Insider Monkey has processed numerous 13F filings of hedge funds and successful investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the first quarter. You can find write-ups about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves and analyze what the smart money thinks of Wells Fargo & Company (NYSE:WFC) based on that data.
Is Wells Fargo & Company (NYSE:WFC) a healthy stock for your portfolio? Hedge funds are becoming less hopeful. The number of bullish hedge fund positions decreased by 4 lately. Our calculations also showed that WFC ranked 25th among the 30 most popular stocks among hedge funds.
In the eyes of most investors, hedge funds are seen as worthless, old investment vehicles of yesteryear. While there are greater than 8000 funds with their doors open at present, We choose to focus on the moguls of this group, about 750 funds. It is estimated that this group of investors preside over bulk of all hedge funds' total asset base, and by watching their top investments, Insider Monkey has spotted several investment strategies that have historically surpassed the S&P 500 index. Insider Monkey's flagship hedge fund strategy outpaced the S&P 500 index by 5 percentage points annually since its inception in May 2014 through the end of May. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 30.9% since February 2017 (through May 30th) even though the market was up nearly 24% during the same period. We just shared a list of 5 short targets in our latest quarterly update and they are already down an average of 11.9% in less than a couple of weeks whereas our long picks outperformed the market by 2 percentage points in this volatile 2 week period.
We're going to view the fresh hedge fund action encompassing Wells Fargo & Company (NYSE:WFC).
How are hedge funds trading Wells Fargo & Company (NYSE:WFC)?
At the end of the first quarter, a total of 73 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -5% from the fourth quarter of 2018. The graph below displays the number of hedge funds with bullish position in WFC over the last 15 quarters. With hedgies' sentiment swirling, there exists a select group of key hedge fund managers who were upping their stakes significantly (or already accumulated large positions).
More specifically, Berkshire Hathaway was the largest shareholder of Wells Fargo & Company (NYSE:WFC), with a stake worth $19801.7 million reported as of the end of March. Trailing Berkshire Hathaway was Eagle Capital Management, which amassed a stake valued at $1330.6 million. Gardner Russo & Gardner, Theleme Partners, and Orbis Investment Management were also very fond of the stock, giving the stock large weights in their portfolios.
Since Wells Fargo & Company (NYSE:WFC) has experienced bearish sentiment from the entirety of the hedge funds we track, it's easy to see that there lies a certain "tier" of money managers who sold off their positions entirely by the end of the third quarter. Intriguingly, Patrick Degorce's Theleme Partners cut the largest stake of all the hedgies followed by Insider Monkey, valued at an estimated $341 million in stock, and Clint Carlson's Carlson Capital was right behind this move, as the fund cut about $49.1 million worth. These moves are interesting, as total hedge fund interest fell by 4 funds by the end of the third quarter.
Let's go over hedge fund activity in other stocks similar to Wells Fargo & Company (NYSE:WFC). We will take a look at The Home Depot, Inc. (NYSE:HD), The Boeing Company (NYSE:BA), Merck & Co., Inc. (NYSE:MRK), and Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM). This group of stocks' market values resemble WFC's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HD,58,3544213,0 BA,71,4346311,4 MRK,64,4602295,-4 TSM,39,3547334,2 Average,58,4010038,0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 58 hedge funds with bullish positions and the average amount invested in these stocks was $4010 million. That figure was $25751 million in WFC's case. The Boeing Company (NYSE:BA) is the most popular stock in this table. On the other hand Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM) is the least popular one with only 39 bullish hedge fund positions. Compared to these stocks Wells Fargo & Company (NYSE:WFC) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately WFC wasn't nearly as popular as these 20 stocks and hedge funds that were betting on WFC were disappointed as the stock returned -5.9% during the same 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 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.