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Hedge Funds Are Cashing Out Of SYSCO Corporation (SYY)

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In this article you are going to find out whether hedge funds think SYSCO Corporation (NYSE:SYY) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It's not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

SYSCO Corporation (NYSE:SYY) investors should pay attention to a decrease in hedge fund interest recently. SYSCO Corporation (NYSE:SYY) was in 40 hedge funds' portfolios at the end of June. The all time high for this statistic is 42. Our calculations also showed that SYY isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).

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 monthly stock picks returned 185.4% since March 2017 and outperformed the S&P 500 ETFs by more than 79 percentage points (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

TRIAN PARTNERS
TRIAN PARTNERS

Nelson Peltz of Trian Partners

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, we like undervalued, EBITDA-positive growth stocks, so we are checking out stock pitches like this emerging biotech stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Now we're going to take a look at the key hedge fund action regarding SYSCO Corporation (NYSE:SYY).

Do Hedge Funds Think SYY Is A Good Stock To Buy Now?

At the end of June, a total of 40 of the hedge funds tracked by Insider Monkey were long this stock, a change of -5% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in SYY over the last 24 quarters. With the smart money's sentiment swirling, there exists a few notable hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).

The largest stake in SYSCO Corporation (NYSE:SYY) was held by Trian Partners, which reported holding $1389.8 million worth of stock at the end of June. It was followed by Yacktman Asset Management with a $424.4 million position. Other investors bullish on the company included GLG Partners, Arrowstreet Capital, and D E Shaw. In terms of the portfolio weights assigned to each position Trian Partners allocated the biggest weight to SYSCO Corporation (NYSE:SYY), around 16.25% of its 13F portfolio. Jones Road Capital Management is also relatively very bullish on the stock, earmarking 6.54 percent of its 13F equity portfolio to SYY.

Seeing as SYSCO Corporation (NYSE:SYY) has faced bearish sentiment from the smart money, it's safe to say that there lies a certain "tier" of hedge funds that slashed their positions entirely last quarter. Interestingly, Jack Woodruff's Candlestick Capital Management said goodbye to the biggest stake of all the hedgies followed by Insider Monkey, comprising close to $83.5 million in stock. Steve Cohen's fund, Point72 Asset Management, also sold off its stock, about $52 million worth. These bearish behaviors are important to note, as total hedge fund interest dropped by 2 funds last quarter.

Let's also examine hedge fund activity in other stocks similar to SYSCO Corporation (NYSE:SYY). These stocks are Pioneer Natural Resources Company (NYSE:PXD), Parker-Hannifin Corporation (NYSE:PH), O'Reilly Automotive Inc (NASDAQ:ORLY), Marathon Petroleum Corp (NYSE:MPC), The Allstate Corporation (NYSE:ALL), Fortinet Inc (NASDAQ:FTNT), and Paychex, Inc. (NASDAQ:PAYX). This group of stocks' market caps resemble SYY's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PXD,45,876323,8 PH,42,1446066,-1 ORLY,44,2366019,-1 MPC,48,2616162,2 ALL,33,923765,-8 FTNT,32,850545,9 PAYX,29,940182,4 Average,39,1431295,1.9 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 39 hedge funds with bullish positions and the average amount invested in these stocks was $1431 million. That figure was $2601 million in SYY's case. Marathon Petroleum Corp (NYSE:MPC) is the most popular stock in this table. On the other hand Paychex, Inc. (NASDAQ:PAYX) is the least popular one with only 29 bullish hedge fund positions. SYSCO Corporation (NYSE:SYY) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SYY is 60.5. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 21.8% in 2021 through October 11th and still beat the market by 4.4 percentage points. Hedge funds were also right about betting on SYY as the stock returned 7.8% since the end of Q2 (through 10/11) 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.