Were Hedge Funds Right About Betting On JPMorgan Chase & Co. (JPM)?

At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards JPMorgan Chase & Co. (NYSE:JPM).

Is JPMorgan Chase & Co. (NYSE:JPM) a bargain? Investors who are in the know were taking a bullish view. The number of bullish hedge fund bets improved by 11 in recent months. JPMorgan Chase & Co. (NYSE:JPM) was in 123 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 112. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that JPM ranks 12th among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). There were 112 hedge funds in our database with JPM positions at the end of the first quarter.

Video: Watch our video about the top 5 most popular hedge fund stocks.

In the eyes of most traders, hedge funds are assumed to be underperforming, outdated financial tools of the past. While there are greater than 8000 funds in operation at the moment, We look at the leaders of this club, about 850 funds. These money managers preside over most of the hedge fund industry’s total capital, and by tracking their top stock picks, Insider Monkey has brought to light various investment strategies that have historically exceeded Mr. Market. Insider Monkey’s flagship short hedge fund strategy defeated the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than quadrupled this year. We are trying to identify other EV revolution winners, so we are checking out this under-the-radar lithium stock. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. Keeping this in mind let’s take a peek at the recent hedge fund action regarding JPMorgan Chase & Co. (NYSE:JPM).

Hedge fund activity in JPMorgan Chase & Co. (NYSE:JPM)

At Q2’s end, a total of 123 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 10% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards JPM over the last 20 quarters. With hedge funds’ sentiment swirling, there exists a select group of notable hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).

Among these funds, Berkshire Hathaway held the most valuable stake in JPMorgan Chase & Co. (NYSE:JPM), which was worth $2088.9 million at the end of the third quarter. On the second spot was Viking Global which amassed $603.1 million worth of shares. Fisher Asset Management, D1 Capital Partners, and D E Shaw were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Brave Warrior Capital allocated the biggest weight to JPMorgan Chase & Co. (NYSE:JPM), around 9.31% of its 13F portfolio. Hi-Line Capital Management is also relatively very bullish on the stock, dishing out 7.02 percent of its 13F equity portfolio to JPM.

As aggregate interest increased, key hedge funds have been driving this bullishness. D1 Capital Partners, managed by Daniel Sundheim, assembled the most valuable position in JPMorgan Chase & Co. (NYSE:JPM). D1 Capital Partners had $580.4 million invested in the company at the end of the quarter. Stanley Druckenmiller’s Duquesne Capital also made a $151.6 million investment in the stock during the quarter. The other funds with new positions in the stock are Clint Carlson’s Carlson Capital, Paul Marshall and Ian Wace’s Marshall Wace LLP, and Keith Meister’s Corvex Capital.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as JPMorgan Chase & Co. (NYSE:JPM) but similarly valued. These stocks are UnitedHealth Group Inc. (NYSE:UNH), The Home Depot, Inc. (NYSE:HD), Intel Corporation (NASDAQ:INTC), NVIDIA Corporation (NASDAQ:NVDA), Verizon Communications Inc. (NYSE:VZ), AT&T Inc. (NYSE:T), and Adobe Inc. (NASDAQ:ADBE). This group of stocks’ market caps are closest to JPM’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 82.9 hedge funds with bullish positions and the average amount invested in these stocks was $5612 million. That figure was $8732 million in JPM’s case. Adobe Inc. (NASDAQ:ADBE) is the most popular stock in this table. On the other hand AT&T Inc. (NYSE:T) is the least popular one with only 57 bullish hedge fund positions. Compared to these stocks JPMorgan Chase & Co. (NYSE:JPM) is more popular among hedge funds. Our overall hedge fund sentiment score for JPM is 94.5. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 29.2% in 2020 through October 16th and still beat the market by 19.7 percentage points. Unfortunately JPM wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on JPM were slightly disappointed as the stock returned 10% since the end of the second quarter (through 10/16) and underperformed the market by a small margin. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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