Looking for high-potential stocks? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 5.2% in the 12 months ending October 30, with more than 51% of the stocks in the index failing to beat the benchmark. Therefore, the odds that one will pin down a winner by randomly picking a stock are less than the odds in a fair coin-tossing game. Conversely, hedge funds’ 30 preferred S&P 500 stocks (as of September 2014) generated a return of 9.5% during the same 12-month period, with 63% of these stock picks outperformed the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering a 16-year period indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like The Home Depot, Inc. (NYSE:HD).
Is The Home Depot, Inc. (NYSE:HD) going to take off soon? Investors who are in the know are turning bullish. The number of bullish hedge fund positions increased by 2 in recent months. HD was in 69 hedge funds’ portfolios at the end of the third quarter of 2015. There were 67 hedge funds in our database with HD holdings at the end of the previous quarter. At the end of this article we will also compare HD to other stocks, including HSBC Holdings plc (ADR) (NYSE:HSBC), Alibaba Group Holding Ltd (NYSE:BABA), and Gilead Sciences, Inc. (NASDAQ:GILD) to get a better sense of its popularity.
According to most traders, hedge funds are assumed to be slow, outdated investment tools of yesteryear. While there are greater than 8000 funds trading at present, Our experts look at the leaders of this club, about 700 funds. These investment experts oversee the lion’s share of the smart money’s total asset base, and by paying attention to their matchless investments, Insider Monkey has unsheathed several investment strategies that have historically outperformed Mr. Market. Insider Monkey’s small-cap hedge fund strategy exceeded the S&P 500 index by 12 percentage points per annum for a decade in their back tests.
Keeping this in mind, let’s review the key action regarding The Home Depot, Inc. (NYSE:HD).
What have hedge funds been doing with The Home Depot, Inc. (NYSE:HD)?
Heading into Q4, a total of 69 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 3% from one quarter earlier. With hedgies’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Ken Fisher’s Fisher Asset Management has the most valuable position in The Home Depot, Inc. (NYSE:HD), worth close to $967.4 million, accounting for 2% of its total 13F portfolio. Coming in second is AQR Capital Management, led by Cliff Asness, holding a $357 million position; the fund has 0.7% of its 13F portfolio invested in the stock. Remaining professional money managers that hold long positions encompass John Armitage’s Egerton Capital Limited, Ken Griffin’s Citadel Investment Group and Ryan Pedlow’s Two Creeks Capital Management.