Is Walmart Inc. (WMT) A Good Stock To Buy According To Hedge Funds?

Billionaire hedge fund managers such as Steve Cohen and Stan Druckenmiller can generate millions or even billions of dollars every year by pinning down high-potential small-cap stocks and pouring cash into these candidates. Small-cap stocks are overlooked by most investors, brokerage houses, and financial services hubs, while the unlimited research abilities of the big players within the hedge fund industry can easily identify the undervalued and high-potential stocks that reside the ignored corners of equity markets. There are numerous small-cap stocks that have turned out to be great winners, which is one of the main reasons the Insider Monkey team pays close attention to the hedge fund activity in relation to these stocks.

Is Walmart Inc. (NYSE:WMT) a superb investment today? Money managers are betting on the stock. The number of bullish hedge fund positions advanced by 8 in recent months. Our calculations also showed that WMT isn’t among the 30 most popular stocks among hedge funds.

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 the 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 market by 18 percentage points since May 2014 through December 3, 2018 (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.


Let’s take a gander at the key hedge fund action regarding Walmart Inc. (NYSE:WMT).

What have hedge funds been doing with Walmart Inc. (NYSE:WMT)?

Heading into the fourth quarter of 2018, a total of 60 of the hedge funds tracked by Insider Monkey were long this stock, a change of 15% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards WMT over the last 13 quarters. With hedgies’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were upping their stakes substantially (or already accumulated large positions).


Of the funds tracked 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 $1.09 billion position in the stock, comprising 4.2% of its 13F portfolio. The second largest stake is held by Fisher Asset Management, managed by Ken Fisher, which holds a $932.7 million position; the fund has 1.1% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors that are bullish encompass Cliff Asness’s AQR Capital Management, Phill Gross and Robert Atchinson’s Adage Capital Management and Richard S. Pzena’s Pzena Investment Management.

Now, some big names were leading the bulls’ herd. Masters Capital Management, managed by Mike Masters, assembled the biggest call position in Walmart Inc. (NYSE:WMT). Masters Capital Management had $187.8 million invested in the company at the end of the quarter. Brandon Haley’s Holocene Advisors also made a $126.5 million investment in the stock during the quarter. The other funds with new positions in the stock are Steve Cohen’s Point72 Asset Management, Israel Englander’s Millennium Management, and Larry Foley and Paul Farrell’s Bronson Point Partners.

Let’s go over hedge fund activity in other stocks similar to Walmart Inc. (NYSE:WMT). We will take a look at Pfizer Inc. (NYSE:PFE), UnitedHealth Group Inc. (NYSE:UNH), Nestlé S.A. (OTCMKTS:NSRGY), and Wells Fargo & Company (NYSE:WFC). This group of stocks’ market valuations resemble WMT’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PFE 58 4303936 10
UNH 71 6422611 3
NSRGY 5 1575298 0
WFC 79 29963465 6
Average 53.25 10566 4.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 53.25 hedge funds with bullish positions and the average amount invested in these stocks was $10.57 billion. That figure was $4.72 billion in WMT’s case. Wells Fargo & Company (NYSE:WFC) is the most popular stock in this table. On the other hand Nestle SA Reg Shs. Ser. B Spons (OTCMKTS:NSRGY) is the least popular one with only 5 bullish hedge fund positions. Walmart Inc. (NYSE:WMT) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard WFC might be a better candidate to consider a long position.

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