The elite funds run by legendary investors such as Dan Loeb and David Tepper make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small cap stocks that big investment banks don’t follow. Because of their pay structures, they have strong incentive to do the research necessary to beat the market. That’s why we pay close attention to what they think in small cap stocks. In this article, we take a closer look at Johnson & Johnson (NYSE:JNJ) from the perspective of those elite funds.
Johnson & Johnson investors should pay attention to a decrease in activity from the world’s largest hedge funds of late. JNJ was in 74 hedge funds’ portfolios at the end of September. There were 78 hedge funds in our database with JNJ holdings at the end of the previous quarter. 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 General Electric Company (NYSE:GE), Facebook Inc (NASDAQ:FB), and China Mobile Ltd. (ADR) (NYSE:CHL) to gather more data points.
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Keeping this in mind, let’s take a peek at the fresh action regarding Johnson & Johnson (NYSE:JNJ).
What does the smart money think about Johnson & Johnson (NYSE:JNJ)?
Heading into Q4, a total of 74 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -5% from the previous quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Ken Fisher’s Fisher Asset Management has the largest position in Johnson & Johnson (NYSE:JNJ), worth close to $997.9 million, amounting to 2.1% of its total 13F portfolio. On Fisher Asset Management’s heels is Donald Yacktman of Yacktman Asset Management, with a $705.8 million position; 4.6% of its 13F portfolio is allocated to the stock. Remaining members of the smart money that hold long positions contain Cliff Asness’ AQR Capital Management, Phill Gross and Robert Atchinson’s Adage Capital Management and Ken Griffin’s Citadel Investment Group.
Since Johnson & Johnson (NYSE:JNJ) has experienced falling interest from the entirety of the hedge funds we track, logic holds that there exists a select few hedge funds that decided to sell off their entire stakes by the end of the third quarter. Intriguingly, Stephen DuBois’ Camber Capital Management said goodbye to the largest investment of all the hedgies monitored by Insider Monkey, comprising close to $48.7 million in call options. James Crichton’s fund, Hitchwood Capital Management, also dropped its call options, about $29.2 million worth. These transactions are interesting, as total 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). These stocks are General Electric Company (NYSE:GE), Facebook Inc (NASDAQ:FB), China Mobile Ltd. (ADR) (NYSE:CHL), and Amazon.com, Inc. (NASDAQ:AMZN). This group of stocks’ market valuations match JNJ’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GE | 74 | 5951572 | 4 |
| FB | 128 | 8955439 | -5 |
| CHL | 20 | 213813 | -7 |
| AMZN | 113 | 14981060 | 10 |
As you can see these stocks had an average of 83.75 hedge funds with bullish positions and the average amount invested in these stocks was $7,525 million. That figure was $3,939 million in JNJ’s case. Facebook Inc (NASDAQ:FB) is the most popular stock in this table. On the other hand China Mobile Ltd. (ADR) (NYSE:CHL) is the least popular one with only 20 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. In this regard FB might be a better candidate to consider a long position.
