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Is Johnson Controls International plc (JCI) A Good Stock To Buy?

We at Insider Monkey have gone over 730 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 June 28th. In this article, we look at what those funds think of Johnson Controls International plc (NYSE:JCI) based on that data.

Johnson Controls International plc (NYSE:JCI) has experienced a decrease in enthusiasm from smart money recently. JCI was in 18 hedge funds’ portfolios at the end of the second quarter of 2019. There were 25 hedge funds in our database with JCI positions at the end of the previous quarter. Our calculations also showed that JCI isn’t among the 30 most popular stocks among hedge funds (see the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

JCI_oct2019

Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to take a peek at the key hedge fund action encompassing Johnson Controls International plc (NYSE:JCI).

How have hedgies been trading Johnson Controls International plc (NYSE:JCI)?

At Q2’s end, a total of 18 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -28% from one quarter earlier. By comparison, 11 hedge funds held shares or bullish call options in JCI a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).

Jeremy Mindich - Scopia Capital

Among these funds, Scopia Capital held the most valuable stake in Johnson Controls International plc (NYSE:JCI), which was worth $165.7 million at the end of the second quarter. On the second spot was Diamond Hill Capital which amassed $103.9 million worth of shares. Moreover, D E Shaw, Adage Capital Management, and GAMCO Investors were also bullish on Johnson Controls International plc (NYSE:JCI), allocating a large percentage of their portfolios to this stock.

Seeing as Johnson Controls International plc (NYSE:JCI) has witnessed declining sentiment from the smart money, it’s safe to say that there were a few hedge funds who sold off their full holdings in the second quarter. Intriguingly, Alexander Mitchell’s Scopus Asset Management cut the biggest position of all the hedgies tracked by Insider Monkey, comprising about $28.1 million in stock, and Steve Cohen’s Point72 Asset Management was right behind this move, as the fund said goodbye to about $18.1 million worth. These bearish behaviors are important to note, as total hedge fund interest dropped by 7 funds in the second quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Johnson Controls International plc (NYSE:JCI). We will take a look at BB&T Corporation (NYSE:BBT), Autodesk, Inc. (NASDAQ:ADSK), The Kraft Heinz Company (NASDAQ:KHC), and Ecopetrol S.A. (NYSE:EC). This group of stocks’ market values are similar to JCI’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BBT 23 352478 -7
ADSK 56 3385274 -1
KHC 34 10579951 5
EC 10 189695 -5
Average 30.75 3626850 -2

View table here if you experience formatting issues.

As you can see these stocks had an average of 30.75 hedge funds with bullish positions and the average amount invested in these stocks was $3627 million. That figure was $635 million in JCI’s case. Autodesk, Inc. (NASDAQ:ADSK) is the most popular stock in this table. On the other hand Ecopetrol S.A. (NYSE:EC) is the least popular one with only 10 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 calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on JCI as the stock returned 6.9% during the same time frame and outperformed the market by an even larger margin.

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

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