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Hedge Fund Consensus Stocks vs. Walmart Inc. (WMT) In 2019

Debasis Saha

We are still in an overall bull market and many stocks that smart money investors were piling into surged in 2019. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained more than 57% each. Hedge funds' top 3 stock picks returned 44.6% this year and beat the S&P 500 ETFs by almost 14 percentage points. That's a big deal. This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.

Hedge fund interest in Walmart Inc. (NYSE:WMT) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare WMT to other stocks including Nestle SA (OTCMKTS:NSRGY), The Procter & Gamble Company (NYSE:PG), and Exxon Mobil Corporation (NYSE:XOM) to get a better sense of its popularity.

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 flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

[caption id="attachment_26335" align="alignnone" width="600"] Ken Fisher of Fisher Asset Management[/caption]

Ken Fisher FISHER ASSET MANAGEMENT

We leave no stone unturned when looking for the next great investment idea. For example one of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock is still extremely cheap despite already gaining 20 percent. Keeping this in mind we're going to review the new hedge fund action encompassing Walmart Inc. (NYSE:WMT).

What does smart money think about Walmart Inc. (NYSE:WMT)?

Heading into the fourth quarter of 2019, a total of 56 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards WMT over the last 17 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.

Is WMT A Good Stock To Buy?

More specifically, Bill & Melinda Gates Foundation Trust was the largest shareholder of Walmart Inc. (NYSE:WMT), with a stake worth $1377 million reported as of the end of September. Trailing Bill & Melinda Gates Foundation Trust was Fisher Asset Management, which amassed a stake valued at $1295.2 million. Renaissance Technologies, AQR Capital Management, and D E Shaw 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 Gabalex Capital allocated the biggest weight to Walmart Inc. (NYSE:WMT), around 8% of its 13F portfolio. Bill & Melinda Gates Foundation Trust is also relatively very bullish on the stock, setting aside 6.49 percent of its 13F equity portfolio to WMT.

Judging by the fact that Walmart Inc. (NYSE:WMT) has witnessed bearish sentiment from the entirety of the hedge funds we track, it's easy to see that there is a sect of money managers that slashed their full holdings by the end of the third quarter. Interestingly, Brandon Haley's Holocene Advisors said goodbye to the biggest position of all the hedgies tracked by Insider Monkey, valued at close to $45.5 million in stock. Michael Kharitonov and Jon David McAuliffe's fund, Voleon Capital, also said goodbye to its stock, about $33.1 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let's now review hedge fund activity in other stocks similar to Walmart Inc. (NYSE:WMT). We will take a look at Nestle SA (OTCMKTS:NSRGY), The Procter & Gamble Company (NYSE:PG), Exxon Mobil Corporation (NYSE:XOM), and AT&T Inc. (NYSE:T). This group of stocks' market valuations resemble WMT's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NSRGY,4,1831756,0 PG,66,11536685,8 XOM,48,1365038,-2 T,46,1515476,4 Average,41,4062239,2.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 41 hedge funds with bullish positions and the average amount invested in these stocks was $4062 million. That figure was $5584 million in WMT's case. The Procter & Gamble Company (NYSE:PG) is the most popular stock in this table. On the other hand Nestle SA (OTCMKTS:NSRGY) is the least popular one with only 4 bullish hedge fund positions. Walmart Inc. (NYSE:WMT) is not the most popular stock in this group but hedge fund interest is still above average. 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 20 most popular stocks among hedge funds returned 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Unfortunately WMT wasn't nearly as popular as these 20 stocks and hedge funds that were betting on WMT were disappointed as the stock returned 30.4% in 2019 (through December 23rd) 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 many of these stocks already outperformed the market so far this year. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

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

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