Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Johnson Controls International plc (NYSE:JCI).
Johnson Controls International plc (NYSE:JCI) has seen an increase in activity from the world’s largest hedge funds of late. Johnson Controls International plc (NYSE:JCI) was in 41 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 55. There were 34 hedge funds in our database with JCI positions at the end of the fourth quarter. Our calculations also showed that JCI isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Louis Bacon Moore of Moore Capital
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation, which is why we are checking out this inflation play. We go through lists like 10 best gold stocks to buy to identify promising stocks. 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. Now we’re going to take a look at the recent hedge fund action regarding Johnson Controls International plc (NYSE:JCI).
Do Hedge Funds Think JCI Is A Good Stock To Buy Now?
At the end of the first quarter, a total of 41 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 21% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in JCI over the last 23 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.
When looking at the institutional investors followed by Insider Monkey, Citadel Investment Group, managed by Ken Griffin, holds the number one position in Johnson Controls International plc (NYSE:JCI). Citadel Investment Group has a $242.8 million position in the stock, comprising 0.1% of its 13F portfolio. The second largest stake is held by Holocene Advisors, managed by Brandon Haley, which holds a $183.8 million position; 1.2% of its 13F portfolio is allocated to the stock. Some other hedge funds and institutional investors that are bullish comprise Israel Englander’s Millennium Management, Cliff Asness’s AQR Capital Management and Phill Gross and Robert Atchinson’s Adage Capital Management. In terms of the portfolio weights assigned to each position MIK Capital allocated the biggest weight to Johnson Controls International plc (NYSE:JCI), around 1.87% of its 13F portfolio. Appian Way Asset Management is also relatively very bullish on the stock, dishing out 1.59 percent of its 13F equity portfolio to JCI.
As industrywide interest jumped, key money managers were leading the bulls’ herd. Moore Global Investments, managed by Louis Bacon, created the biggest position in Johnson Controls International plc (NYSE:JCI). Moore Global Investments had $47.9 million invested in the company at the end of the quarter. Ray Dalio’s Bridgewater Associates also initiated a $37.8 million position during the quarter. The following funds were also among the new JCI investors: Steve Cohen’s Point72 Asset Management, Alexander Mitchell’s Scopus Asset Management, and Richard SchimeláandáLawrence Sapanski’s Cinctive Capital Management.
Let’s now review hedge fund activity in other stocks similar to Johnson Controls International plc (NYSE:JCI). These stocks are Align Technology, Inc. (NASDAQ:ALGN), Ross Stores, Inc. (NASDAQ:ROST), Exelon Corporation (NASDAQ:EXC), TE Connectivity Ltd. (NYSE:TEL), Biogen Inc. (NASDAQ:BIIB), Palantir Technologies Inc. (NYSE:PLTR), and EOG Resources Inc (NYSE:EOG). This group of stocks’ market valuations are closest to JCI’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ALGN | 49 | 2831496 | -1 |
| ROST | 48 | 976585 | -9 |
| EXC | 44 | 1134135 | 14 |
| TEL | 39 | 2343917 | 0 |
| BIIB | 63 | 2481373 | 0 |
| PLTR | 32 | 1147240 | -6 |
| EOG | 30 | 596119 | -15 |
| Average | 43.6 | 1644409 | -2.4 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 43.6 hedge funds with bullish positions and the average amount invested in these stocks was $1644 million. That figure was $1024 million in JCI’s case. Biogen Inc. (NASDAQ:BIIB) is the most popular stock in this table. On the other hand EOG Resources Inc (NYSE:EOG) is the least popular one with only 30 bullish hedge fund positions. Johnson Controls International plc (NYSE:JCI) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for JCI is 49. 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 gained 17.4% in 2021 through June 18th and beat the market by 6.1 percentage points. A small number of hedge funds were also right about betting on JCI, though not to the same extent, as the stock returned 8.4% since the end of Q1 (through June 18th) and outperformed the market.
Follow Johnson Controls Inc (Old Filings) (NYSE:JCI)
Follow Johnson Controls Inc (Old Filings) (NYSE:JCI)
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Disclosure: None. This article was originally published at Insider Monkey.
