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U.S. Bancorp (USB): Hedge Funds Taking Some Chips Off The Table

Debasis Saha
·7 mins read

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Stocks kept going up since then. In this article we look at how hedge funds traded U.S. Bancorp (NYSE:USB) and determine whether the smart money was really smart about this stock.

U.S. Bancorp (NYSE:USB) investors should pay attention to a decrease in hedge fund interest recently. U.S. Bancorp (NYSE:USB) was in 48 hedge funds' portfolios at the end of June. There were 51 hedge funds in our database with USB holdings at the end of March. Our calculations also showed that USB isn't among the 30 most popular stocks among hedge funds (click for Q2 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.

Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. 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 S&P 500 ETFs by 58 percentage points since March 2017 (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.

Daniel Sundheim D1 Capital
Daniel Sundheim D1 Capital

Daniel Sundheim of D1 Capital Partners

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this junior gold mining stock.. We go through lists like the 10 most profitable companies in America to pick the best large-cap stocks to buy. 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. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. With all of this in mind let's analyze the key hedge fund action regarding U.S. Bancorp (NYSE:USB).

What have hedge funds been doing with U.S. Bancorp (NYSE:USB)?

At the end of June, a total of 48 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -6% from the first quarter of 2020. By comparison, 39 hedge funds held shares or bullish call options in USB a year ago. 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 USB A Good Stock To Buy?
Is USB A Good Stock To Buy?

Among these funds, Berkshire Hathaway held the most valuable stake in U.S. Bancorp (NYSE:USB), which was worth $4858.8 million at the end of the third quarter. On the second spot was D1 Capital Partners which amassed $651.3 million worth of shares. Yacktman Asset Management, D E Shaw, and AQR Capital 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 Gillson Capital allocated the biggest weight to U.S. Bancorp (NYSE:USB), around 4.92% of its 13F portfolio. D1 Capital Partners is also relatively very bullish on the stock, earmarking 4.86 percent of its 13F equity portfolio to USB.

Due to the fact that U.S. Bancorp (NYSE:USB) has witnessed bearish sentiment from the entirety of the hedge funds we track, it's safe to say that there exists a select few fund managers that slashed their full holdings by the end of the second quarter. Intriguingly, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital sold off the biggest investment of the 750 funds monitored by Insider Monkey, totaling about $95 million in stock, and Renaissance Technologies was right behind this move, as the fund cut about $17 million worth. These transactions are important to note, as total hedge fund interest fell by 3 funds by the end of the second quarter.

Let's check out hedge fund activity in other stocks - not necessarily in the same industry as U.S. Bancorp (NYSE:USB) but similarly valued. We will take a look at Applied Materials, Inc. (NASDAQ:AMAT), Illinois Tool Works Inc. (NYSE:ITW), America Movil SAB de CV (NYSE:AMX), The Southern Company (NYSE:SO), Illumina, Inc. (NASDAQ:ILMN), Marsh & McLennan Companies, Inc. (NYSE:MMC), and Uber Technologies, Inc. (NYSE:UBER). This group of stocks' market values are closest to USB's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AMAT,58,2461809,2 ITW,35,565341,1 AMX,11,97994,0 SO,38,360503,5 ILMN,41,1193190,7 MMC,38,846796,1 UBER,94,5388672,-3 Average,45,1559186,1.9 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 45 hedge funds with bullish positions and the average amount invested in these stocks was $1559 million. That figure was $6299 million in USB's case. Uber Technologies, Inc. (NYSE:UBER) is the most popular stock in this table. On the other hand America Movil SAB de CV (NYSE:AMX) is the least popular one with only 11 bullish hedge fund positions. U.S. Bancorp (NYSE:USB) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for USB is 53.7. 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 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 33% in 2020 through the end of August and beat the market by 23.2 percentage points. Unfortunately USB wasn't nearly as popular as these 10 stocks and hedge funds that were betting on USB were disappointed as the stock returned -1.1% 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.

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

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