The Insider Monkey team has completed processing the quarterly 13F filings for the September quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards General Mills, Inc. (NYSE:GIS).
Is GIS a good stock to buy? The smart money was selling. The number of bullish hedge fund positions were cut by 1 lately. General Mills, Inc. (NYSE:GIS) was in 36 hedge funds' portfolios at the end of September. The all time high for this statistic is 42. Our calculations also showed that GIS 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.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 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 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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
Phillip Gross of Adage Capital
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 let's check out the recent hedge fund action encompassing General Mills, Inc. (NYSE:GIS).
Do Hedge Funds Think GIS Is A Good Stock To Buy Now?
At Q3's end, a total of 36 of the hedge funds tracked by Insider Monkey were long this stock, a change of -3% from one quarter earlier. On the other hand, there were a total of 37 hedge funds with a bullish position in GIS 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.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Renaissance Technologies, holds the largest position in General Mills, Inc. (NYSE:GIS). Renaissance Technologies has a $402.1 million position in the stock, comprising 0.4% of its 13F portfolio. Sitting at the No. 2 spot is Two Sigma Advisors, led by John Overdeck and David Siegel, holding a $212.5 million position; 0.6% of its 13F portfolio is allocated to the stock. Some other professional money managers that hold long positions contain D. E. Shaw's D E Shaw, Cliff Asness's AQR Capital Management and Phill Gross and Robert Atchinson's Adage Capital Management. In terms of the portfolio weights assigned to each position Half Sky Capital allocated the biggest weight to General Mills, Inc. (NYSE:GIS), around 8.7% of its 13F portfolio. Wallace Capital Management is also relatively very bullish on the stock, earmarking 2.8 percent of its 13F equity portfolio to GIS.
Because General Mills, Inc. (NYSE:GIS) has experienced bearish sentiment from hedge fund managers, it's easy to see that there lies a certain "tier" of fund managers that elected to cut their full holdings by the end of the third quarter. It's worth mentioning that Donald Sussman's Paloma Partners sold off the biggest position of the 750 funds followed by Insider Monkey, totaling close to $6.5 million in stock. Ben Levine, Andrew Manuel and Stefan Renold's fund, LMR Partners, also cut its stock, about $6.5 million worth. These transactions are interesting, as aggregate hedge fund interest dropped by 1 funds by the end of the third quarter.
Let's also examine hedge fund activity in other stocks similar to General Mills, Inc. (NYSE:GIS). These stocks are Electronic Arts Inc. (NASDAQ:EA), Cognizant Technology Solutions Corp (NASDAQ:CTSH), Bank of Montreal (NYSE:BMO), BCE Inc. (NYSE:BCE), Prudential Public Limited Company (NYSE:PUK), Banco Santander (Brasil) SA (NYSE:BSBR), and L3Harris Technologies, Inc. (NYSE:LHX). This group of stocks' market valuations resemble GIS's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position EA,62,1376224,-5 CTSH,45,3326420,6 BMO,10,112811,-3 BCE,10,84651,0 PUK,4,7017,-1 BSBR,5,9931,-5 LHX,42,1149064,-8 Average,25.4,866588,-2.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 25.4 hedge funds with bullish positions and the average amount invested in these stocks was $867 million. That figure was $1054 million in GIS's case. Electronic Arts Inc. (NASDAQ:EA) is the most popular stock in this table. On the other hand Prudential Public Limited Company (NYSE:PUK) is the least popular one with only 4 bullish hedge fund positions. General Mills, Inc. (NYSE:GIS) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for GIS is 57.3. 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 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 33.3% in 2020 through December 18th and beat the market again by 16.4 percentage points. Unfortunately GIS wasn't nearly as popular as these 20 stocks and hedge funds that were betting on GIS were disappointed as the stock returned -2.9% since the end of September (through 12/18) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 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.