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The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 817 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of September 30th, about a month before the elections. In this article we look at what those investors think of Aramark (NYSE:ARMK).
Is ARMK a good stock to buy now? Hedge funds were getting more optimistic. The number of long hedge fund bets improved by 6 recently. Aramark (NYSE:ARMK) was in 40 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistic is 53. Our calculations also showed that ARMK isn't among the 30 most popular stocks among hedge funds (click for Q3 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.
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 66 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 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Eric Mandelblatt of Soroban Capital Partners
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy to pick the best large-cap stocks to buy. 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. With all of this in mind we're going to take a look at the key hedge fund action encompassing Aramark (NYSE:ARMK).
Do Hedge Funds Think ARMK Is A Good Stock To Buy Now?
At third quarter's end, a total of 40 of the hedge funds tracked by Insider Monkey were long this stock, a change of 18% from the second quarter of 2020. Below, you can check out the change in hedge fund sentiment towards ARMK over the last 21 quarters. With the smart money's sentiment swirling, there exists an "upper tier" of notable hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).
More specifically, Kensico Capital was the largest shareholder of Aramark (NYSE:ARMK), with a stake worth $160.4 million reported as of the end of September. Trailing Kensico Capital was King Street Capital, which amassed a stake valued at $129.7 million. Soroban Capital Partners, Permian Investment Partners, and Mantle Ridge LP 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 Mantle Ridge LP allocated the biggest weight to Aramark (NYSE:ARMK), around 100% of its 13F portfolio. Permian Investment Partners is also relatively very bullish on the stock, dishing out 16.29 percent of its 13F equity portfolio to ARMK.
With a general bullishness amongst the heavyweights, key hedge funds were breaking ground themselves. Soroban Capital Partners, managed by Eric W. Mandelblatt and Gaurav Kapadia, initiated the biggest position in Aramark (NYSE:ARMK). Soroban Capital Partners had $96.5 million invested in the company at the end of the quarter. James Dinan's York Capital Management also made a $24.3 million investment in the stock during the quarter. The other funds with brand new ARMK positions are Robert Pohly's Samlyn Capital, Malcolm Levine's Dendur Capital, and Mark Kingdon's Kingdon Capital.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Aramark (NYSE:ARMK) but similarly valued. We will take a look at HD Supply Holdings Inc (NASDAQ:HDS), Carlisle Companies, Inc. (NYSE:CSL), GrubHub Inc (NYSE:GRUB), Lamar Advertising Company (REIT) (NASDAQ:LAMR), Dolby Laboratories, Inc. (NYSE:DLB), Novavax, Inc. (NASDAQ:NVAX), and Ionis Pharmaceuticals, Inc. (NASDAQ:IONS). All of these stocks' market caps are closest to ARMK's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HDS,41,1195088,-3 CSL,28,191780,-10 GRUB,49,1607648,-3 LAMR,37,380864,-7 DLB,35,596301,7 NVAX,36,611401,18 IONS,25,312130,2 Average,35.9,699316,0.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 35.9 hedge funds with bullish positions and the average amount invested in these stocks was $699 million. That figure was $881 million in ARMK's case. GrubHub Inc (NYSE:GRUB) is the most popular stock in this table. On the other hand Ionis Pharmaceuticals, Inc. (NASDAQ:IONS) is the least popular one with only 25 bullish hedge fund positions. Aramark (NYSE:ARMK) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ARMK is 63.9. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. Hedge funds were also right about betting on ARMK as the stock returned 41.2% since the end of Q3 (through 12/14) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.