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Hedge Funds (Except Buffett) Never Been Less Bullish On Bank of America (BAC)

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Stocks kept going up since then. In this article we look at how hedge funds traded Bank of America Corporation (NYSE:BAC) and determine whether the smart money was really smart about this stock.

Bank of America Corporation (NYSE:BAC) has experienced a decrease in hedge fund sentiment recently. The number of bullish hedge fund positions in BAC is at its all-time low in our database. Nevertheless BAC still managed to rank #29 among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

If you’d ask most stock holders, hedge funds are seen as underperforming, outdated investment vehicles of years past. While there are over 8000 funds trading at present, We hone in on the elite of this group, about 850 funds. These hedge fund managers preside over most of the smart money’s total asset base, and by tailing their inimitable picks, Insider Monkey has revealed a number of investment strategies that have historically outpaced the market. Insider Monkey’s flagship short hedge fund strategy outpaced the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Richard Pzena - Pzena Investment Management

Richard S. Pzena of Pzena Investment Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out ideas like this under-the-radar stock to identify the next tenbagger. Currently, investors are pessimistic about commercial real estate investments. So, we are checking out this contrarian play to diversify our market exposure. 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. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Now we’re going to take a look at the latest hedge fund action encompassing Bank of America Corporation (NYSE:BAC).

What does smart money think about Bank of America Corporation (NYSE:BAC)?

At the end of the second quarter, a total of 91 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -4% from one quarter earlier. On the other hand, there were a total of 94 hedge funds with a bullish position in BAC a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Berkshire Hathaway, managed by Warren Buffett, holds the largest position in Bank of America Corporation (NYSE:BAC). Berkshire Hathaway has a $21.969 billion position in the stock, comprising 10.9% of its 13F portfolio. The second most bullish fund manager is Ken Griffin of Citadel Investment Group, with a $295.8 million position; 0.1% of its 13F portfolio is allocated to the company. Other members of the smart money that hold long positions consist of Richard S. Pzena’s Pzena Investment Management, Phill Gross and Robert Atchinson’s Adage Capital Management and Robert Pitts’s Steadfast Capital Management. In terms of the portfolio weights assigned to each position Aquamarine Capital Management allocated the biggest weight to Bank of America Corporation (NYSE:BAC), around 13.28% of its 13F portfolio. Berkshire Hathaway is also relatively very bullish on the stock, setting aside 10.85 percent of its 13F equity portfolio to BAC.

Judging by the fact that Bank of America Corporation (NYSE:BAC) has witnessed declining sentiment from the aggregate hedge fund industry, we can see that there is a sect of money managers that elected to cut their entire stakes last quarter. Intriguingly, Ricky Sandler’s Eminence Capital said goodbye to the biggest stake of the “upper crust” of funds watched by Insider Monkey, comprising about $45.7 million in stock, and Daniel Sundheim’s D1 Capital Partners was right behind this move, as the fund dumped about $43.2 million worth. These bearish behaviors are important to note, as total hedge fund interest fell by 4 funds last quarter.

Let’s check out hedge fund activity in other stocks similar to Bank of America Corporation (NYSE:BAC). These stocks are Paypal Holdings Inc (NASDAQ:PYPL), The Walt Disney Company (NYSE:DIS), Tesla Inc. (NASDAQ:TSLA), Netflix, Inc. (NASDAQ:NFLX), Novartis AG (NYSE:NVS), Cisco Systems, Inc. (NASDAQ:CSCO), and Merck & Co., Inc. (NYSE:MRK). This group of stocks’ market caps are similar to BAC’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PYPL 144 11406883 26
DIS 105 6819839 3
TSLA 63 5560864 2
NFLX 113 13487546 4
NVS 21 1942870 -9
CSCO 59 2904558 1
MRK 76 4854278 -2
Average 83 6710977 3.6

View table here if you experience formatting issues.

As you can see these stocks had an average of 83 hedge funds with bullish positions and the average amount invested in these stocks was $6.7 billion. That figure was $24.4 billion in BAC’s case. Paypal Holdings Inc (NASDAQ:PYPL) is the most popular stock in this table. On the other hand Novartis AG (NYSE:NVS) is the least popular one with only 21 bullish hedge fund positions. Bank of America Corporation (NYSE:BAC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for BAC is 49.1. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 28.2% in 2020 through August 24th but beat the market by 20.6 percentage points. Unfortunately BAC wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on BAC were disappointed as the stock returned 8.2% 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 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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