U.S. Markets closed

Hedge Funds Are Buying SYSCO Corporation (SYY)

Reymerlyn Martin

Amid an overall market correction, many stocks that smart money investors were collectively bullish on tanked during the fourth quarter. Among them, Amazon and Netflix ranked among the top 30 picks and both lost around 20%. Facebook, which was the second most popular stock, lost 14% amid uncertainty regarding the interest rates and tech valuations. Nevertheless, our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.

Is SYSCO Corporation (NYSE:SYY) the right pick for your portfolio? The best stock pickers are taking an optimistic view. The number of long hedge fund positions moved up by 11 recently. Our calculations also showed that SYY isn't among the 30 most popular stocks among hedge funds.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 6.3% year to date (through December 3rd) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 18 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

TRIAN PARTNERS

We're going to analyze the fresh hedge fund action regarding SYSCO Corporation (NYSE:SYY).

What have hedge funds been doing with SYSCO Corporation (NYSE:SYY)?

At the end of the third quarter, a total of 31 of the hedge funds tracked by Insider Monkey were long this stock, a change of 55% from the second quarter of 2018. The graph below displays the number of hedge funds with bullish position in SYY over the last 13 quarters. With the smart money's positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).

SYY_dec2018

Among these funds, Trian Partners held the most valuable stake in SYSCO Corporation (NYSE:SYY), which was worth $2758.4 million at the end of the third quarter. On the second spot was Yacktman Asset Management which amassed $296.4 million worth of shares. Moreover, Two Sigma Advisors, Renaissance Technologies, and Arrowstreet Capital were also bullish on SYSCO Corporation (NYSE:SYY), allocating a large percentage of their portfolios to this stock.

As aggregate interest increased, specific money managers have jumped into SYSCO Corporation (NYSE:SYY) headfirst. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, assembled the most valuable position in SYSCO Corporation (NYSE:SYY). Arrowstreet Capital had $108.6 million invested in the company at the end of the quarter. Dmitry Balyasny's Balyasny Asset Management also initiated a $5.1 million position during the quarter. The other funds with new positions in the stock are Anna Nikolayevsky's Axel Capital Management, Sara Nainzadeh's Centenus Global Management, and Paul Tudor Jones's Tudor Investment Corp.

Let's check out hedge fund activity in other stocks - not necessarily in the same industry as SYSCO Corporation (NYSE:SYY) but similarly valued. These stocks are Applied Materials, Inc. (NASDAQ:AMAT), JD.Com Inc (NASDAQ:JD), BB&T Corporation (NYSE:BBT), and Eaton Corporation plc (NYSE:ETN). All of these stocks' market caps match SYY's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AMAT,43,1985227,-2 JD,32,2971575,-9 BBT,20,118410,-1 ETN,38,965450,8 Average,33.25,1510166,-1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 33.25 hedge funds with bullish positions and the average amount invested in these stocks was $1.51 billion. That figure was $3.82 billion in SYY's case. Applied Materials, Inc. (NASDAQ:AMAT) is the most popular stock in this table. On the other hand BB&T Corporation (NYSE:BBT) is the least popular one with only 20 bullish hedge fund positions. SYSCO Corporation (NYSE:SYY) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. In this regard AMAT might be a better candidate to consider a long position.

Disclosure: None. This article was originally published at Insider Monkey.

Related Content