Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors' consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Visa Inc (NYSE:V).
Visa Inc (NYSE:V) has seen an increase in hedge fund sentiment recently. Our calculations also showed that V ranked 7th among the 30 most popular stocks among hedge funds (see the video below). Overall hedge fund sentiment towards Visa has never been more bullish. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
We're going to take a look at the latest hedge fund action surrounding Visa Inc (NYSE:V).
How are hedge funds trading Visa Inc (NYSE:V)?
Heading into the fourth quarter of 2019, a total of 132 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 13% from one quarter earlier. On the other hand, there were a total of 112 hedge funds with a bullish position in V a year ago. With hedgies' capital changing hands, there exists an "upper tier" of noteworthy hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).
More specifically, Fisher Asset Management was the largest shareholder of Visa Inc (NYSE:V), with a stake worth $3474.7 million reported as of the end of March. Trailing Fisher Asset Management was Berkshire Hathaway, which amassed a stake valued at $1816.8 million. Arrowstreet Capital, Akre Capital Management, and D E Shaw were also very fond of the stock, giving the stock large weights in their portfolios. In terms of the portfolio weights assigned to each position Hengistbury Investment Partners allocated the biggest weight to Visa Inc (NYSE:V), around 45.3% of its portfolio. Valley Forge Capital is also relatively very bullish on the stock, dishing out 18.5 percent of its 13F equity portfolio to V.
Now, key money managers have been driving this bullishness. Millennium Management, managed by Israel Englander, created the most outsized call position in Visa Inc (NYSE:V). Millennium Management had $61 million invested in the company at the end of the quarter. James Parsons's Junto Capital Management also initiated a $49.5 million position during the quarter. The following funds were also among the new V investors: Bo Shan's Gobi Capital, Glen Kacher's Light Street Capital, and Christopher James's Partner Fund Management.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Visa Inc (NYSE:V) but similarly valued. We will take a look at JPMorgan Chase & Co. (NYSE:JPM), Johnson & Johnson (NYSE:JNJ), Walmart Inc. (NYSE:WMT), and Nestle SA (OTCMKTS:NSRGY). This group of stocks' market valuations are closest to V's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position JPM,84,11167465,-6 JNJ,76,7326703,13 WMT,56,5584105,0 NSRGY,4,1831756,0 Average,55,6477507,1.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 55 hedge funds with bullish positions and the average amount invested in these stocks was $6478 million. That figure was $15686 million in V's case. JPMorgan Chase & Co. (NYSE:JPM) 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. Compared to these stocks Visa Inc (NYSE:V) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 34.7% in 2019 through November 22nd and outperformed the S&P 500 ETF (SPY) by 8.5 percentage points. Unfortunately V wasn't nearly as successful as these 20 stocks and hedge funds that were betting on V were disappointed as the stock returned 4.5% during the fourth quarter (through 11/22) and slightly 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 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.