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Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 900 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about The Kraft Heinz Company (NASDAQ:KHC).
Hedge fund interest in The Kraft Heinz Company (NASDAQ:KHC) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that KHC isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings). The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as TE Connectivity Ltd. (NYSE:TEL), Carrier Global Corporation (NYSE:CARR), and The Bank of New York Mellon Corporation (NYSE:BK) to gather more data points.
Richard Driehaus of Driehaus Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so 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. With all of this in mind let's go over the latest hedge fund action regarding The Kraft Heinz Company (NASDAQ:KHC).
Do Hedge Funds Think KHC Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 33 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. The graph below displays the number of hedge funds with bullish position in KHC over the last 25 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Berkshire Hathaway held the most valuable stake in The Kraft Heinz Company (NASDAQ:KHC), which was worth $11989.9 million at the end of the third quarter. On the second spot was Bridgewater Associates which amassed $85.1 million worth of shares. Citadel Investment Group, Driehaus Capital, and Balyasny Asset Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Kehrs Ridge Capital allocated the biggest weight to The Kraft Heinz Company (NASDAQ:KHC), around 5.35% of its 13F portfolio. Berkshire Hathaway is also relatively very bullish on the stock, designating 4.09 percent of its 13F equity portfolio to KHC.
Because The Kraft Heinz Company (NASDAQ:KHC) has faced bearish sentiment from the smart money, it's easy to see that there were a few fund managers who were dropping their positions entirely by the end of the third quarter. Interestingly, Michael Burry's Scion Asset Management cut the biggest position of the "upper crust" of funds followed by Insider Monkey, comprising about $58.1 million in stock. Peter Rathjens, Bruce Clarke and John Campbell's fund, Arrowstreet Capital, also said goodbye to its stock, about $34.9 million worth. These transactions are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's check out hedge fund activity in other stocks similar to The Kraft Heinz Company (NASDAQ:KHC). We will take a look at TE Connectivity Ltd. (NYSE:TEL), Carrier Global Corporation (NYSE:CARR), The Bank of New York Mellon Corporation (NYSE:BK), T. Rowe Price Group, Inc. (NASDAQ:TROW), Kimberly Clark Corporation (NYSE:KMB), L3Harris Technologies, Inc. (NASDAQ:LHX), and Veeva Systems Inc (NYSE:VEEV). This group of stocks' market values are closest to KHC's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TEL,41,2188058,2 CARR,46,1324758,0 BK,46,4657475,-6 TROW,35,471726,11 KMB,28,410445,-9 LHX,29,492448,-13 VEEV,44,1631737,0 Average,38.4,1596664,-2.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 38.4 hedge funds with bullish positions and the average amount invested in these stocks was $1597 million. That figure was $12322 million in KHC's case. Carrier Global Corporation (NYSE:CARR) is the most popular stock in this table. On the other hand Kimberly Clark Corporation (NYSE:KMB) is the least popular one with only 28 bullish hedge fund positions. The Kraft Heinz Company (NASDAQ:KHC) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for KHC is 35.4. 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. 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 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 28.6% in 2021 through November 30th and surpassed the market again by 5.6 percentage points. Unfortunately KHC wasn't nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); KHC investors were disappointed as the stock returned -7.7% since the end of September (through 11/30) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.
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Disclosure: None. This article was originally published at Insider Monkey.