Walt Disney lost considerable investor support from hedge funds and other parts of the investment community in recent months.
The operator of theme parks, resort hotels, cable and broadcasting networks, and movie studios was widely deemed to be highly vulnerable to the economic meltdown and sheltering-in-place orders resulting from the pandemic.
In the first quarter, Disney’s stock saw the largest net reduction in hedge fund investors among the most widely held stocks. Fifty-seven hedge funds liquidated their positions while 33 established new positions for a net decline of 24 hedge fund investors, according to Novus, the portfolio intelligence platform for institutional investors that compiles a comprehensive database of hedge fund stock ownership.
In addition, 18 more funds trimmed their stakes than those that added to their holdings.
Disney’s stock plunged nearly 40 percent from late February to late March, bottoming in the mid-$80s. Meanwhile, in May alone two investment banks downgraded their ratings on the stock, at least five firms reduced their price targets, according to marketbeat.com.
UBS, for example, which had a neutral rating on the stock and a $114 price target, warned clients that it is “bracing for a tough June quarter,” citing difficult trends ahead in parks and advertising. It also noted that Disney management is taking a prudent approach to cash flow.
As it turns out, investors who wound up buying the selloff have been rewarded greatly.
Shares of Disney have surged nearly 40 percent from their low and are now approaching most sell-side analyst price targets.
The company’s new Disney+ streaming service has been a beneficiary of the sheltering in place orders. In addition, its theme parks are starting to open their gates. Disney recently reopened Shanghai Disney Resort and Disney Springs in Orlando, which is essentially a huge outdoor shopping area.
And earlier this week the company submitted plans for reopening its Florida theme parks beginning July 11.
At around $118, the stock is now only about 14 percent below its earlier high.
Several hedge funds did initiate sizable positions in the first quarter. It is not publicly known what price they paid.
Dan Sundheim’s D1 Capital Partners was the second-biggest buyer of the stock in the first quarter, scooping up more than 6.5 million shares, according to its first-quarter 13F filing. Its total stake of 7.63 million shares ranks as the Tiger Grandcub’s sixth-largest U.S. long position.
Dan Loeb’s Third Point bought a new stake of 1.425 million shares in the first quarter — its biggest new position in the period . Meanwhile, Disney is the second largest U.S. long position of Samlyn Capital.
On the other hand, Disney was not a significant holding of any of the major hedge funds that liquidated their stakes in the first quarter.
They included Glenview Capital Management, which unloaded its entire stake of more than 2 million shares, and Millennium Management, which sold 1.24 million shares, which had amounted to a small part of its huge and highly diversified common stock portfolio.
