Looking for high-potential stocks? Just follow the big players within the hedge fund industry! This is not an ad, but let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities. The Standard and Poor’s 500 Index returned approximately 5.2% in the 12 months ending October 30, with more than 51% of the stocks in the index failing to beat the benchmark. Therefore, the odds that one will pin down a ‘winner’ by randomly picking a stock are less than the odds in a fair coin-tossing game. Conversely, hedge funds’ 30 preferred S&P 500 stocks (as of September 2014) generated a return of 9.5% during the same 12-month period, while 63% of these stock picks outperformed the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering a 16-year period indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like Visa Inc (NYSE:V).
Visa Inc (NYSE:V) has seen an increase in hedge fund interest in recent months.
In the eyes of most traders, hedge funds are assumed to be worthless, old investment tools of yesteryear. While there are more than 8,000 funds trading at present, hedge fund experts at Insider Monkey look at the bigwigs of this group, about 700 funds. These investment experts handle the bulk of the hedge fund industry’s total asset base, and by watching their top stock picks, Insider Monkey has identified many investment strategies that have historically outstripped Mr. Market. Insider Monkey’s small-cap hedge fund strategy exceeded the S&P 500 index by 18 percentage points per year for a decade in back tests.
Keeping this in mind, we’re going to review the new action regarding Visa Inc (NYSE:V).
How have hedgies been trading Visa Inc (NYSE:V)?
At the end of the third quarter, a total of 102 of the hedge funds tracked by Insider Monkey were bullish on this stock, a rise of four from one quarter earlier. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were upping their holdings significantly.
Ken Fisher‘s Fisher Asset Management had the number one position in Visa Inc (NYSE:V), worth close to $1.02 billion, accounting for 2.1% of its total 13F portfolio. On Fisher Asset Management’s heels was Warren Buffett of Berkshire Hathaway, with a $688.6 million position; 0.5% of its 13F portfolio was allocated to the position. Remaining members of the smart money that held long positions encompass Stephen Mandel’s Lone Pine Capital, Ken Griffin’s Citadel Investment Group, and John Armitage’s Egerton Capital Limited.
Now, key money managers have jumped into Visa Inc (NYSE:V) headfirst. Conatus Capital Management, managed by David Stemerman, established the most outsized position in Visa Inc (NYSE:V). Conatus Capital Management had $99.2 million invested in the company at the end of the quarter. Jacob Doft’s Highline Capital Management also initiated a $79.4 million position during the quarter. The following funds were also among the new Visa investors: Andrew Sandler’s Sandler Capital Management, and Ben Gambill’s Tiger Eye Capital.
Let’s check out hedge fund activity in other stocks similar to Visa Inc (NYSE:V). These stocks are Royal Dutch Shell plc (ADR) (NYSE:RDS.A), Citigroup Inc (NYSE:C), Chevron Corporation (NYSE:CVX), and The Home Depot, Inc. (NYSE:HD). All of these stocks’ market caps are similar to Visa’s.
|Ticker||No of HFs with positions||Total Value of HF Positions (x$1000)||Change in HF Position|
Sentiment for Visa was fairly strong among elite money managers during the turbulent third quarter, and prominent investors like Ken Fisher and Warren Buffett maintained huge positions in the stock. All of this points to the fact that Visa is the type of buy-and-hold investment that can withstand short-term fluctuations and will come out stronger in the long run.