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Were Hedge Funds Right About Walmart Inc. (WMT)?

Reymerlyn Martin

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 have processed the filings of the more than 700 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their December 31 holdings, data that is available nowhere else. Should you consider Walmart Inc. (NYSE:WMT) for your portfolio? We'll look to this invaluable collective wisdom for the answer.

Walmart Inc. (NYSE:WMT) has seen an increase in enthusiasm from smart money recently. WMT was in 63 hedge funds' portfolios at the end of the fourth quarter of 2018. There were 60 hedge funds in our database with WMT holdings at the end of the previous quarter. Our calculations also showed that WMT isn't among the 30 most popular stocks among hedge funds.

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 flagship best performing hedge funds strategy returned 20.7% year to date (through March 12th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 32 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Phill Gross, Adage Capital Management

We're going to review the recent hedge fund action regarding Walmart Inc. (NYSE:WMT).

What have hedge funds been doing with Walmart Inc. (NYSE:WMT)?

Heading into the first quarter of 2019, a total of 63 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 5% from the second quarter of 2018. Below, you can check out the change in hedge fund sentiment towards WMT over the last 14 quarters. With the smart money's positions undergoing their usual ebb and flow, there exists an "upper tier" of noteworthy hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).

WMT_mar2019

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Michael Larson's Bill & Melinda Gates Foundation Trust has the number one position in Walmart Inc. (NYSE:WMT), worth close to $1.0808 billion, corresponding to 4.9% of its total 13F portfolio. The second most bullish fund manager is Ken Fisher of Fisher Asset Management, with a $956 million position; 1.3% of its 13F portfolio is allocated to the company. Other peers with similar optimism comprise Cliff Asness's AQR Capital Management, Phill Gross and Robert Atchinson's Adage Capital Management and D. E. Shaw's D E Shaw.

Now, key money managers were leading the bulls' herd. Hoplite Capital Management, managed by John Lykouretzos, established the most valuable position in Walmart Inc. (NYSE:WMT). Hoplite Capital Management had $55.7 million invested in the company at the end of the quarter. Gregg Moskowitz's Interval Partners also initiated a $34.9 million position during the quarter. The other funds with brand new WMT positions are Michael Kharitonov and Jon David McAuliffe's Voleon Capital, Nick Niell's Arrowgrass Capital Partners, and Anand Parekh's Alyeska Investment Group.

Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Walmart Inc. (NYSE:WMT) but similarly valued. We will take a look at Nestle SA (OTCMKTS:NSRGY), Royal Dutch Shell plc (NYSE:RDS), Pfizer Inc. (NYSE:PFE), and Bank of America Corporation (NYSE:BAC). This group of stocks' market caps are closest to WMT's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NSRGY,4,1502328,-1 RDS,33,1619869,-3 PFE,59,4674754,1 BAC,99,27370812,-3 Average,48.75,8791941,-1.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 48.75 hedge funds with bullish positions and the average amount invested in these stocks was $8792 million. That figure was $4444 million in WMT's case. Bank of America Corporation (NYSE:BAC) 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. Walmart Inc. (NYSE:WMT) 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. Unfortunately WMT wasn't in this group. Hedge funds that bet on WMT were disappointed as the stock returned 6.2% and underperformed the market. If you are interested in investing in large cap stocks, you should check out the top 15 hedge fund stocks as 13 of these outperformed the market.

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

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