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Hedge Funds Have Never Been This Bullish On The Walt Disney Company (DIS)

Is The Walt Disney Company (NYSE:DIS) a good equity to bet on right now? We know coronavirus is probably the #1 concern in your mind right now. It should be. We estimate that COVID-19 will kill around 5 million people worldwide and there is actually a 3.3% probability that president Donald Trump will die from the new coronavirus (see the details). Coronavirus will probably cause a short recession and then things will get back to business as usual. That’s why we believe you should use this opportunity to identify the best stocks to invest for the future and add them to your portfolio at increasingly attractive prices. How do we find high quality stocks? We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Is The Walt Disney Company (NYSE:DIS) a safe investment right now? Investors who are in the know are taking a bullish view. The number of long hedge fund bets advanced by 3 in recent months. Our calculations also showed that DIS now ranks 12th among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

In today’s marketplace there are many indicators stock traders use to grade publicly traded companies. A couple of the less known indicators are hedge fund and insider trading signals. We have shown that, historically, those who follow the best picks of the best money managers can outpace the broader indices by a superb margin (see the details here).

Frank Brosens Taconic Capital

Frank Brosens of Taconic Capital

We leave no stone unturned when looking for the next great investment idea. For example this gold mining company is acquiring gold mines in Americas at a fraction of the cost of drilling them, so we look into its viability. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. In January, we recommended a long position in one of the most shorted stocks in the market, and that stock returned nearly 50% despite the large losses in the market since our recommendation. Now we’re going to take a look at the key hedge fund action encompassing The Walt Disney Company (NYSE:DIS).

How are hedge funds trading The Walt Disney Company (NYSE:DIS)?

At Q4’s end, a total of 118 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 3% from one quarter earlier. On the other hand, there were a total of 71 hedge funds with a bullish position in DIS a year ago. With hedge funds’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).

More specifically, Citadel Investment Group was the largest shareholder of The Walt Disney Company (NYSE:DIS), with a stake worth $558.7 million reported as of the end of September. Trailing Citadel Investment Group was Yacktman Asset Management, which amassed a stake valued at $547.7 million. Diamond Hill Capital, Anchorage Advisors, and D E Shaw 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 Anchorage Advisors allocated the biggest weight to The Walt Disney Company (NYSE:DIS), around 15.32% of its 13F portfolio. Park Presidio Capital is also relatively very bullish on the stock, setting aside 11.44 percent of its 13F equity portfolio to DIS.

Now, key hedge funds were leading the bulls’ herd. Whale Rock Capital Management, managed by Alex Sacerdote, assembled the most outsized position in The Walt Disney Company (NYSE:DIS). Whale Rock Capital Management had $239.3 million invested in the company at the end of the quarter. Frank Brosens’s Taconic Capital also made a $57.9 million investment in the stock during the quarter. The other funds with new positions in the stock are Louis Bacon’s Moore Global Investments, Gavin Baker’s Atreides Management, and Robert B. Gillam’s McKinley Capital Management.

Let’s go over hedge fund activity in other stocks similar to The Walt Disney Company (NYSE:DIS). These stocks are Intel Corporation (NASDAQ:INTC), Verizon Communications Inc. (NYSE:VZ), The Home Depot, Inc. (NYSE:HD), and The Coca-Cola Company (NYSE:KO). This group of stocks’ market values are closest to DIS’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
INTC 58 6147008 -6
VZ 65 1885232 1
HD 91 4996321 21
KO 51 23797078 -5
Average 66.25 9206410 2.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 66.25 hedge funds with bullish positions and the average amount invested in these stocks was $9206 million. That figure was $4968 million in DIS’s case. The Home Depot, Inc. (NYSE:HD) is the most popular stock in this table. On the other hand The Coca-Cola Company (NYSE:KO) is the least popular one with only 51 bullish hedge fund positions. Compared to these stocks The Walt Disney Company (NYSE:DIS) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks also gained 0.1% in 2020 through March 2nd and beat the market by 4.1 percentage points. Unfortunately DIS wasn’t nearly as successful as these 20 stocks and hedge funds that were betting on DIS were disappointed as the stock returned -17% during the first two months of 2020 (through March 2nd) 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 most of these stocks already outperformed the market in Q1.

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

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