Is Johnson Controls, Inc. (JCI) A Good Stock To Buy?

Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track more than 700 prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile gigantic failures like hedge funds’ recent losses in Valeant. Let’s take a closer look at what the funds we track think about Johnson Controls, Inc. (NYSE:JCI) in this article.

Is Johnson Controls, Inc. (NYSE:JCI) a bargain? The smart money is taking a pessimistic view. The number of bullish hedge fund bets dropped by 9 recently. At the end of this article we will also compare JCI to other stocks including DISH Network Corp. (NASDAQ:DISH), Banco Bradesco SA (ADR) (NYSE:BBD), and Imperial Oil Limited (USA) (NYSEAMEX:IMO) to get a better sense of its popularity.

Follow Johnson Controls Inc (Old Filings) (NYSE:JCI)

Now, we’re going to go over the new action surrounding Johnson Controls, Inc. (NYSE:JCI).

How are hedge funds trading Johnson Controls, Inc. (NYSE:JCI)?

Heading into Q4, a total of 32 of the hedge funds tracked by Insider Monkey were bullish in this stock, a change of -22% from the second quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were upping their holdings considerably (or already accumulated large positions).

According to publicly available hedge fund holdings data compiled by Insider Monkey, Edinburgh Partners, managed by Sandy Nairn, holds the most valuable position in Johnson Controls, Inc. (NYSE:JCI). Edinburgh Partners has a $78.5 million position in the stock, comprising 8.3% of its 13F portfolio. The second most bullish hedge fund manager is D E Shaw, managed by D. E. Shaw, which held a $62.5 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Remaining peers that hold long positions contain Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, John Overdeck and David Siegel’s Two Sigma Advisors and Cliff Asness’s AQR Capital Management.

Judging by the fact that Johnson Controls, Inc. (NYSE:JCI) has witnessed falling interest from the entirety of the hedge funds we track, logic holds that there exists a select few funds who were dropping their positions entirely last quarter. Interestingly, Barry Rosenstein’s JANA Partners sold off the largest stake of the “upper crust” of funds monitored by Insider Monkey, worth an estimated $497.1 million in stock. Doug Gordon, Jon Hilsabeck and Don Jabro’s fund, Shellback Capital, also dropped its stock, about $13.8 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest was cut by 9 funds last quarter.

Let’s check out hedge fund activity in other stocks similar to Johnson Controls, Inc. (NYSE:JCI). We will take a look at DISH Network Corp. (NASDAQ:DISH), Banco Bradesco SA (ADR) (NYSE:BBD), Imperial Oil Limited (USA) (NYSEAMEX:IMO), and Humana Inc (NYSE:HUM). This group of stocks’ market values are closest to JCI’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
DISH 53 3089941 -15
BBD 11 146176 -4
IMO 9 76127 -2
HUM 56 4290176 -28

As you can see these stocks had an average of 32.25 hedge funds with bullish positions and the average amount invested in these stocks was $1,901 million.That figure was $478 millions in JCI’s case. Humana Inc (NYSE:HUM) is the most popular stock in this table. On the other hand Imperial Oil Limited (USA) (NYSEAMEX:IMO) is the least popular one with only 9 bullish hedge fund positions. Johnson Controls, Inc. (NYSE:JCI) 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. In this regard HUM might be a better candidate to consider a long position.