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

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. We are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article we look at how hedge funds traded JPMorgan Chase & Co. (NYSE:JPM) and determine whether the smart money was really smart about this stock.

JPMorgan Chase & Co. (NYSE:JPM) investors should pay attention to an increase in activity from the world’s largest hedge funds of late. Our calculations also showed that JPM ranked 15th among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks) ahead of other large banking stocks like Wells Fargo, Citigroup, and Bank of America.

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

To the average investor there are many signals investors use to appraise publicly traded companies. A duo of the most innovative signals are hedge fund and insider trading indicators. Our researchers have shown that, historically, those who follow the best picks of the elite investment managers can outpace their index-focused peers by a solid amount (see the details here).

Andreas Halvorsen

Andreas Halvorsen of Viking Global

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s take a look at the recent hedge fund action regarding JPMorgan Chase & Co. (NYSE:JPM).

What does smart money think about JPMorgan Chase & Co. (NYSE:JPM)?

At the end of the first quarter, a total of 112 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 14% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards JPM over the last 18 quarters. With the smart money’s capital changing hands, there exists an “upper tier” of notable hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).

Among these funds, Berkshire Hathaway held the most valuable stake in JPMorgan Chase & Co. (NYSE:JPM), which was worth $5196 million at the end of the third quarter. On the second spot was Fisher Asset Management which amassed $543.8 million worth of shares. Citadel Investment Group, Viking Global, and Gardner Russo & Gardner 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 Azora Capital allocated the biggest weight to JPMorgan Chase & Co. (NYSE:JPM), around 11.7% of its 13F portfolio. Brave Warrior Capital is also relatively very bullish on the stock, designating 9.9 percent of its 13F equity portfolio to JPM.

With a general bullishness amongst the heavyweights, key money managers have been driving this bullishness. Viking Global, managed by Andreas Halvorsen, initiated the largest position in JPMorgan Chase & Co. (NYSE:JPM). Viking Global had $367.8 million invested in the company at the end of the quarter. Renaissance Technologies also made a $150 million investment in the stock during the quarter. The other funds with brand new JPM positions are Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Louis Bacon’s Moore Global Investments, and Dmitry Balyasny’s Balyasny Asset Management.

Let’s now review hedge fund activity in other stocks similar to JPMorgan Chase & Co. (NYSE:JPM). We will take a look at The Procter & Gamble Company (NYSE:PG), Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM), Mastercard Incorporated (NYSE:MA), and UnitedHealth Group Inc. (NYSE:UNH). This group of stocks’ market caps resemble JPM’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PG 77 9519275 -2
TSM 54 4298613 -9
MA 139 11896575 14
UNH 104 6665163 13
Average 93.5 8094907 4

View table here if you experience formatting issues.

As you can see these stocks had an average of 93.5 hedge funds with bullish positions and the average amount invested in these stocks was $8095 million. That figure was $9731 million in JPM’s case. Mastercard Incorporated (NYSE:MA) is the most popular stock in this table. On the other hand Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM) is the least popular one with only 54 bullish hedge fund positions. JPMorgan Chase & Co. (NYSE:JPM) 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. 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 13.3% in 2020 through June 25th but beat the market by 16.8 percentage points. Unfortunately JPM wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on JPM were disappointed as the stock returned 9.9% during the same time period and underperformed the market. 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 many of these stocks already outperformed the market so far this year.

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