Should I Avoid The Walt Disney Company (DIS)?

Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 900 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about The Walt Disney Company (NYSE:DIS).

The Walt Disney Company (NYSE:DIS) investors should pay attention to a decrease in hedge fund interest of late. The Walt Disney Company (NYSE:DIS) was in 112 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 144. There were 134 hedge funds in our database with DIS holdings at the end of March. Our calculations also showed that DIS ranked 14th among the 30 most popular stocks among hedge funds (click for Q2 rankings).

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Dan Loeb of Third Point

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV 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. Now let’s take a look at the key hedge fund action regarding The Walt Disney Company (NYSE:DIS).

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

At second quarter’s end, a total of 112 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -16% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in DIS over the last 24 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in The Walt Disney Company (NYSE:DIS) was held by Fisher Asset Management, which reported holding $1885.2 million worth of stock at the end of June. It was followed by Coatue Management with a $1031.4 million position. Other investors bullish on the company included Citadel Investment Group, Matrix Capital Management, and Third Point. In terms of the portfolio weights assigned to each position Fosse Capital Partners allocated the biggest weight to The Walt Disney Company (NYSE:DIS), around 23.83% of its 13F portfolio. Yost Capital Management is also relatively very bullish on the stock, designating 11.37 percent of its 13F equity portfolio to DIS.

Due to the fact that The Walt Disney Company (NYSE:DIS) has witnessed declining sentiment from hedge fund managers, it’s safe to say that there were a few hedge funds that elected to cut their full holdings in the second quarter. At the top of the heap, Alex Sacerdote’s Whale Rock Capital Management dropped the largest stake of all the hedgies tracked by Insider Monkey, valued at an estimated $367.9 million in stock, and Aaron Cowen’s Suvretta Capital Management was right behind this move, as the fund dumped about $211.6 million worth. These transactions are important to note, as total hedge fund interest fell by 22 funds in the second quarter.

Let’s now take a look at hedge fund activity in other stocks similar to The Walt Disney Company (NYSE:DIS). We will take a look at ASML Holding N.V. (NASDAQ:ASML), Adobe Inc. (NASDAQ:ADBE), Exxon Mobil Corporation (NYSE:XOM), Comcast Corporation (NASDAQ:CMCSA), Toyota Motor Corporation (NYSE:TM), NIKE, Inc. (NYSE:NKE), and Netflix, Inc. (NASDAQ:NFLX). This group of stocks’ market valuations are similar to DIS’s market valuation.

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As you can see these stocks had an average of 68.1 hedge funds with bullish positions and the average amount invested in these stocks was $7281 million. That figure was $10830 million in DIS’s case. Netflix, Inc. (NASDAQ:NFLX) is the most popular stock in this table. On the other hand Toyota Motor Corporation (NYSE:TM) is the least popular one with only 12 bullish hedge fund positions. The Walt Disney Company (NYSE:DIS) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for DIS is 86.8. 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 positive signal but 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 24.1% in 2021 through September 20th and beat the market again by 6.9 percentage points. Unfortunately DIS wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on DIS were disappointed as the stock returned 1.6% since the end of June (through 9/20) 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 many of these stocks already outperformed the market since 2019.

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