U.S. Bancorp (NYSE:USB) reported its financial results for the second quarter this morning. The financial services holding company reported earnings per share of $0.80, 2.5% more than its earnings in the same quarter last year, while also meeting the consensus forecast of $0.80 per share for the quarter from analysts. U.S. Bancorp reported revenue of $5 billion for the quarter, slightly lower than the $5.2 billion it pulled in during the same period in 2014. Some of the key highlights in the report included its return on average assets rate of 1.46%, return on average common equity of 14.3%, and year-over-year average total loan growth of 4%. As well, the company reported strong new lending activity of $54.2 billion during the quarter, while average total deposits grew by 8.9% and net interest income growth was at 9.1%. The company also announced that it will be returning 76% of capital generated to shareholders through dividends and the buyback of 14 million common shares. Many analysts’ have reiterated their ratings and increased their price target on U.S. Bancorp (NYSE:USB) in the last few weeks, expecting the company to meet or exceed earnings expectations, which it has managed to do. The company, which ranks as one of the value investments of legendary trader Warren Buffett, is flat in pre-market trading after trading up by over 2% earlier in the pre-market.
As mentioned, hedge fund manager Warren Buffett continues to remain bullish on U.S. Bancorp (NYSE:USB), along with several other major investors. At the end of March, a total of 42 of the hedge funds tracked by Insider Monkey were holding long positions in the stock, with total investment of $5.56 billion, 1.4% more than the aggregate capital invested by 37 hedge funds at the end of 2014. Considering the fact that U.S. Bancorp (NYSE:USB) stock dropped around 4.5% during the January – March period, we can say that hedge funds opted to pour more money into the stock during the first quarter on its weakness, expecting a turnaround. Shares are up slightly since the end of the first quarter.
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Likewise, other research (not our own) has shown insider purchases are also effective piggybacking methods for investors that lead to greater returns. That’s why we believe investors should pay attention to what hedge funds and insiders are buying and keep them apprised of this information. Looking at the insider activity at U.S. Bancorp (NYSE:USB), there were no insider purchases in the first half of the year, but there were a few insider sales. Chairman & CEO at U.S. Bancorp (NYSE:USB), Richard Davis sold around 550,000 shares and Vice Chairman & COO Andrew Cecere sold around 250,000 shares in February, among other sales.
Keeping this in mind, let’s take a glance at the new hedge fund activity encompassing U.S. Bancorp (NYSE:USB).
What does the smart money think about U.S. Bancorp (NYSE:USB)?
Of the funds tracked by Insider Monkey, Warren Buffett‘s holding company Berkshire Hathaway had the number one position in U.S. Bancorp (NYSE:USB) with around 83.7 million shares worth close to $3.66 billion at the end of March, comprising 3.4% of its total 13F portfolio. Berkshire Hathaway had 80.1 million shares of the company at the end of 2014, buying around 3.6 million shares during the January – March period. The second-largest stake was held by Yacktman Asset Management, led by Donald Yacktman, another acclaimed value investor. Yacktman’s fund held around 11.8 million shares valued at $516.6 million; 2.4% of its 13F portfolio was allocated to the company. Some other hedge funds with similar optimism include Jean-Marie Eveillard’s First Eagle Investment Management, Lou Simpson’s SQ Advisors, Ross Margolies’ Stelliam Investment Management, and Phill Gross and Robert Atchinson‘s Adage Capital Management.
As the data suggested, there must be a pool of hedge fund managers who opened fresh positions in U.S. Bancorp (NYSE:USB). Leading the way was Balyasny Asset Management, led by Dmitry Balyasny, which assembled the biggest new position in U.S. Bancorp (NYSE:USB). Balyasny Asset Management purchased around 1.58 million shares of the company during the first trimester. Israel Englander‘s Millennium Management also initiated a position in the stock during the quarter by purchasing around 280,000 shares. The other funds with new positions in the stock are Nick Niell’s Arrowgrass Capital Partners, Peter Muller’s PDT Partners, and Mitch Cantor’s Mountain Lake Investment Management.
Overall, the hedge funds were bullish on U.S. Bancorp (NYSE:USB) and analysts were expecting the company to do well, as evidenced by the increase in price targets. The company also managed to meet the street’s expectation in earnings for the second quarter. Considering the fact that leading hedge fund managers like Warren Buffett continue to remain bullish on the stock, we recommend this stock as a buy at the moment.
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