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 Wells Fargo & Company (NYSE:WFC) was a good investment heading into the fourth quarter and how the stock traded in comparison to the top hedge fund picks.
Is Wells Fargo & Company (NYSE:WFC) a superb investment right now? The smart money was in a bearish mood. The number of bullish hedge fund bets fell by 6 recently. Wells Fargo & Company (NYSE:WFC) was in 88 hedge funds’ portfolios at the end of September. The all time high for this statistic is 104. Our calculations also showed that WFC ranked 27th among the 30 most popular stocks among hedge funds (click for Q3 rankings). There were 94 hedge funds in our database with WFC holdings at the end of June.
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. Keeping this in mind let’s review the key hedge fund action surrounding Wells Fargo & Company (NYSE:WFC).
Richard S. Pzena of Pzena Investment Management
Do Hedge Funds Think WFC 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 were bullish on this stock, a change of -6% from one quarter earlier. By comparison, 90 hedge funds held shares or bullish call options in WFC a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Eagle Capital Management was the largest shareholder of Wells Fargo & Company (NYSE:WFC), with a stake worth $1566.3 million reported as of the end of September. Trailing Eagle Capital Management was Theleme Partners, which amassed a stake valued at $934.1 million. Pzena Investment Management, Citadel Investment Group, and First Pacific Advisors LLC 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 Theleme Partners allocated the biggest weight to Wells Fargo & Company (NYSE:WFC), around 26.67% of its 13F portfolio. Magnolia Capital Fund is also relatively very bullish on the stock, dishing out 20.17 percent of its 13F equity portfolio to WFC.
Because Wells Fargo & Company (NYSE:WFC) has experienced falling interest from the entirety of the hedge funds we track, it’s easy to see that there lies a certain “tier” of hedge funds who sold off their entire stakes last quarter. It’s worth mentioning that Matthew Stadelman’s Diamond Hill Capital dumped the largest investment of the “upper crust” of funds watched by Insider Monkey, worth an estimated $240 million in stock. Dmitry Balyasny’s fund, Balyasny Asset Management, also dumped its stock, about $97.6 million worth. These moves are interesting, as total hedge fund interest dropped by 6 funds last quarter.
Let’s now take a look at hedge fund activity in other stocks similar to Wells Fargo & Company (NYSE:WFC). These stocks are Merck & Co., Inc. (NYSE:MRK), AstraZeneca plc (NASDAQ:AZN), Novartis AG (NYSE:NVS), McDonald’s Corporation (NYSE:MCD), Morgan Stanley (NYSE:MS), Texas Instruments Incorporated (NASDAQ:TXN), and Sea Limited (NYSE:SE). This group of stocks’ market values match WFC’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MRK | 77 | 4550626 | -2 |
| AZN | 41 | 3757394 | 4 |
| NVS | 22 | 1439973 | 0 |
| MCD | 58 | 3339098 | -8 |
| MS | 65 | 4990950 | -4 |
| TXN | 40 | 1938965 | -10 |
| SE | 117 | 14135309 | 13 |
| Average | 60 | 4878902 | -1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 60 hedge funds with bullish positions and the average amount invested in these stocks was $4879 million. That figure was $6188 million in WFC’s case. Sea Limited (NYSE:SE) is the most popular stock in this table. On the other hand Novartis AG (NYSE:NVS) is the least popular one with only 22 bullish hedge fund positions. Wells Fargo & Company (NYSE:WFC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for WFC is 59.1. 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. Hedge funds were also right about betting on WFC as the stock returned 16.4% since the end of Q3 (through 1/31) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.
