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In this article we are going to use hedge fund sentiment as a tool and determine whether Bank of America Corporation (NYSE:BAC) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds' picks don't beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Bank of America Corporation (NYSE:BAC) has experienced a decrease in hedge fund sentiment lately. Bank of America Corporation (NYSE:BAC) was in 97 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic is 139. There were 99 hedge funds in our database with BAC positions at the end of the fourth quarter. Our calculations also showed that BAC ranked 24th among the 30 most popular stocks among hedge funds (click for Q1 rankings).
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Robert Pohly of Samlyn Capital
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, advertising technology one of the fastest growing industries right now, so we are checking out stock pitches like this under-the-radar adtech stock that can deliver 10x gains. We go through lists like the 10 best hydrogen fuel cell 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. With all of this in mind we're going to take a gander at the fresh hedge fund action regarding Bank of America Corporation (NYSE:BAC).
Do Hedge Funds Think BAC Is A Good Stock To Buy Now?
At first quarter's end, a total of 97 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -2% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards BAC over the last 23 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Bank of America Corporation (NYSE:BAC) was held by Berkshire Hathaway, which reported holding $39080.8 million worth of stock at the end of December. It was followed by Viking Global with a $1211.5 million position. Other investors bullish on the company included GQG Partners, Diamond Hill Capital, and Pzena Investment Management. In terms of the portfolio weights assigned to each position Aquamarine Capital Management allocated the biggest weight to Bank of America Corporation (NYSE:BAC), around 15.52% of its 13F portfolio. Berkshire Hathaway is also relatively very bullish on the stock, dishing out 14.45 percent of its 13F equity portfolio to BAC.
Due to the fact that Bank of America Corporation (NYSE:BAC) has experienced a decline in interest from the aggregate hedge fund industry, it's safe to say that there lies a certain "tier" of money managers that decided to sell off their full holdings by the end of the first quarter. It's worth mentioning that Robert Pitts's Steadfast Capital Management dropped the largest stake of the "upper crust" of funds watched by Insider Monkey, totaling about $194 million in stock. Marcio Appel's fund, Adam Capital, also said goodbye to its stock, about $119.8 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest was cut by 2 funds by the end of the first quarter.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Bank of America Corporation (NYSE:BAC) but similarly valued. We will take a look at 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), ASML Holding N.V. (NASDAQ:ASML), and Comcast Corporation (NASDAQ:CMCSA). This group of stocks' market values are similar to BAC's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PG,70,8539030,-13 NVDA,80,6204940,-8 HD,68,4359872,-11 PYPL,143,14717163,-4 INTC,83,7616792,11 ASML,35,3827143,5 CMCSA,88,9762151,4 Average,81,7861013,-2.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 81 hedge funds with bullish positions and the average amount invested in these stocks was $7861 million. That figure was $45321 million in BAC'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. Bank of America Corporation (NYSE:BAC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for BAC is 52.6. 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 17.2% in 2021 through June 11th and still beat the market by 3.3 percentage points. Hedge funds were also right about betting on BAC as the stock returned 8.6% since the end of Q1 (through 6/11) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.