It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The Standard and Poor’s 500 Total Return Index ETFs returned approximately 27.5% in 2019 (through the end of November). Conversely, hedge funds’ top 20 large-cap stock picks generated a return of 37.4% during the same 11-month period, with the majority of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds' consensus stock picks generate superior risk-adjusted returns. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like Coca-Cola FEMSA, S.A.B. de C.V. (NYSE:KOF).
Coca-Cola FEMSA, S.A.B. de C.V. (NYSE:KOF) shareholders have witnessed an increase in hedge fund sentiment in recent months. KOF was in 12 hedge funds' portfolios at the end of September. There were 9 hedge funds in our database with KOF positions at the end of the previous quarter. Our calculations also showed that KOF isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
According to most traders, hedge funds are perceived as unimportant, outdated financial tools of years past. While there are more than 8000 funds in operation at present, Our researchers look at the upper echelon of this club, about 750 funds. Most estimates calculate that this group of people administer most of the smart money's total capital, and by paying attention to their matchless equity investments, Insider Monkey has brought to light a few investment strategies that have historically surpassed the broader indices. Insider Monkey's flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points per annum since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
[caption id="attachment_26073" align="alignnone" width="600"] Jim Simons of Renaissance Technologies[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds' buy/sell signals. We're going to take a gander at the latest hedge fund action regarding Coca-Cola FEMSA, S.A.B. de C.V. (NYSE:KOF).
How have hedgies been trading Coca-Cola FEMSA, S.A.B. de C.V. (NYSE:KOF)?
At Q3's end, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 33% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards KOF over the last 17 quarters. With the smart money's positions undergoing their usual ebb and flow, there exists an "upper tier" of notable hedge fund managers who were upping their stakes significantly (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Bill & Melinda Gates Foundation Trust, managed by Michael Larson, holds the most valuable position in Coca-Cola FEMSA, S.A.B. de C.V. (NYSE:KOF). Bill & Melinda Gates Foundation Trust has a $376.7 million position in the stock, comprising 1.8% of its 13F portfolio. Coming in second is Renaissance Technologies, holding a $90.6 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Some other professional money managers that are bullish comprise Israel Englander's Millennium Management, Paul Marshall and Ian Wace's Marshall Wace and Cliff Asness's AQR Capital Management. In terms of the portfolio weights assigned to each position Bill & Melinda Gates Foundation Trust allocated the biggest weight to Coca-Cola FEMSA, S.A.B. de C.V. (NYSE:KOF), around 1.77% of its 13F portfolio. Ellington is also relatively very bullish on the stock, earmarking 0.1 percent of its 13F equity portfolio to KOF.
As one would reasonably expect, some big names were breaking ground themselves. ExodusPoint Capital, managed by Michael Gelband, assembled the largest position in Coca-Cola FEMSA, S.A.B. de C.V. (NYSE:KOF). ExodusPoint Capital had $0.7 million invested in the company at the end of the quarter. Minhua Zhang's Weld Capital Management also made a $0.4 million investment in the stock during the quarter. The other funds with new positions in the stock are Ken Griffin's Citadel Investment Group and Donald Sussman's Paloma Partners.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Coca-Cola FEMSA, S.A.B. de C.V. (NYSE:KOF) but similarly valued. These stocks are Expeditors International of Washington (NASDAQ:EXPD), Citrix Systems, Inc. (NASDAQ:CTXS), Host Hotels and Resorts Inc (NYSE:HST), and The J.M. Smucker Company (NYSE:SJM). This group of stocks' market values are similar to KOF's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position EXPD,27,361013,2 CTXS,27,1658692,-7 HST,27,594453,-1 SJM,26,453856,0 Average,26.75,767004,-1.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 26.75 hedge funds with bullish positions and the average amount invested in these stocks was $767 million. That figure was $488 million in KOF's case. Expeditors International of Washington (NASDAQ:EXPD) is the most popular stock in this table. On the other hand The J.M. Smucker Company (NYSE:SJM) is the least popular one with only 26 bullish hedge fund positions. Compared to these stocks Coca-Cola FEMSA, S.A.B. de C.V. (NYSE:KOF) is even less popular than SJM. Hedge funds dodged a bullet by taking a bearish stance towards KOF. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately KOF wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); KOF investors were disappointed as the stock returned -3% during the fourth quarter (through the end of November) 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 so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.