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Are Hedge Funds Going To Get Burned By Johnson & Johnson (JNJ) ?

Hedge funds run by legendary names like George Soros and David Tepper make billions of dollars a year for themselves and their super-rich accredited investors (you’ve got to have a minimum of $1 million liquid to invest in a hedge fund) by spending enormous resources on analyzing and uncovering data about small-cap stocks that the big brokerage houses don’t follow. Small caps are where they can generate significant outperformance. That’s why we pay special attention to hedge fund activity in these stocks.

Is Johnson & Johnson (NYSE:JNJ) worth your attention right now? Money managers are reducing their bets on the stock. The number of long hedge fund bets went down by 4 in recent months. Our calculations also showed that JNJ isn’t among the 30 most popular stocks among hedge funds.

In the financial world there are many signals stock market investors use to assess publicly traded companies. Some of the most under-the-radar signals are hedge fund and insider trading sentiment. Our experts have shown that, historically, those who follow the top picks of the elite money managers can outpace their index-focused peers by a superb amount (see the details here).

Donald Yacktman

We’re going to take a peek at the latest hedge fund action encompassing Johnson & Johnson (NYSE:JNJ).

What does the smart money think about Johnson & Johnson (NYSE:JNJ)?

Heading into the second quarter of 2019, a total of 69 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -5% from the fourth quarter of 2018. The graph below displays the number of hedge funds with bullish position in JNJ over the last 15 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

JNJ_jun2019

Among these funds, Fisher Asset Management held the most valuable stake in Johnson & Johnson (NYSE:JNJ), which was worth $1463.1 million at the end of the first quarter. On the second spot was AQR Capital Management which amassed $889.5 million worth of shares. Moreover, Yacktman Asset Management, D E Shaw, and Adage Capital Management were also bullish on Johnson & Johnson (NYSE:JNJ), allocating a large percentage of their portfolios to this stock.

Due to the fact that Johnson & Johnson (NYSE:JNJ) has experienced declining sentiment from the aggregate hedge fund industry, we can see that there was a specific group of funds who were dropping their entire stakes by the end of the third quarter. Intriguingly, Steve Cohen’s Point72 Asset Management cut the largest stake of all the hedgies followed by Insider Monkey, comprising close to $159.2 million in call options, and Matthew Mark’s Jet Capital Investors was right behind this move, as the fund sold off about $29.5 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest fell by 4 funds by the end of the third quarter.

Let’s go over hedge fund activity in other stocks similar to Johnson & Johnson (NYSE:JNJ). We will take a look at Visa Inc (NYSE:V), Exxon Mobil Corporation (NYSE:XOM), JPMorgan Chase & Co. (NYSE:JPM), and Walmart Inc. (NYSE:WMT). All of these stocks’ market caps are similar to JNJ’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
V 124 13224012 -4
XOM 49 1310955 -4
JPM 100 10348850 -1
WMT 57 4392529 -6
Average 82.5 7319087 -3.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 82.5 hedge funds with bullish positions and the average amount invested in these stocks was $7319 million. That figure was $5802 million in JNJ’s case. Visa Inc (NYSE:V) is the most popular stock in this table. On the other hand Exxon Mobil Corporation (NYSE:XOM) is the least popular one with only 49 bullish hedge fund positions. Johnson & Johnson (NYSE:JNJ) is not the least popular stock in this group but hedge fund interest is still below average. 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 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately JNJ wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); JNJ investors were disappointed as the stock returned -4.8% 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 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market so far in Q2.

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

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