Were Hedge Funds Right About The Walt Disney Company (DIS)?

Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 900 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about The Walt Disney Company (NYSE:DIS).

The Walt Disney Company (NYSE:DIS) investors should pay attention to an increase in hedge fund sentiment in recent months. The Walt Disney Company (NYSE:DIS) was in 144 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic was previously 118. This means the bullish number of hedge fund positions in this stock reached a brand new all time high. There were 112 hedge funds in our database with DIS holdings at the end of September. Our calculations also showed that DIS ranked 11th among the 30 most popular stocks among hedge funds (click for Q4 rankings).

James Dinan of York Capital Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the CBD market is growing at a 33% annualized rate, so we are taking a closer look at this under-the-radar hemp stock. We go through lists like the 10 best biotech stocks under $10 to identify the next stock with 10x upside potential. 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. Keeping this in mind let’s take a gander at the key hedge fund action encompassing The Walt Disney Company (NYSE:DIS).

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

At the end of December, a total of 144 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 29% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in DIS over the last 22 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Coatue Management was the largest shareholder of The Walt Disney Company (NYSE:DIS), with a stake worth $2003.2 million reported as of the end of December. Trailing Coatue Management was Fisher Asset Management, which amassed a stake valued at $1791.6 million. D E Shaw, Third Point, and Eagle Capital Management 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 Fosse Capital Partners allocated the biggest weight to The Walt Disney Company (NYSE:DIS), around 21.38% of its 13F portfolio. Yost Capital Management is also relatively very bullish on the stock, dishing out 21.17 percent of its 13F equity portfolio to DIS.

With a general bullishness amongst the heavyweights, key money managers have jumped into The Walt Disney Company (NYSE:DIS) headfirst. Viking Global, managed by Andreas Halvorsen, established the most valuable position in The Walt Disney Company (NYSE:DIS). Viking Global had $773.9 million invested in the company at the end of the quarter. Alex Sacerdote’s Whale Rock Capital Management also initiated a $542.5 million position during the quarter. The other funds with brand new DIS
positions are Josh Resnick’s Jericho Capital Asset Management, Dmitry Balyasny’s Balyasny Asset Management, and Alexander Mitchell’s Scopus Asset Management.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as The Walt Disney Company (NYSE:DIS) but similarly valued. These stocks are NVIDIA Corporation (NASDAQ:NVDA), The Home Depot, Inc. (NYSE:HD), Paypal Holdings Inc (NASDAQ:PYPL), Bank of America Corporation (NYSE:BAC), Verizon Communications Inc. (NYSE:VZ), Adobe Inc. (NASDAQ:ADBE), and Comcast Corporation (NASDAQ:CMCSA). This group of stocks’ market caps are similar to DIS’s market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NVDA,88,8692203,6 HD,79,4924208,6 PYPL,147,15961182,-3 BAC,99,35340008,11 VZ,67,10502830,2 ADBE,114,11927730,8 CMCSA,84,8831767,2 Average,96.9,13739990,4.6 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 96.9 hedge funds with bullish positions and the average amount invested in these stocks was $13740 million. That figure was $16417 million in DIS’s case. Paypal Holdings Inc (NASDAQ:PYPL) is the most popular stock in this table. On the other hand Verizon Communications Inc. (NYSE:VZ) is the least popular one with only 67 bullish hedge fund positions. The Walt Disney Company (NYSE:DIS) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for DIS is 95. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.3% in 2021 through April 19th and beat the market again by 0.9 percentage points. Unfortunately DIS wasn’t nearly as successful as these 30 stocks and hedge funds that were betting on DIS were disappointed as the stock returned 3.4% since the end of December (through 4/19) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the more diversified list of the top 30 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.