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Hedge Funds Have Never Been This Bullish On JPMorgan Chase & Co. (JPM)

Abigail Fisher

In this article we will take a look at whether hedge funds think JPMorgan Chase & Co. (NYSE:JPM) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

JPMorgan Chase & Co. (NYSE:JPM) shareholders have witnessed an increase in support from the world's most elite money managers lately. JPM was in 112 hedge funds' portfolios at the end of March. There were 98 hedge funds in our database with JPM positions at the end of the previous quarter. Our calculations also showed that JPM is among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

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 72% since March 2017 and outperformed the S&P 500 ETFs by more than 44 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_26082" align="aligncenter" width="399"] Andreas Halvorsen of Viking Global[/caption]

Andreas Halvorsen

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we asked astrophysicist Neil deGrasse Tyson about Tesla, Elon Musk, and his top stock picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we're going to view the fresh hedge fund action regarding JPMorgan Chase & Co. (NYSE:JPM).

How are hedge funds trading JPMorgan Chase & Co. (NYSE:JPM)?

At the end of the first quarter, a total of 112 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 14% from the previous quarter. On the other hand, there were a total of 100 hedge funds with a bullish position in JPM a year ago. With hedgies' sentiment swirling, there exists a select group of key hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).

The largest stake in JPMorgan Chase & Co. (NYSE:JPM) was held by Berkshire Hathaway, which reported holding $5196 million worth of stock at the end of September. It was followed by Fisher Asset Management with a $543.8 million position. Other investors bullish on the company included Citadel Investment Group, Viking Global, and Gardner Russo & Gardner. In terms of the portfolio weights assigned to each position Azora Capital allocated the biggest weight to JPMorgan Chase & Co. (NYSE:JPM), around 11.7% of its 13F portfolio. Brave Warrior Capital is also relatively very bullish on the stock, designating 9.9 percent of its 13F equity portfolio to JPM.

With a general bullishness amongst the heavyweights, key money managers were breaking ground themselves. Viking Global, managed by Andreas Halvorsen, created the largest position in JPMorgan Chase & Co. (NYSE:JPM). Viking Global had $367.8 million invested in the company at the end of the quarter. Renaissance Technologies also made a $150 million investment in the stock during the quarter. The following funds were also among the new JPM investors: Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital, Louis Bacon's Moore Global Investments, and Dmitry Balyasny's Balyasny Asset Management.

Let's also examine hedge fund activity in other stocks similar to JPMorgan Chase & Co. (NYSE:JPM). We will take a look at The Procter & Gamble Company (NYSE:PG), Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM), Mastercard Incorporated (NYSE:MA), and UnitedHealth Group Inc. (NYSE:UNH). This group of stocks' market caps resemble JPM's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PG,77,9519275,-2 TSM,54,4298613,-9 MA,139,11896575,14 UNH,104,6665163,13 Average,93.5,8094907,4 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 93.5 hedge funds with bullish positions and the average amount invested in these stocks was $8095 million. That figure was $9731 million in JPM's case. Mastercard Incorporated (NYSE:MA) is the most popular stock in this table. On the other hand Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) is the least popular one with only 54 bullish hedge fund positions. JPMorgan Chase & Co. (NYSE:JPM) 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 7.9% in 2020 through May 22nd but beat the market by 15.6 percentage points. Unfortunately JPM wasn't nearly as popular as these 10 stocks and hedge funds that were betting on JPM were disappointed as the stock returned 0.4% during the same time 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 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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

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