We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn't mean that they don't have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Conagra Brands, Inc. (NYSE:CAG) and determine whether hedge funds skillfully traded this stock.
Is Conagra Brands, Inc. (NYSE:CAG) a bargain? Investors who are in the know were buying. The number of long hedge fund positions improved by 5 recently. Conagra Brands, Inc. (NYSE:CAG) was in 35 hedge funds' portfolios at the end of June. The all time high for this statistics is 50. Our calculations also showed that CAG 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). There were 30 hedge funds in our database with CAG holdings at the end of March. Video: Watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are many metrics shareholders use to value their holdings. Some of the most under-the-radar metrics are hedge fund and insider trading moves. Our experts have shown that, historically, those who follow the best picks of the elite money managers can outclass their index-focused peers by a significant margin (see the details here).
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this junior gold mining stock. Legal marijuana is one of the fastest growing industries right now, so we are also checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world 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. Now let's check out the recent hedge fund action encompassing Conagra Brands, Inc. (NYSE:CAG).
Hedge fund activity in Conagra Brands, Inc. (NYSE:CAG)
At the end of the second quarter, a total of 35 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 17% from the previous quarter. On the other hand, there were a total of 24 hedge funds with a bullish position in CAG a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Conagra Brands, Inc. (NYSE:CAG) was held by JANA Partners, which reported holding $381.9 million worth of stock at the end of September. It was followed by GAMCO Investors with a $56.3 million position. Other investors bullish on the company included Millennium Management, Citadel Investment Group, and Scopus Asset Management. In terms of the portfolio weights assigned to each position JANA Partners allocated the biggest weight to Conagra Brands, Inc. (NYSE:CAG), around 35.84% of its 13F portfolio. Huber Capital Management is also relatively very bullish on the stock, earmarking 0.99 percent of its 13F equity portfolio to CAG.
Now, some big names have been driving this bullishness. Scopus Asset Management, managed by Alexander Mitchell, created the most valuable position in Conagra Brands, Inc. (NYSE:CAG). Scopus Asset Management had $23.7 million invested in the company at the end of the quarter. John Overdeck and David Siegel's Two Sigma Advisors also initiated a $8.5 million position during the quarter. The other funds with brand new CAG positions are Steve Cohen's Point72 Asset Management, Donald Sussman's Paloma Partners, and Ryan Tolkin (CIO)'s Schonfeld Strategic Advisors.
Let's now review hedge fund activity in other stocks similar to Conagra Brands, Inc. (NYSE:CAG). We will take a look at iQIYI, Inc. (NASDAQ:IQ), Alnylam Pharmaceuticals, Inc. (NASDAQ:ALNY), Cheniere Energy Partners LP (NYSE:CQP), Teleflex Incorporated (NYSE:TFX), Freeport-McMoRan Inc. (NYSE:FCX), W.W. Grainger, Inc. (NYSE:GWW), and Occidental Petroleum Corporation (NYSE:OXY). All of these stocks' market caps resemble CAG's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position IQ,17,1283437,-11 ALNY,38,982898,4 CQP,3,9442,0 TFX,28,651313,-4 FCX,53,1222479,11 GWW,28,426625,2 OXY,34,1758766,-1 Average,28.7,904994,0.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 28.7 hedge funds with bullish positions and the average amount invested in these stocks was $905 million. That figure was $614 million in CAG's case. Freeport-McMoRan Inc. (NYSE:FCX) is the most popular stock in this table. On the other hand Cheniere Energy Partners LP (NYSE:CQP) is the least popular one with only 3 bullish hedge fund positions. Conagra Brands, Inc. (NYSE:CAG) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CAG is 63. 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 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 33% in 2020 through the end of August and beat the market by 23.2 percentage points. Unfortunately CAG wasn't nearly as popular as these 10 stocks and hedge funds that were betting on CAG were disappointed as the stock returned 9.7% during the same time period 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 many of these stocks already outperformed the market so far this year.
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Disclosure: None. This article was originally published at Insider Monkey.