Stocks, especially the once high flying technology stocks, had a lousy start to the new year. QQQ lost 9% of its value in January. We aren’t certain about the bubbly technology stocks that trade for ridiculously high multiples of their revenues, but we believe top hedge fund stocks will deliver positive returns for the rest of the year. In this article, we will take a closer look at hedge fund sentiment towards Bank of America Corporation (NYSE:BAC) at the end of the third quarter and determine whether the smart money was really smart about this stock.
Bank of America Corporation (NYSE:BAC) investors should pay attention to a decrease in enthusiasm from smart money lately. Bank of America Corporation (NYSE:BAC) was in 72 hedge funds’ portfolios at the end of September. The all time high for this statistic is 139. Our calculations also showed that BAC isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
Clint Carlson of Carlson Capital
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 let’s view the fresh hedge fund action encompassing Bank of America Corporation (NYSE:BAC).
Do Hedge Funds Think BAC Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2021, a total of 72 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -17% from the previous quarter. By comparison, 88 hedge funds held shares or bullish call options in BAC 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.
The largest stake in Bank of America Corporation (NYSE:BAC) was held by Berkshire Hathaway, which reported holding $42878.8 million worth of stock at the end of September. It was followed by GQG Partners with a $780.2 million position. Other investors bullish on the company included Citadel Investment Group, Laurion Capital Management, and Pzena Investment Management. In terms of the portfolio weights assigned to each position Aquamarine Capital Management allocated the biggest weight to Bank of America Corporation (NYSE:BAC), around 15.98% of its 13F portfolio. Berkshire Hathaway is also relatively very bullish on the stock, designating 14.61 percent of its 13F equity portfolio to BAC.
Judging by the fact that Bank of America Corporation (NYSE:BAC) has faced falling interest from the entirety of the hedge funds we track, it’s safe to say that there is a sect of funds that elected to cut their positions entirely heading into Q4. Interestingly, Matthew Stadelman’s Diamond Hill Capital dropped the biggest stake of the 750 funds followed by Insider Monkey, totaling close to $648.1 million in stock, and Andreas Halvorsen’s Viking Global was right behind this move, as the fund said goodbye to about $295.8 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest was cut by 15 funds heading into Q4.
Let’s check out hedge fund activity in other stocks similar to Bank of America Corporation (NYSE:BAC). We will take a look at The Home Depot, Inc. (NYSE:HD), Mastercard Incorporated (NYSE:MA), The Procter & Gamble Company (NYSE:PG), ASML Holding N.V. (NASDAQ:ASML), The Walt Disney Company (NYSE:DIS), Paypal Holdings Inc (NASDAQ:PYPL), and Adobe Inc. (NASDAQ:ADBE). This group of stocks’ market valuations resemble BAC’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HD | 58 | 4380170 | -6 |
| MA | 146 | 17659997 | -10 |
| PG | 69 | 6414152 | 1 |
| ASML | 41 | 4858031 | -3 |
| DIS | 101 | 9416047 | -11 |
| PYPL | 123 | 12880990 | -20 |
| ADBE | 95 | 12682168 | 6 |
| Average | 90.4 | 9755936 | -6.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 90.4 hedge funds with bullish positions and the average amount invested in these stocks was $9756 million. That figure was $46488 million in BAC’s case. Mastercard Incorporated (NYSE:MA) is the most popular stock in this table. On the other hand ASML Holding N.V. (NASDAQ:ASML) is the least popular one with only 41 bullish hedge fund positions. Bank of America Corporation (NYSE:BAC) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for BAC is 20.3. 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 small number of hedge funds were also right about betting on BAC as the stock returned 9.2% since the end of the third quarter (through 1/31) and outperformed the market by an even larger margin.
Follow Bank Of America Corp (NYSE:BAC)
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Disclosure: None. This article was originally published at Insider Monkey.
