In this article we will check out the progression of hedge fund sentiment towards The Hershey Company (NYSE:HSY) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Is The Hershey Company (NYSE:HSY) a healthy stock for your portfolio? The best stock pickers are becoming less confident. The number of bullish hedge fund bets shrunk by 6 in recent months. Our calculations also showed that HSY isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). Video: Watch our video about the top 5 most popular hedge fund stocks.
In the 21st century investor’s toolkit there are several gauges market participants employ to value stocks. A couple of the most innovative gauges are hedge fund and insider trading signals. Our researchers have shown that, historically, those who follow the best picks of the elite money managers can beat the broader indices by a healthy margin (see the details here).
[caption id="attachment_26397" align="aligncenter" width="393"] Ray Dalio of Bridgewater Associates[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020's unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we're going to analyze the key hedge fund action surrounding The Hershey Company (NYSE:HSY).
How are hedge funds trading The Hershey Company (NYSE:HSY)?
At the end of the first quarter, a total of 33 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -15% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in HSY over the last 18 quarters. With hedge funds' capital changing hands, there exists a few notable hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Renaissance Technologies, holds the largest position in The Hershey Company (NYSE:HSY). Renaissance Technologies has a $696.3 million position in the stock, comprising 0.7% of its 13F portfolio. The second largest stake is held by AQR Capital Management, led by Cliff Asness, holding a $119.7 million position; 0.2% of its 13F portfolio is allocated to the stock. Some other professional money managers that are bullish consist of Noam Gottesman's GLG Partners, Phill Gross and Robert Atchinson's Adage Capital Management and Ken Griffin's Citadel Investment Group. In terms of the portfolio weights assigned to each position Cognios Capital allocated the biggest weight to The Hershey Company (NYSE:HSY), around 0.85% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, designating 0.68 percent of its 13F equity portfolio to HSY.
Judging by the fact that The Hershey Company (NYSE:HSY) has witnessed falling interest from hedge fund managers, we can see that there was a specific group of hedgies that elected to cut their positions entirely last quarter. It's worth mentioning that Matthew Tewksbury's Stevens Capital Management dumped the largest position of the 750 funds followed by Insider Monkey, valued at about $3.3 million in stock, and Matthew Hulsizer's PEAK6 Capital Management was right behind this move, as the fund cut about $2.9 million worth. These moves are important to note, as total hedge fund interest dropped by 6 funds last quarter.
Let's go over hedge fund activity in other stocks similar to The Hershey Company (NYSE:HSY). We will take a look at Chunghwa Telecom Co., Ltd (NYSE:CHT), ICICI Bank Limited (NYSE:IBN), Constellation Brands, Inc. (NYSE:STZ), and Telefonaktiebolaget LM Ericsson (publ) (NASDAQ:ERIC). This group of stocks' market valuations are closest to HSY's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CHT,6,123577,2 IBN,24,378931,-5 STZ,50,1504770,-2 ERIC,20,366624,2 Average,25,593476,-0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 25 hedge funds with bullish positions and the average amount invested in these stocks was $593 million. That figure was $958 million in HSY's case. Constellation Brands, Inc. (NYSE:STZ) is the most popular stock in this table. On the other hand Chunghwa Telecom Co., Ltd (NYSE:CHT) is the least popular one with only 6 bullish hedge fund positions. The Hershey Company (NYSE:HSY) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May but beat the market by 13.2 percentage points. Unfortunately HSY wasn't nearly as popular as these 10 stocks and hedge funds that were betting on HSY were disappointed as the stock returned 3% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.