Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the second quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of Wells Fargo & Company (NYSE: WFC) based on that data and determine whether they were really smart about the stock.
Wells Fargo & Company (NYSE: WFC) has seen an increase in support from the world’s most elite money managers recently. However, our calculations also showed that WFC isn’t 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). Video: Watch our video about the top 5 most popular hedge fund stocks.
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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 56 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Boykin Curry of Eagle Capital
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What have hedge funds been doing with Wells Fargo & Company (NYSE:WFC)?
At Q2’s end, a total of 86 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 13% from the first quarter of 2020. Below, you can check out the change in hedge fund sentiment towards WFC over the last 20 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Berkshire Hathaway, managed by Warren Buffett, holds the largest position in Wells Fargo & Company (NYSE:WFC). Berkshire Hathaway has a $6.0821 billion position in the stock, comprising 3% of its 13F portfolio. Sitting at the No. 2 spot is Boykin Curry of Eagle Capital Management, with a $760.9 million position; the fund has 2.8% of its 13F portfolio invested in the stock. Some other professional money managers that hold long positions comprise D. E. Shaw’s D E Shaw, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and Richard S. Pzena’s Pzena Investment Management. In terms of the portfolio weights assigned to each position Magnolia Capital Fund allocated the biggest weight to Wells Fargo & Company (NYSE:WFC), around 25% of its 13F portfolio. Theleme Partners is also relatively very bullish on the stock, earmarking 12.87 percent of its 13F equity portfolio to WFC.
As industrywide interest jumped, key money managers were breaking ground themselves. Duquesne Capital, managed by Stanley Druckenmiller, initiated the most outsized position in Wells Fargo & Company (NYSE:WFC). Duquesne Capital had $39.6 million invested in the company at the end of the quarter. Brian J. Higgins’s King Street Capital also initiated a $34.6 million position during the quarter. The other funds with new positions in the stock are Brandon Haley’s Holocene Advisors, George Soros’s Soros Fund Management, and Quincy Lee’s Ancient Art (Teton Capital).
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Wells Fargo & Company (NYSE:WFC) but similarly valued. We will take a look at BHP Group (NYSE: BBL), The Boeing Company (NYSE: BA), PetroChina Company Limited (NYSE: PTR), Pinduoduo Inc. (NASDAQ: PDD), QUALCOMM, Incorporated (NASDAQ: QCOM), Lockheed Martin Corporation (NYSE: LMT), and GlaxoSmithKline plc (NYSE: GSK). This group of stocks’ market caps resemble WFC’s market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BBL,22,919411,1 BA,39,1280437,-15 PTR,6,63660,-1 PDD,30,4149572,2 QCOM,74,2202796,14 LMT,53,1553657,-2 GSK,28,2068711,1 Average,36,1748321,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 36 hedge funds with bullish positions and the average amount invested in these stocks was $1748 million. That figure was $10345 million in WFC’s case. QUALCOMM, Incorporated (NASDAQ: QCOM) is the most popular stock in this table. On the other hand PetroChina Company Limited (NYSE: PTR) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Wells Fargo & Company (NYSE:WFC) is more popular among hedge funds. Our overall hedge fund sentiment score for WFC is 84.8. 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. 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 28.2% in 2020 through August 24th and still beat the market by 20.6 percentage points. Unfortunately WFC wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on WFC were disappointed as the stock returned -3.9% since the end of the second quarter 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 most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.