Were Hedge Funds Right About Dumping The Walt Disney Company (DIS)? (2024)

We at Insider Monkey have gone over 873 13F filings that hedge funds and prominent investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 30th. In this article, we look at what those funds think of The Walt Disney Company (NYSE:DIS) based on that data.

The Walt Disney Company (NYSE:DIS) was in 112 hedge funds’ portfolios at the end of June. The all time high for this statistic is 144. DIS has seen a decrease in enthusiasm from smart money in recent months. There were 134 hedge funds in our database with DIS positions at the end of the first quarter. Our calculations also showed that DIS ranked 14th among the 30 most popular stocks among hedge funds (click for Q2 rankings).

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 has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 79 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. Recently we came across a high growth stock that has tons of hidden assets and is trading at an extremely cheap valuation.We go through lists like the 10best growth stocks to buyto 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 onour homepage. Keeping this in mind we’re going to check out the key hedge fund action surrounding The Walt Disney Company (NYSE:DIS).

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

At the end of June, a total of 112 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -16% from the first quarter of 2020. On the other hand, there were a total of 105 hedge funds with a bullish position in DIS a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Fisher Asset Management held the most valuable stake in The Walt Disney Company (NYSE:DIS), which was worth $1885.2 million at the end of the second quarter. On the second spot was Coatue Management which amassed $1031.4 million worth of shares. Citadel Investment Group, Matrix Capital Management, and Third Point 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 23.83% of its 13F portfolio. Yost Capital Management is also relatively very bullish on the stock, setting aside 11.37 percent of its 13F equity portfolio to DIS.

Judging by the fact that The Walt Disney Company (NYSE:DIS) has experienced falling interest from the entirety of the hedge funds we track, it’s safe to say that there were a few money managers who were dropping their entire stakes in the second quarter. Intriguingly, Alex Sacerdote’s Whale Rock Capital Management dropped the biggest stake of the 750 funds tracked by Insider Monkey, comprising an estimated $367.9 million in stock. Aaron Cowen’s fund, Suvretta Capital Management, also sold off its stock, about $211.6 million worth. These transactions are intriguing to say the least, as total hedge fund interest was cut by 22 funds in the second quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as The Walt Disney Company (NYSE:DIS) but similarly valued. We will take a look at ASML Holding N.V. (NASDAQ:ASML), Adobe Inc. (NASDAQ:ADBE), Exxon Mobil Corporation (NYSE:XOM), Comcast Corporation (NASDAQ:CMCSA), Toyota Motor Corporation (NYSE:TM), NIKE, Inc. (NYSE:NKE), and Netflix, Inc. (NASDAQ:NFLX). This group of stocks’ market values match DIS’s market value.

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As you can see these stocks had an average of 68.1 hedge funds with bullish positions and the average amount invested in these stocks was $7281 million. That figure was $10830 million in DIS’s case. Netflix, Inc. (NASDAQ:NFLX) is the most popular stock in this table. On the other hand Toyota Motor Corporation (NYSE:TM) is the least popular one with only 12 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 86.8. 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 26.3% in 2021 through October 29th and beat the market again by 2.3 percentage points. Unfortunately DIS wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on DIS were disappointed as the stock returned -3.8% since the end of June (through 10/29) 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.

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