The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 867 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of September 30th, when the S&P 500 Index was trading around the 4300 level. Since then investors decided to bet on the economic recovery and a stock market rebound even though we experienced a temporary correction in January. In this article you are going to find out whether hedge funds thought Johnson & Johnson (NYSE:JNJ) was a good investment heading into the fourth quarter and how the stock traded in comparison to the top hedge fund picks.
Hedge fund interest in Johnson & Johnson (NYSE:JNJ) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that JNJ ranked 26th among the 30 most popular stocks among hedge funds (click for Q3 rankings). The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Alibaba Group Holding Limited (NYSE:BABA), Walmart Inc. (NYSE:WMT), and UnitedHealth Group Inc. (NYSE:UNH) to gather more data points.
Richard S. Pzena of Pzena Investment Management
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so 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. Now we’re going to check out the new hedge fund action regarding Johnson & Johnson (NYSE:JNJ).
Do Hedge Funds Think JNJ Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 88 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. On the other hand, there were a total of 82 hedge funds with a bullish position in JNJ a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Fundsmith LLP held the most valuable stake in Johnson & Johnson (NYSE:JNJ), which was worth $1163.4 million at the end of the third quarter. On the second spot was Arrowstreet Capital which amassed $856.7 million worth of shares. Citadel Investment Group, Two Sigma Advisors, and AQR Capital 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 Copernicus Capital Management allocated the biggest weight to Johnson & Johnson (NYSE:JNJ), around 9.78% of its 13F portfolio. Beddow Capital Management is also relatively very bullish on the stock, designating 4.16 percent of its 13F equity portfolio to JNJ.
Because Johnson & Johnson (NYSE:JNJ) has experienced bearish sentiment from the smart money, it’s safe to say that there lies a certain “tier” of money managers who sold off their positions entirely last quarter. It’s worth mentioning that Donald Sussman’s Paloma Partners said goodbye to the biggest position of all the hedgies monitored by Insider Monkey, totaling an estimated $17.5 million in stock, and Andrew Weiss’s Weiss Asset Management was right behind this move, as the fund dumped about $16.2 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Johnson & Johnson (NYSE:JNJ) but similarly valued. These stocks are Alibaba Group Holding Limited (NYSE:BABA), Walmart Inc. (NYSE:WMT), UnitedHealth Group Inc. (NYSE:UNH), Bank of America Corporation (NYSE:BAC), The Home Depot, Inc. (NYSE:HD), Mastercard Incorporated (NYSE:MA), and The Procter & Gamble Company (NYSE:PG). This group of stocks’ market caps resemble JNJ’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BABA | 115 | 10201096 | -31 |
| WMT | 71 | 7932562 | 0 |
| UNH | 95 | 11705313 | -10 |
| BAC | 72 | 46487618 | -15 |
| HD | 58 | 4380170 | -6 |
| MA | 146 | 17659997 | -10 |
| PG | 69 | 6414152 | 1 |
| Average | 89.4 | 14968701 | -10.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 89.4 hedge funds with bullish positions and the average amount invested in these stocks was $14969 million. That figure was $6872 million in JNJ’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 58 bullish hedge fund positions. Johnson & Johnson (NYSE:JNJ) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for JNJ is 50.1. 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. 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 29.6% in 2021 and still beat the market by 3.6 percentage points. A relatively small number of hedge funds were also right about betting on JNJ as the stock returned 7.4% since the end of the third quarter (through 1/31) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
