullish position in WMT a year ago. With hedge funds’ capital changing hands, there exists a few noteworthy hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).

More specifically, Fisher Asset Management was the largest shareholder of Walmart Inc. (NYSE:WMT), with a stake worth $1705.3 million reported as of the end of December. Trailing Fisher Asset Management was Bill & Melinda Gates Foundation Trust, which amassed a stake valued at $1672.6 million. AQR Capital Management, Bridgewater Associates, and Millennium Management 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 Empirical Capital Partners allocated the biggest weight to Walmart Inc. (NYSE:WMT), around 12.62% of its 13F portfolio. Bill & Melinda Gates Foundation Trust is also relatively very bullish on the stock, setting aside 7.49 percent of its 13F equity portfolio to WMT.

There weren’t any hedge funds initiating brand new positions in the stock during the fourth quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Walmart Inc. (NYSE:WMT) but similarly valued. We will take a look at JPMorgan Chase & Co. (NYSE:JPM), Mastercard Incorporated (NYSE:MA), The Procter & Gamble Company (NYSE:PG), UnitedHealth Group Inc. (NYSE:UNH), The Walt Disney Company (NYSE:DIS), NVIDIA Corporation (NASDAQ:NVDA), and The Home Depot, Inc. (NYSE:HD). All of these stocks’ market caps are closest to WMT’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 107.3 hedge funds with bullish positions and the average amount invested in these stocks was $10883 million. That figure was $6197 million in WMT’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 79 bullish hedge fund positions. Compared to these stocks Walmart Inc. (NYSE:WMT) is even less popular than HD. Our overall hedge fund sentiment score for WMT is 35.6. 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. Hedge funds dodged a bullet by taking a bearish stance towards WMT. Our calculations showed that the top 20 most popular hedge fund stocks returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 7% in 2021 through March 12th but managed to beat the market again by 1.6 percentage points. Unfortunately WMT wasn’t nearly as popular as these 30 stocks (hedge fund sentiment was very bearish); WMT investors were disappointed as the stock returned -7% since the end of the fourth quarter (through 3/12) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

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