Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the second quarter. You can find articles about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of McCormick & Company, Incorporated (NYSE:MKC) based on that data and determine whether they were really smart about the stock.
McCormick & Company, Incorporated (NYSE:MKC) was in 32 hedge funds' portfolios at the end of June. The all time high for this statistics is 31. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. MKC has seen an increase in enthusiasm from smart money of late. There were 31 hedge funds in our database with MKC positions at the end of the first quarter. Our calculations also showed that MKC 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). 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 56 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.
John Overdeck of Two Sigma Advisors
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, this “mom” trader turned $2000 into $2 million within 2 years. So, we are checking out her best trade idea of the month. 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. With all of this in mind we're going to review the recent hedge fund action surrounding McCormick & Company, Incorporated (NYSE:MKC).
What have hedge funds been doing with McCormick & Company, Incorporated (NYSE:MKC)?
At the end of June, a total of 32 of the hedge funds tracked by Insider Monkey were long this stock, a change of 3% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in MKC over the last 20 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in McCormick & Company, Incorporated (NYSE:MKC) was held by Two Sigma Advisors, which reported holding $66.7 million worth of stock at the end of September. It was followed by AQR Capital Management with a $54.5 million position. Other investors bullish on the company included Adage Capital Management, Citadel Investment Group, and Impax Asset Management. In terms of the portfolio weights assigned to each position Motley Fool Asset Management allocated the biggest weight to McCormick & Company, Incorporated (NYSE:MKC), around 0.53% of its 13F portfolio. Cinctive Capital Management is also relatively very bullish on the stock, dishing out 0.3 percent of its 13F equity portfolio to MKC.
As industrywide interest jumped, key money managers have jumped into McCormick & Company, Incorporated (NYSE:MKC) headfirst. Maverick Capital, managed by Lee Ainslie, initiated the largest position in McCormick & Company, Incorporated (NYSE:MKC). Maverick Capital had $5.3 million invested in the company at the end of the quarter. Ben Levine, Andrew Manuel and Stefan Renold's LMR Partners also initiated a $4.6 million position during the quarter. The following funds were also among the new MKC investors: Steve Cohen's Point72 Asset Management, Ken Griffin's Citadel Investment Group, and Greg Eisner's Engineers Gate Manager.
Let's now review hedge fund activity in other stocks similar to McCormick & Company, Incorporated (NYSE:MKC). These stocks are Verisign, Inc. (NASDAQ:VRSN), Moderna, Inc. (NASDAQ:MRNA), Motorola Solutions Inc (NYSE:MSI), V.F. Corporation (NYSE:VFC), Parker-Hannifin Corporation (NYSE:PH), Twitter Inc (NYSE:TWTR), and Marvell Technology Group Ltd. (NASDAQ:MRVL). This group of stocks' market valuations are closest to MKC's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position VRSN,47,6245654,6 MRNA,37,788433,12 MSI,36,535822,2 VFC,27,558958,8 PH,39,1172205,7 TWTR,68,1278023,13 MRVL,41,664690,12 Average,42.1,1606255,8.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 42.1 hedge funds with bullish positions and the average amount invested in these stocks was $1606 million. That figure was $252 million in MKC's case. Twitter Inc (NYSE:TWTR) is the most popular stock in this table. On the other hand V.F. Corporation (NYSE:VFC) is the least popular one with only 27 bullish hedge fund positions. McCormick & Company, Incorporated (NYSE:MKC) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for MKC is 42.1. 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 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 23.8% in 2020 through September 14th and still beat the market by 17.6 percentage points. A small number of hedge funds were also right about betting on MKC as the stock returned 11.9% since the end of June (through September 14th) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.