Were Hedge Funds Right About The Walt Disney Company (DIS)?

After several tireless days we have finished crunching the numbers from nearly 900 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms’ equity portfolios as of March 31st. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards The Walt Disney Company (NYSE:DIS).

Is The Walt Disney Company (NYSE:DIS) a good stock to buy now? Prominent investors were becoming less hopeful. The number of long hedge fund bets were trimmed by 10 in recent months. The Walt Disney Company (NYSE:DIS) was in 134 hedge funds’ portfolios at the end of March. The all time high for this statistic is 144. Our calculations also showed that DIS ranked 10th among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 144 hedge funds in our database with DIS positions at the end of the fourth quarter.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

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. Now let’s take a gander at the key hedge fund action surrounding The Walt Disney Company (NYSE:DIS).

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

At the end of the first quarter, a total of 134 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -7% from the fourth quarter of 2020. Below, you can check out the change in hedge fund sentiment towards DIS over the last 23 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in The Walt Disney Company (NYSE:DIS) was held by Fisher Asset Management, which reported holding $1908.7 million worth of stock at the end of December. It was followed by Coatue Management with a $1122.3 million position. Other investors bullish on the company included Citadel Investment Group, D E Shaw, and Third Point. In terms of the portfolio weights assigned to each position Fosse Capital Partners allocated the biggest weight to The Walt Disney Company (NYSE:DIS), around 21.92% of its 13F portfolio. White Square Capital is also relatively very bullish on the stock, setting aside 18.66 percent of its 13F equity portfolio to DIS.

Due to the fact that The Walt Disney Company (NYSE:DIS) has witnessed a decline in interest from the smart money, we can see that there lies a certain “tier” of fund managers that elected to cut their entire stakes by the end of the first quarter. Intriguingly, Andreas Halvorsen’s Viking Global said goodbye to the biggest position of the 750 funds watched by Insider Monkey, totaling about $773.9 million in stock. Josh Resnick’s fund, Jericho Capital Asset Management, also dumped its stock, about $349.1 million worth. These transactions are important to note, as aggregate hedge fund interest fell by 10 funds by the end of the first quarter.

Let’s go over hedge fund activity in other stocks similar to The Walt Disney Company (NYSE:DIS). These stocks are Bank of America Corporation (NYSE:BAC), 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), and ASML Holding N.V. (NASDAQ:ASML). All of these stocks’ market caps are closest to DIS’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 82.3 hedge funds with bullish positions and the average amount invested in these stocks was $12941 million. That figure was $12553 million in DIS’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. The Walt Disney Company (NYSE:DIS) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for DIS is 93.4. 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 DIS wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on DIS were disappointed as the stock returned -4% 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.

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

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