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Were Hedge Funds Right About Betting On U.S. Bancorp (USB)?

Reymerlyn Martin

How do we determine whether U.S. Bancorp (NYSE:USB) makes for a good investment at the moment? We analyze the sentiment of a select group of the very best investors in the world, who spend immense amounts of time and resources studying companies. They may not always be right (no one is), but data shows that their consensus long positions have historically outperformed the market when we adjust for known risk factors.

U.S. Bancorp (NYSE:USB) investors should pay attention to an increase in support from the world's most elite money managers recently. USB was in 41 hedge funds' portfolios at the end of December. There were 39 hedge funds in our database with USB positions at the end of September. Our calculations also showed that USB isn't among the 30 most popular stocks among hedge funds.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.5% through March 12, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Dmitry Balyasny

We're going to take a glance at the new hedge fund action encompassing U.S. Bancorp (NYSE:USB).

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

At the end of the fourth quarter, a total of 41 of the hedge funds tracked by Insider Monkey were long this stock, a change of 5% from the previous quarter. On the other hand, there were a total of 42 hedge funds with a bullish position in USB a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

USB_mar2019

Among these funds, Berkshire Hathaway held the most valuable stake in U.S. Bancorp (NYSE:USB), which was worth $5909.4 million at the end of the third quarter. On the second spot was Yacktman Asset Management which amassed $215.8 million worth of shares. Moreover, Balyasny Asset Management, AQR Capital Management, and Basswood Capital were also bullish on U.S. Bancorp (NYSE:USB), allocating a large percentage of their portfolios to this stock.

With a general bullishness amongst the heavyweights, key money managers have been driving this bullishness. Renaissance Technologies, managed by Jim Simons, assembled the most outsized position in U.S. Bancorp (NYSE:USB). Renaissance Technologies had $18.1 million invested in the company at the end of the quarter. Nick Niell's Arrowgrass Capital Partners also made a $9.1 million investment in the stock during the quarter. The other funds with brand new USB positions are Sander Gerber's Hudson Bay Capital Management, Matthew Hulsizer's PEAK6 Capital Management, and James Dondero's Highland Capital Management.

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. These stocks are British American Tobacco plc (NYSEAMEX:BTI), Banco Santander, S.A. (NYSE:SAN), CIGNA Corporation (NYSE:CI), and Danaher Corporation (NYSE:DHR). All of these stocks' market caps resemble USB's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BTI,10,191500,-5 SAN,18,698131,-1 CI,68,4557359,8 DHR,48,2127751,-3 Average,36,1893685,-0.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 36 hedge funds with bullish positions and the average amount invested in these stocks was $1894 million. That figure was $6539 million in USB's case. CIGNA Corporation (NYSE:CI) is the most popular stock in this table. On the other hand British American Tobacco plc (NYSEAMEX:BTI) is the least popular one with only 10 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 calculations showed that top 15 most popular stocks among hedge funds returned 19.7% through March 15th and outperformed the S&P 500 ETF (SPY) by 6.6 percentage points. Hedge funds were also right about betting on Microsoft as the stock returned 13.9% and outperformed the market as well.

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

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