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Where Do Hedge Funds Stand On Walmart Inc. (WMT)?

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·5 min read
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As we already know from media reports and hedge fund investor letters, hedge funds delivered their best returns in a decade. Most investors who decided to stick with hedge funds after a rough 2018 recouped their losses by the end of the fourth quarter of 2019. A significant number of hedge funds continued their strong performance in 2020 and 2021 as well. We get to see hedge funds' thoughts towards the market and individual stocks by aggregating their quarterly portfolio movements and reading their investor letters. In this article, we will particularly take a look at what hedge funds think about Walmart Inc. (NYSE:WMT).

Hedge fund interest in Walmart Inc. (NYSE:WMT) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that WMT isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings). The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as UnitedHealth Group Inc. (NYSE:UNH), Bank of America Corporation (NYSE:BAC), and The Home Depot, Inc. (NYSE:HD) to gather more data points.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Keeping this in mind we're going to take a look at the fresh hedge fund action surrounding Walmart Inc. (NYSE:WMT).


Ken Fisher of Fisher Asset Management

Do Hedge Funds Think WMT Is A Good Stock To Buy Now?

At the end of the third quarter, a total of 71 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. By comparison, 69 hedge funds held shares or bullish call options in WMT a year ago. With hedge funds' positions undergoing their usual ebb and flow, there exists an "upper tier" of notable hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).

More specifically, Fisher Asset Management was the largest shareholder of Walmart Inc. (NYSE:WMT), with a stake worth $1815.3 million reported as of the end of September. Trailing Fisher Asset Management was Bill & Melinda Gates Foundation Trust, which amassed a stake valued at $964.8 million. Bridgewater Associates, D E Shaw, and Arrowstreet Capital 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 Empirical Capital Partners allocated the biggest weight to Walmart Inc. (NYSE:WMT), around 15.38% of its 13F portfolio. Pittencrieff Partners - Gabalex Capital is also relatively very bullish on the stock, designating 7.41 percent of its 13F equity portfolio to WMT.

Because Walmart Inc. (NYSE:WMT) has experienced declining sentiment from hedge fund managers, it's easy to see that there exists a select few funds that decided to sell off their positions entirely last quarter. Intriguingly, Joseph Samuels's Islet Management dropped the largest investment of the "upper crust" of funds watched by Insider Monkey, worth close to $70.5 million in call options, and Michael Burry's Scion Asset Management was right behind this move, as the fund cut about $53.4 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let's go over 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 UnitedHealth Group Inc. (NYSE:UNH), Bank of America Corporation (NYSE:BAC), The Home Depot, Inc. (NYSE:HD), Mastercard Incorporated (NYSE:MA), The Procter & Gamble Company (NYSE:PG), ASML Holding N.V. (NASDAQ:ASML), and The Walt Disney Company (NYSE:DIS). 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 UNH,95,11705313,-10 BAC,72,46487618,-15 HD,58,4380170,-6 MA,146,17659997,-10 PG,69,6414152,1 ASML,41,4858031,-3 DIS,101,9416047,-11 Average,83.1,14417333,-7.7 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 83.1 hedge funds with bullish positions and the average amount invested in these stocks was $14417 million. That figure was $7933 million in WMT's case. Mastercard Incorporated (NYSE:MA) is the most popular stock in this table. On the other hand ASML Holding N.V. (NASDAQ:ASML) is the least popular one with only 41 bullish hedge fund positions. Walmart Inc. (NYSE:WMT) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for WMT is 49.3. 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 negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.6% in 2021 through November 30th and surpassed the market again by 5.6 percentage points. Unfortunately WMT wasn't nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); WMT investors were disappointed as the stock returned 0.9% since the end of September (through 11/30) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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