Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Bank of America Corporation (NYSE:BAC).
Bank of America Corporation (NYSE:BAC) has experienced a decrease in enthusiasm from smart money in recent months. Bank of America Corporation (NYSE:BAC) was in 97 hedge funds’ portfolios at the end of March. The all time high for this statistic is 139. Our calculations also showed that BAC ranked #24 among the 30 most popular stocks among hedge funds (click for Q1 rankings).
In the eyes of most stock holders, hedge funds are viewed as underperforming, outdated financial tools of the past. While there are greater than 8000 funds trading today, Our experts hone in on the moguls of this group, around 850 funds. Most estimates calculate that this group of people command the majority of the hedge fund industry’s total capital, and by following their first-class stock picks, Insider Monkey has unsheathed a number of investment strategies that have historically outrun Mr. Market. Insider Monkey’s flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Also, our monthly newsletter’s portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .
Warren Buffett of Berkshire Hathaway
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind we’re going to check out the new hedge fund action encompassing Bank of America Corporation (NYSE:BAC).
Do Hedge Funds Think BAC Is A Good Stock To Buy Now?
At first quarter’s end, a total of 97 of the hedge funds tracked by Insider Monkey were long this stock, a change of -2% from the fourth quarter of 2020. On the other hand, there were a total of 95 hedge funds with a bullish position in BAC a year ago. With hedge funds’ capital changing hands, there exists a few notable hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
The largest stake in Bank of America Corporation (NYSE:BAC) was held by Berkshire Hathaway, which reported holding $39080.8 million worth of stock at the end of December. It was followed by Viking Global with a $1211.5 million position. Other investors bullish on the company included GQG Partners, Diamond Hill Capital, 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 15.52% of its 13F portfolio. Berkshire Hathaway is also relatively very bullish on the stock, earmarking 14.45 percent of its 13F equity portfolio to BAC.
Due to the fact that Bank of America Corporation (NYSE:BAC) has experienced bearish sentiment from hedge fund managers, we can see that there were a few money managers who were dropping their entire stakes by the end of the first quarter. Interestingly, Robert Pitts’s Steadfast Capital Management dumped the largest position of the 750 funds tracked by Insider Monkey, totaling close to $194 million in stock, and Marcio Appel’s Adam Capital was right behind this move, as the fund said goodbye to about $119.8 million worth. These bearish behaviors are interesting, as total hedge fund interest dropped by 2 funds by the end of the first quarter.
Let’s now take a look at hedge fund activity in other stocks similar to Bank of America Corporation (NYSE:BAC). We will take a look at The Procter & Gamble Company (NYSE:PG), NVIDIA Corporation (NASDAQ:NVDA), The Home Depot, Inc. (NYSE:HD), Paypal Holdings Inc (NASDAQ:PYPL), Intel Corporation (NASDAQ:INTC), ASML Holding N.V. (NASDAQ:ASML), and Comcast Corporation (NASDAQ:CMCSA). This group of stocks’ market values resemble BAC’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PG | 70 | 8539030 | -13 |
| NVDA | 80 | 6204940 | -8 |
| HD | 68 | 4359872 | -11 |
| PYPL | 143 | 14717163 | -4 |
| INTC | 83 | 7616792 | 11 |
| ASML | 35 | 3827143 | 5 |
| CMCSA | 88 | 9762151 | 4 |
| Average | 81 | 7861013 | -2.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 81 hedge funds with bullish positions and the average amount invested in these stocks was $7861 million. That figure was $45321 million in BAC’s case. Paypal Holdings Inc (NASDAQ:PYPL) 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 35 bullish hedge fund positions. Bank of America Corporation (NYSE:BAC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for BAC is 52.6. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 25.8% in 2021 through August 6th and beat the market again by 6.7 percentage points. Unfortunately BAC wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on BAC were disappointed as the stock returned 4.2% since the end of March (through 8/6) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
Follow Bank Of America Corp (NYSE:BAC)
Follow Bank Of America Corp (NYSE:BAC)
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Disclosure: None. This article was originally published at Insider Monkey.
