Where Do Hedge Funds Stand On Johnson Controls International plc (JCI)

While the market driven by short-term sentiment influenced by the accommodative interest rate environment in the US, virus news and stimulus spending, many smart money investors are starting to get cautious towards the current bull run since March, 2020 and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Johnson Controls International plc (NYSE:JCI).

Is Johnson Controls International plc (NYSE:JCI) a healthy stock for your portfolio? The best stock pickers were taking a pessimistic view. The number of bullish hedge fund bets fell by 2 in recent months. Johnson Controls International plc (NYSE:JCI) was in 39 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 55. Our calculations also showed that JCI isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 79 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Rick Gerson

Richard Gerson of Falcon Edge Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, we like undervalued, EBITDA-positive growth stocks, so we are checking out stock pitches like this emerging biotech stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Now we’re going to take a glance at the new hedge fund action encompassing Johnson Controls International plc (NYSE:JCI).

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

At second quarter’s end, a total of 39 of the hedge funds tracked by Insider Monkey were long this stock, a change of -5% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in JCI over the last 24 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Johnson Controls International plc (NYSE:JCI) was held by Citadel Investment Group, which reported holding $248.3 million worth of stock at the end of June. It was followed by Holocene Advisors with a $200.7 million position. Other investors bullish on the company included Millennium Management, Adage Capital Management, and Balyasny Asset Management. In terms of the portfolio weights assigned to each position Falcon Edge Capital allocated the biggest weight to Johnson Controls International plc (NYSE:JCI), around 2.54% of its 13F portfolio. Cartenna Capital is also relatively very bullish on the stock, designating 2.16 percent of its 13F equity portfolio to JCI.

Since Johnson Controls International plc (NYSE:JCI) has witnessed bearish sentiment from hedge fund managers, we can see that there exists a select few fund managers who were dropping their entire stakes last quarter. At the top of the heap, Anand Parekh’s Alyeska Investment Group sold off the largest stake of the “upper crust” of funds followed by Insider Monkey, totaling an estimated $6.1 million in stock. Kamyar Khajavi’s fund, MIK Capital, also said goodbye to its stock, about $5.1 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest dropped by 2 funds last quarter.

Let’s now review hedge fund activity in other stocks similar to Johnson Controls International plc (NYSE:JCI). We will take a look at EOG Resources Inc (NYSE:EOG), TC Energy Corporation (NYSE:TRP), Align Technology, Inc. (NASDAQ:ALGN), Monster Beverage Corp (NASDAQ:MNST), eBay Inc (NASDAQ:EBAY), Marvell Technology, Inc. (NASDAQ:MRVL), and Vodafone Group Plc (NASDAQ:VOD). All of these stocks’ market caps match JCI’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
EOG 35 411137 5
TRP 22 118166 -3
ALGN 57 2689837 8
MNST 46 2310929 1
EBAY 39 3126079 -12
MRVL 51 1390237 18
VOD 17 703238 0
Average 38.1 1535660 2.4

View table here if you experience formatting issues.

As you can see these stocks had an average of 38.1 hedge funds with bullish positions and the average amount invested in these stocks was $1536 million. That figure was $1270 million in JCI’s case. Align Technology, Inc. (NASDAQ:ALGN) is the most popular stock in this table. On the other hand Vodafone Group Plc (NASDAQ:VOD) is the least popular one with only 17 bullish hedge fund positions. Johnson Controls International plc (NYSE:JCI) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for JCI is 51.8. 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. 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 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 21.8% in 2021 through October 11th and beat the market again by 4.4 percentage points. Unfortunately JCI wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on JCI were disappointed as the stock returned 0.6% since the end of June (through 10/11) 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 many of these stocks already outperformed the market since 2019.

Follow Johnson Controls Inc (Old Filings) (NYSE:JCI)

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