We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in JPMorgan Chase & Co. (NYSE:JPM)? The smart money sentiment can provide an answer to this question.
JPMorgan Chase & Co. (NYSE:JPM) was in 98 hedge funds’ portfolios at the end of December. JPM investors should be aware of an increase in hedge fund sentiment lately. There were 94 hedge funds in our database with JPM positions at the end of the previous quarter. Our calculations also showed that JPM ranked 19th among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
According to most shareholders, hedge funds are assumed to be slow, old investment vehicles of the past. While there are more than 8000 funds trading at present, Our researchers look at the aristocrats of this group, approximately 850 funds. Most estimates calculate that this group of people oversee most of the smart money’s total asset base, and by keeping track of their finest investments, Insider Monkey has determined a number of investment strategies that have historically surpassed the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 35.3% since February 2017 (through March 3rd) even though the market was up more than 35% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Phill Gross of Adage Capital Management
We leave no stone unturned when looking for the next great investment idea. For example, this trader is claiming triple digit returns, so we check out his latest trade recommendations We are probably at the peak of the COVID-19 pandemic, so we check out this biotech investor’s coronavirus picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences (by the way watch this video if you want to hear one of the best healthcare hedge fund manager’s coronavirus analysis). Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s check out the key hedge fund action encompassing JPMorgan Chase & Co. (NYSE:JPM).
Hedge fund activity in JPMorgan Chase & Co. (NYSE:JPM)
At the end of the fourth quarter, a total of 98 of the hedge funds tracked by Insider Monkey were long this stock, a change of 4% from the third quarter of 2019. By comparison, 101 hedge funds held shares or bullish call options in JPM a year ago. With hedgies’ capital changing hands, there exists a few key hedge fund managers who were upping their holdings considerably (or already accumulated large positions).
Among these funds, Berkshire Hathaway held the most valuable stake in JPMorgan Chase & Co. (NYSE:JPM), which was worth $8296.4 million at the end of the third quarter. On the second spot was Fisher Asset Management which amassed $830.7 million worth of shares. Citadel Investment Group, Adage Capital Management, 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 Brave Warrior Capital allocated the biggest weight to JPMorgan Chase & Co. (NYSE:JPM), around 13.56% of its 13F portfolio. Hi-Line Capital Management is also relatively very bullish on the stock, setting aside 8 percent of its 13F equity portfolio to JPM.
As aggregate interest increased, some big names were breaking ground themselves. Steadfast Capital Management, managed by Robert Pitts, established the most valuable position in JPMorgan Chase & Co. (NYSE:JPM). Steadfast Capital Management had $240.2 million invested in the company at the end of the quarter. Stanley Druckenmiller’s Duquesne Capital also initiated a $179.4 million position during the quarter. The other funds with new positions in the stock are Ray Dalio’s Bridgewater Associates, Zach Schreiber’s Point State Capital, and Israel Englander’s Millennium Management.
Let’s now review hedge fund activity in other stocks similar to JPMorgan Chase & Co. (NYSE:JPM). These stocks are Visa Inc (NYSE:V), Johnson & Johnson (NYSE:JNJ), Walmart Inc. (NYSE:WMT), and Bank of America Corporation (NYSE:BAC). This group of stocks’ market valuations are closest to JPM’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| V | 143 | 16812443 | -4 |
| JNJ | 85 | 8257996 | 1 |
| WMT | 52 | 5252501 | -6 |
| BAC | 99 | 38412092 | -4 |
| Average | 94.75 | 17183758 | -3.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 94.75 hedge funds with bullish positions and the average amount invested in these stocks was $17184 million. That figure was $13134 million in JPM’s case. Visa Inc (NYSE:V) is the most popular stock in this table. On the other hand Walmart Inc. (NYSE:WMT) is the least popular one with only 52 bullish hedge fund positions. JPMorgan Chase & Co. (NYSE:JPM) is not the most popular stock in this group but hedge fund interest is still above average. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 1.0% in 2020 through April 20th but beat the market by 11 percentage points. Unfortunately JPM wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on JPM were disappointed as the stock returned -33.1% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
