Were Hedge Funds Right About The Home Depot, Inc. (HD)?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 873 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of June 30th, 2021. In this article we are going to take a look at smart money sentiment towards The Home Depot, Inc. (NYSE:HD).

Is The Home Depot, Inc. (NYSE:HD) the right investment to pursue these days? The best stock pickers were reducing their bets on the stock. The number of long hedge fund positions were trimmed by 4 lately. The Home Depot, Inc. (NYSE:HD) was in 64 hedge funds’ portfolios at the end of June. The all time high for this statistic is 91. Our calculations also showed that HD isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 68 hedge funds in our database with HD positions at the end of the first quarter.

If you’d ask most traders, hedge funds are viewed as unimportant, outdated investment vehicles of years past. While there are greater than 8000 funds with their doors open at present, We look at the upper echelon of this group, about 850 funds. Most estimates calculate that this group of people administer the lion’s share of the hedge fund industry’s total capital, and by watching their top stock picks, Insider Monkey has determined a few investment strategies that have historically defeated the market. Insider Monkey’s flagship short hedge fund strategy outpaced the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Also, our monthly newsletter’s portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website.

Matthew Hulsizer of PEAK6 Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. We check out articles like Warren Buffett’s 3 money saving tips that provide inflation and volatility hedges. 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. Keeping this in mind we’re going to take a gander at the new hedge fund action encompassing The Home Depot, Inc. (NYSE:HD).

Do Hedge Funds Think HD Is A Good Stock To Buy Now?

At second quarter’s end, a total of 64 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -6% from the first quarter of 2020. The graph below displays the number of hedge funds with bullish position in HD over the last 24 quarters. With the smart money’s sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).

Among these funds, Fisher Asset Management held the most valuable stake in The Home Depot, Inc. (NYSE:HD), which was worth $2325.9 million at the end of the second quarter. On the second spot was Citadel Investment Group which amassed $507.8 million worth of shares. AQR Capital Management, Adage Capital Management, and Markel Gayner Asset 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 Pittencrieff Partners – Gabalex Capital allocated the biggest weight to The Home Depot, Inc. (NYSE:HD), around 7.13% of its 13F portfolio. Chilton Investment Company is also relatively very bullish on the stock, setting aside 5.79 percent of its 13F equity portfolio to HD.

Seeing as The Home Depot, Inc. (NYSE:HD) has faced bearish sentiment from hedge fund managers, logic holds that there is a sect of fund managers who sold off their positions entirely by the end of the second quarter. Intriguingly, John Overdeck and David Siegel’s Two Sigma Advisors said goodbye to the largest stake of all the hedgies tracked by Insider Monkey, totaling an estimated $64.2 million in stock. Renaissance Technologies, also dropped its stock, about $38.8 million worth. These transactions are important to note, as total hedge fund interest dropped by 4 funds by the end of the second quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as The Home Depot, Inc. (NYSE:HD) but similarly valued. These stocks are The Procter & Gamble Company (NYSE:PG), The Walt Disney Company (NYSE:DIS), ASML Holding N.V. (NASDAQ:ASML), Adobe Inc. (NASDAQ:ADBE), Exxon Mobil Corporation (NYSE:XOM), Comcast Corporation (NASDAQ:CMCSA), and Toyota Motor Corporation (NYSE:TM). This group of stocks’ market values resemble HD’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 68.1 hedge funds with bullish positions and the average amount invested in these stocks was $7013 million. That figure was $4177 million in HD’s case. The Walt Disney Company (NYSE:DIS) is the most popular stock in this table. On the other hand Toyota Motor Corporation (NYSE:TM) is the least popular one with only 12 bullish hedge fund positions. The Home Depot, Inc. (NYSE:HD) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for HD is 48.1. 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 26.3% in 2021 through October 29th and still beat the market by 2.3 percentage points. A small number of hedge funds were also right about betting on HD as the stock returned 17.2% since the end of the second quarter (through 10/29) and outperformed the market by an even larger margin.

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Disclosure: None. This article was originally published at Insider Monkey.

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