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Do Hedge Funds Love Bank of America Corporation (BAC)?

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Is Bank of America Corporation (NYSE:BAC) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.

Is Bank of America Corporation (NYSE:BAC) a splendid investment now? Prominent investors were selling. The number of long hedge fund positions decreased by 15 recently. Bank of America Corporation (NYSE:BAC) was in 72 hedge funds' portfolios at the end of September. The all time high for this statistic is 139. Our calculations also showed that BAC isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so 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. With all of this in mind let's view the recent hedge fund action encompassing Bank of America Corporation (NYSE:BAC).

Rajiv Jain of GQG Partners
Rajiv Jain of GQG Partners

Rajiv Jain of GQG Partners

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

Heading into the fourth quarter of 2021, a total of 72 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -17% from the second quarter of 2021. On the other hand, there were a total of 88 hedge funds with a bullish position in BAC a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Berkshire Hathaway held the most valuable stake in Bank of America Corporation (NYSE:BAC), which was worth $42878.8 million at the end of the third quarter. On the second spot was GQG Partners which amassed $780.2 million worth of shares. Citadel Investment Group, Laurion Capital Management, and Pzena Investment Management 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 Aquamarine Capital Management allocated the biggest weight to Bank of America Corporation (NYSE:BAC), around 15.98% of its 13F portfolio. Berkshire Hathaway is also relatively very bullish on the stock, setting aside 14.61 percent of its 13F equity portfolio to BAC.

Seeing as Bank of America Corporation (NYSE:BAC) has faced declining sentiment from the smart money, logic holds that there was a specific group of funds who sold off their entire stakes by the end of the third quarter. Intriguingly, Matthew Stadelman's Diamond Hill Capital said goodbye to the biggest position of the "upper crust" of funds monitored by Insider Monkey, worth about $648.1 million in stock. Andreas Halvorsen's fund, Viking Global, also dumped its stock, about $295.8 million worth. These bearish behaviors are interesting, as total hedge fund interest fell by 15 funds by the end of the third quarter.

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Bank of America Corporation (NYSE:BAC) but similarly valued. These stocks are The Home Depot, Inc. (NYSE:HD), Mastercard Incorporated (NYSE:MA), The Procter & Gamble Company (NYSE:PG), ASML Holding N.V. (NASDAQ:ASML), The Walt Disney Company (NYSE:DIS), Paypal Holdings Inc (NASDAQ:PYPL), and Adobe Inc. (NASDAQ:ADBE). This group of stocks' market values match BAC's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HD,58,4380170,-6 MA,146,17659997,-10 PG,69,6414152,1 ASML,41,4858031,-3 DIS,101,9416047,-11 PYPL,123,12880990,-20 ADBE,95,12682168,6 Average,90.4,9755936,-6.1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 90.4 hedge funds with bullish positions and the average amount invested in these stocks was $9756 million. That figure was $46488 million in BAC's case. Mastercard Incorporated (NYSE:MA) 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 41 bullish hedge fund positions. Bank of America Corporation (NYSE:BAC) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for BAC is 20.3. 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 negative signal and 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 28.6% in 2021 through November 30th and surpassed the market again by 5.6 percentage points. Unfortunately BAC wasn't nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); BAC investors were disappointed as the stock returned 4.8% since the end of September (through 11/30) 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 most of these stocks already outperformed the market in 2021.

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