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Do Hedge Funds Love SYSCO Corporation (SYY)?

Reymerlyn Martin

The 700+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the third quarter, which unveil their equity positions as of September 30. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards SYSCO Corporation (NYSE:SYY).

Is SYSCO Corporation (NYSE:SYY) a great investment today? Hedge funds are taking a bearish view. The number of bullish hedge fund bets decreased by 9 in recent months. Our calculations also showed that SYY isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). SYY was in 22 hedge funds' portfolios at the end of September. There were 31 hedge funds in our database with SYY holdings at the end of the previous quarter. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

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 Russell 2000 ETFs by 40 percentage points since May 2014 (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.

[caption id="attachment_30574" align="aligncenter" width="600"] Nelson Peltz of Trian Partners[/caption]

TRIAN PARTNERS

Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. We're going to take a gander at the latest hedge fund action encompassing SYSCO Corporation (NYSE:SYY).

What does smart money think about SYSCO Corporation (NYSE:SYY)?

At Q3's end, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -29% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards SYY over the last 17 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in SYSCO Corporation (NYSE:SYY) was held by Trian Partners, which reported holding $1879.5 million worth of stock at the end of September. It was followed by Yacktman Asset Management with a $320.3 million position. Other investors bullish on the company included Two Sigma Advisors, Renaissance Technologies, and Eminence Capital. In terms of the portfolio weights assigned to each position Trian Partners allocated the biggest weight to SYSCO Corporation (NYSE:SYY), around 19.62% of its 13F portfolio. Yacktman Asset Management is also relatively very bullish on the stock, dishing out 3.94 percent of its 13F equity portfolio to SYY.

Judging by the fact that SYSCO Corporation (NYSE:SYY) has faced bearish sentiment from hedge fund managers, it's easy to see that there was a specific group of money managers that elected to cut their entire stakes by the end of the third quarter. Interestingly, Jacob Doft's Highline Capital Management dropped the largest stake of the "upper crust" of funds monitored by Insider Monkey, comprising about $43.7 million in stock. Gabriel Plotkin's fund, Melvin Capital Management, also dumped its stock, about $28.3 million worth. These moves are interesting, as aggregate hedge fund interest dropped by 9 funds by the end of the third quarter.

Let's check out hedge fund activity in other stocks similar to SYSCO Corporation (NYSE:SYY). We will take a look at ING Groep N.V. (NYSE:ING), Activision Blizzard, Inc. (NASDAQ:ATVI), Sempra Energy (NYSE:SRE), and Marathon Petroleum Corp (NYSE:MPC). All of these stocks' market caps are closest to SYY's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ING,9,542281,1 ATVI,70,3014968,24 SRE,28,1270412,3 MPC,63,2858868,3 Average,42.5,1921632,7.75 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 42.5 hedge funds with bullish positions and the average amount invested in these stocks was $1922 million. That figure was $3016 million in SYY's case. Activision Blizzard, Inc. (NASDAQ:ATVI) is the most popular stock in this table. On the other hand ING Groep N.V. (NYSE:ING) is the least popular one with only 9 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately SYY wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); SYY investors were disappointed as the stock returned 2% during the first two months of the fourth quarter 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 70 percent of these stocks already outperformed the market in Q4.

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

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