Was The Smart Money Right About Visa Inc (V)?

Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Visa Inc (NYSE:V).

Visa Inc (NYSE:V) investors should pay attention to a decrease in enthusiasm from smart money of late. Visa Inc (NYSE:V) was in 162 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 166. Our calculations also showed that V ranked #5 among the 30 most popular stocks among hedge funds (click for Q2 rankings).

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 79 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.

Now let’s take a glance at the recent hedge fund action regarding Visa Inc (NYSE:V).

Do Hedge Funds Think V Is A Good Stock To Buy Now?

Heading into the third quarter of 2021, a total of 162 of the hedge funds tracked by Insider Monkey were long this stock, a change of -1% from one quarter earlier. On the other hand, there were a total of 154 hedge funds with a bullish position in V a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Ken Fisher’s Fisher Asset Management has the largest position in Visa Inc (NYSE:V), worth close to $5.529 billion, amounting to 3.5% of its total 13F portfolio. The second most bullish fund manager is TCI Fund Management, led by Chris Hohn, holding a $3.287 billion position; the fund has 8.2% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors that are bullish encompass Warren Buffett’s Berkshire Hathaway, Terry Smith’s Fundsmith LLP and Charles Akre’s Akre Capital Management. In terms of the portfolio weights assigned to each position Truvvo Partners allocated the biggest weight to Visa Inc (NYSE:V), around 32.13% of its 13F portfolio. Hengistbury Investment Partners is also relatively very bullish on the stock, earmarking 25.01 percent of its 13F equity portfolio to V.

Due to the fact that Visa Inc (NYSE:V) has experienced a decline in interest from hedge fund managers, it’s easy to see that there lies a certain “tier” of hedge funds that slashed their full holdings in the second quarter. Interestingly, Bo Shan’s Gobi Capital cut the biggest investment of the “upper crust” of funds monitored by Insider Monkey, worth about $65.7 million in stock, and Peter Seuss’s Prana Capital Management was right behind this move, as the fund dumped about $47.6 million worth. These transactions are important to note, as total hedge fund interest was cut by 2 funds in the second quarter.

Let’s also examine hedge fund activity in other stocks similar to Visa Inc (NYSE:V). These stocks are NVIDIA Corporation (NASDAQ:NVDA), JPMorgan Chase & Co. (NYSE:JPM), Johnson & Johnson (NYSE:JNJ), Walmart Inc. (NYSE:WMT), UnitedHealth Group Inc. (NYSE:UNH), Mastercard Incorporated (NYSE:MA), and Bank of America Corporation (NYSE:BAC). All of these stocks’ market caps resemble V’s market cap.

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As you can see these stocks had an average of 100.1 hedge funds with bullish positions and the average amount invested in these stocks was $15127 million. That figure was $27610 million in V’s case. Mastercard Incorporated (NYSE:MA) is the most popular stock in this table. On the other hand Walmart Inc. (NYSE:WMT) is the least popular one with only 71 bullish hedge fund positions. Compared to these stocks Visa Inc (NYSE:V) is more popular among hedge funds. Our overall hedge fund sentiment score for V is 97.3. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 26.3% in 2021 through October 29th and still beat the market by 2.3 percentage points. Unfortunately V wasn’t nearly as successful as these 5 stocks and hedge funds that were betting on V were disappointed as the stock lost 9.3% since the end of the second quarter (through 10/29) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

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