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Hedge Funds Took Refuge In Walmart Inc. (WMT) During The Crash

We at Insider Monkey have gone over 821 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, near the height of the coronavirus market crash. In this article, we look at what those funds think of Walmart Inc. (NYSE:WMT) based on that data.

Walmart Inc. (NYSE:WMT) shareholders have witnessed an increase in support from the world’s most elite money managers recently. Our calculations also showed that WMT isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.

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 44 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.

John Overdeck of Two Sigma

John Overdeck of Two Sigma Advisors

At Insider Monkey we leave no stone unturned when looking for the next great investment idea.  For example, we are still not out of the woods in terms of the coronavirus pandemic. So, we checked out this analyst’s “corona catalyst plays“. We interview hedge fund managers and ask them about best ideas. You can watch our latest hedge fund manager interview here and find out the name of the large-cap healthcare stock that Sio Capital’s Michael Castor expects to double. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to analyze the latest hedge fund action surrounding Walmart Inc. (NYSE:WMT).

What does smart money think about Walmart Inc. (NYSE:WMT)?

Heading into the second quarter of 2020, a total of 55 of the hedge funds tracked by Insider Monkey were long this stock, a change of 6% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards WMT over the last 18 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is WMT A Good Stock To Buy?

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Bill & Melinda Gates Foundation Trust, managed by Michael Larson, holds the number one position in Walmart Inc. (NYSE:WMT). Bill & Melinda Gates Foundation Trust has a $1.3183 billion position in the stock, comprising 7.6% of its 13F portfolio. Sitting at the No. 2 spot is Ken Fisher of Fisher Asset Management, with a $1.2211 billion position; the fund has 1.5% of its 13F portfolio invested in the stock. Other professional money managers with similar optimism encompass Renaissance Technologies, 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 Bill & Melinda Gates Foundation Trust allocated the biggest weight to Walmart Inc. (NYSE:WMT), around 7.6% of its 13F portfolio. Pittencrieff Partners – Gabalex Capital is also relatively very bullish on the stock, dishing out 7.14 percent of its 13F equity portfolio to WMT.

With a general bullishness amongst the heavyweights, specific money managers were breaking ground themselves. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, created the most outsized position in Walmart Inc. (NYSE:WMT). Arrowstreet Capital had $85.6 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also initiated a $18.3 million position during the quarter. The other funds with new positions in the stock are Anand Parekh’s Alyeska Investment Group, Doug Gordon, Jon Hilsabeck and Don Jabro’s Shellback Capital, and John Overdeck and David Siegel’s Two Sigma Advisors.

Let’s go over hedge fund activity in other stocks similar to Walmart Inc. (NYSE:WMT). These stocks are JPMorgan Chase & Co. (NYSE:JPM), The Procter & Gamble Company (NYSE:PG), Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM), and Mastercard Incorporated (NYSE:MA). This group of stocks’ market valuations match WMT’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
JPM 112 9730557 14
PG 77 9519275 -2
TSM 54 4298613 -9
MA 139 11896575 14
Average 95.5 8861255 4.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 95.5 hedge funds with bullish positions and the average amount invested in these stocks was $8861 million. That figure was $4887 million in WMT’s case. Mastercard Incorporated (NYSE:MA) is the most popular stock in this table. On the other hand Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM) is the least popular one with only 54 bullish hedge fund positions. Walmart Inc. (NYSE:WMT) 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. 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 7.9% in 2020 through May 22nd and surpassed the market by 15.6 percentage points. Unfortunately WMT wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); WMT investors were disappointed as the stock returned 9.9% during the second quarter 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 most of these stocks already outperformed the market in 2020.

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