The 5 Most Diversified Stocks That Hedge Funds Love

3. The Walt Disney Company (NYSE:DIS)

Number of Hedge Fund Shareholders: 111

The Walt Disney Company (NYSE:DIS) owns a host of iconic entertainment characters, brands and media networks, operates the leading streaming service in the world, Disney+, and manages a stable of popular theme parks and resorts. It also stages various live performances of its content in the form of Broadway plays, and licenses merchandise of its popular brands.

Bank of America analyst Jessica Reif Ehrlich has a ‘Buy’ rating and $127 price target on Disney, down from $144 previously. The analyst projects Disney to pull in $21.7 billion in fiscal Q4 revenue, down slightly from previous projections due in part to revised Disney+ subscriber adds, which are now expected to come in at 8 million, down from previous forecasts of 15 million.

The Walt Disney Company (NYSE:DIS) remains one of the most popular stocks among hedge funds, but there has been somewhat of an exodus from the stock in recent quarters, with a net 38% decline in hedge fund ownership since the end of 2020. Jim Simons’ Renaissance Technologies and David Tepper’s Appaloosa Management both initiated stakes in DIS during Q2.

Oakmark Fund was buying up shares of The Walt Disney Company (NYSE:DIS) during Q2, revealing that they’re substantially discounted to the fund’s intrinsic value estimates for the stock, as laid out in its Q2 2022 investor letter:

“Disney (NYSE:DIS) is one of the most beloved consumer companies in the world. Its media business has a rich library of intellectual property, which provides a powerful engine for creating new content across the Disney, Pixar, Marvel, and Star Wars brands. This content also contributes to the success of Disney’s theme parks, which generated nearly half the company’s earnings and grew more than 10% annually in the decade prior to the pandemic. Shares have fallen nearly 50% over the past year as investors worried about the company’s ability to transition its media business to a direct-to-consumer streaming world. This transition has required management to make investments in its Disney+ streaming service that are depressing profitability today. However, we believe these investments will ultimately produce attractive returns as Disney+ continues to grow subscribers and increase pricing over time. As a result, we were able to purchase shares at a substantial discount to our estimate of intrinsic value.”