How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding U.S. Bancorp (NYSE:USB).
Is U.S. Bancorp (NYSE:USB) a healthy stock for your portfolio? Money managers were taking a bearish view. The number of long hedge fund bets decreased by 2 recently. U.S. Bancorp (NYSE:USB) was in 41 hedge funds’ portfolios at the end of June. The all time high for this statistic is 60. Our calculations also showed that USB isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 43 hedge funds in our database with USB holdings at the end of March.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 185.4% since March 2017 and outperformed the S&P 500 ETFs by more than 79 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Ryan Tolkin, CIO of Schonfeld Strategic Advisors
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, we like undervalued, EBITDA-positive growth stocks, so we are checking out stock pitches like this emerging biotech 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 we’re going to review the recent hedge fund action surrounding U.S. Bancorp (NYSE:USB).
Do Hedge Funds Think USB Is A Good Stock To Buy Now?
At second quarter’s end, a total of 41 of the hedge funds tracked by Insider Monkey were long this stock, a change of -5% from one quarter earlier. By comparison, 48 hedge funds held shares or bullish call options in USB 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.
Of the funds tracked by Insider Monkey, Berkshire Hathaway, managed by Warren Buffett, holds the number one position in U.S. Bancorp (NYSE:USB). Berkshire Hathaway has a $7.3428 billion position in the stock, comprising 2.5% of its 13F portfolio. The second most bullish fund manager is Yacktman Asset Management, managed by Donald Yacktman, which holds a $269.2 million position; the fund has 2.6% of its 13F portfolio invested in the stock. Remaining professional money managers that hold long positions consist of Ken Griffin’s Citadel Investment Group, Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors and Phill Gross and Robert Atchinson’s Adage Capital Management. In terms of the portfolio weights assigned to each position Prana Capital Management allocated the biggest weight to U.S. Bancorp (NYSE:USB), around 4.43% of its 13F portfolio. BlueMar Capital Management is also relatively very bullish on the stock, earmarking 3.88 percent of its 13F equity portfolio to USB.
Since U.S. Bancorp (NYSE:USB) has experienced declining sentiment from the smart money, it’s safe to say that there was a specific group of fund managers that slashed their positions entirely last quarter. At the top of the heap, Dmitry Balyasny’s Balyasny Asset Management dropped the largest position of all the hedgies monitored by Insider Monkey, totaling close to $52 million in stock, and Michael Anderson’s Hi-Line Capital Management was right behind this move, as the fund dropped about $7.7 million worth. These transactions are intriguing to say the least, as total hedge fund interest dropped by 2 funds last quarter.
Let’s check out hedge fund activity in other stocks similar to U.S. Bancorp (NYSE:USB). These stocks are Automatic Data Processing, Inc. (NASDAQ:ADP), Crown Castle International Corp. (REIT) (NYSE:CCI), ConocoPhillips (NYSE:COP), The TJX Companies, Inc. (NYSE:TJX), Cigna Corporation (NYSE:CI), Enbridge Inc (NYSE:ENB), and The PNC Financial Services Group Inc. (NYSE:PNC). This group of stocks’ market caps are similar to USB’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ADP | 41 | 3018791 | -1 |
| CCI | 42 | 2093903 | -1 |
| COP | 50 | 1158596 | -1 |
| TJX | 56 | 2387336 | -7 |
| CI | 63 | 2807451 | 10 |
| ENB | 19 | 166071 | -3 |
| PNC | 38 | 727612 | -1 |
| Average | 44.1 | 1765680 | -0.6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 44.1 hedge funds with bullish positions and the average amount invested in these stocks was $1766 million. That figure was $8306 million in USB’s case. Cigna Corporation (NYSE:CI) is the most popular stock in this table. On the other hand Enbridge Inc (NYSE:ENB) is the least popular one with only 19 bullish hedge fund positions. U.S. Bancorp (NYSE:USB) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for USB is 48.5. 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 21.8% in 2021 through October 11th and still beat the market by 4.4 percentage points. A small number of hedge funds were also right about betting on USB as the stock returned 9.4% since the end of the second quarter (through 10/11) and outperformed the market by an even larger margin.
Follow Us Bancorp (NYSE:USB)
Follow Us Bancorp (NYSE:USB)
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Disclosure: None. This article was originally published at Insider Monkey.
