In this article we will check out the progression of hedge fund sentiment towards Visa Inc (NYSE:V) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Visa Inc (NYSE:V) has seen a decrease in support from the world’s most elite money managers recently. Visa Inc (NYSE:V) was in 164 hedge funds’ portfolios at the end of March. The all time high for this statistic is 166. There were 166 hedge funds in our database with V holdings at the end of December. Our calculations also showed that Visa ranked 5th among the 30 most popular stocks among hedge funds (click for Q1 rankings).
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, advertising technology one of the fastest growing industries right now, so we are checking out stock pitches like this under-the-radar adtech stock that can deliver 10x gains. We go through lists like the 10 best hydrogen fuel cell 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind we’re going to take a look at the recent hedge fund action encompassing Visa Inc (NYSE:V).
Do Hedge Funds Think V Is A Good Stock To Buy Now?
At first quarter’s end, a total of 164 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -1% from the fourth quarter of 2020. Below, you can check out the change in hedge fund sentiment towards V over the last 23 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Fisher Asset Management held the most valuable stake in Visa Inc (NYSE:V), which was worth $4840.2 million at the end of the fourth quarter. On the second spot was TCI Fund Management which amassed $2976.5 million worth of shares. Berkshire Hathaway, Fundsmith LLP, and Akre Capital Management 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 Truvvo Partners allocated the biggest weight to Visa Inc (NYSE:V), around 33.17% of its 13F portfolio. Hengistbury Investment Partners is also relatively very bullish on the stock, designating 23.42 percent of its 13F equity portfolio to V.
Due to the fact that Visa Inc (NYSE:V) has faced declining sentiment from the entirety of the hedge funds we track, logic holds that there was a specific group of money managers that elected to cut their full holdings heading into Q2. Intriguingly, Marcio Appel’s Adam Capital dropped the biggest stake of the 750 funds tracked by Insider Monkey, valued at about $35.4 million in stock. Mendel Hui’s fund, Isomer Partners, also dumped its stock, about $32.8 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest fell by 2 funds heading into Q2.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Visa Inc (NYSE:V) but similarly valued. These stocks are Johnson & Johnson (NYSE:JNJ), Walmart Inc. (NYSE:WMT), Mastercard Incorporated (NYSE:MA), UnitedHealth Group Inc. (NYSE:UNH), The Walt Disney Company (NYSE:DIS), Bank of America Corporation (NYSE:BAC), and The Procter & Gamble Company (NYSE:PG). This group of stocks’ market caps match V’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 97.1 hedge funds with bullish positions and the average amount invested in these stocks was $15485 million. That figure was $26588 million in V’s case. Mastercard Incorporated (NYSE:MA) is the most popular stock in this table. On the other hand Walmart Inc. (NYSE:WMT) is the least popular one with only 58 bullish hedge fund positions. Compared to these stocks Visa Inc (NYSE:V) is more popular among hedge funds. Our overall hedge fund sentiment score for V is 97.6. 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. 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 returned 17.2% in 2021 through June 11th but still managed to beat the market by 3.3 percentage points. Hedge funds were also right about betting on V as the stock returned 11.1% since the end of March (through 6/11) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.