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Is HRL Stock A Buy or Sell?

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Asma UL Husna
·5 min read
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A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended December 31st, so let’s proceed with the discussion of the hedge fund sentiment on Hormel Foods Corporation (NYSE:HRL).

Is HRL stock a buy? The smart money was taking an optimistic view. The number of long hedge fund bets went up by 1 recently. Hormel Foods Corporation (NYSE:HRL) was in 31 hedge funds' portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 30. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that HRL isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings). There were 30 hedge funds in our database with HRL holdings at the end of September.

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At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we heard that billionaire Peter Thiel is backing this psychedelic-drug startup. So, we are taking a closer look at this space. We go through lists like the 10 best biotech stocks under $10 to identify the next stock with 10x upside potential. 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 website. Now let's take a look at the recent hedge fund action encompassing Hormel Foods Corporation (NYSE:HRL).

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

At fourth quarter's end, a total of 31 of the hedge funds tracked by Insider Monkey were long this stock, a change of 3% from the third quarter of 2020. On the other hand, there were a total of 23 hedge funds with a bullish position in HRL a year ago. With hedge funds' capital changing hands, there exists a few notable hedge fund managers who were upping their stakes substantially (or already accumulated large positions).

Among these funds, AQR Capital Management held the most valuable stake in Hormel Foods Corporation (NYSE:HRL), which was worth $172.2 million at the end of the fourth quarter. On the second spot was Renaissance Technologies which amassed $126.6 million worth of shares. Two Sigma Advisors, Bridgewater Associates, and GLG Partners 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 Fairpointe Capital allocated the biggest weight to Hormel Foods Corporation (NYSE:HRL), around 2.23% of its 13F portfolio. AlphaCrest Capital Management is also relatively very bullish on the stock, designating 0.73 percent of its 13F equity portfolio to HRL.

As one would reasonably expect, specific money managers have jumped into Hormel Foods Corporation (NYSE:HRL) headfirst. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, established the most outsized position in Hormel Foods Corporation (NYSE:HRL). Arrowstreet Capital had $7.2 million invested in the company at the end of the quarter. Louis Navellier's Navellier & Associates also initiated a $2.1 million position during the quarter. The other funds with brand new HRL positions are Alec Litowitz and Ross Laser's Magnetar Capital, Ryan Tolkin (CIO)'s Schonfeld Strategic Advisors, and Parvinder Thiara's Athanor Capital.

Let's now take a look at hedge fund activity in other stocks similar to Hormel Foods Corporation (NYSE:HRL). We will take a look at D.R. Horton, Inc. (NYSE:DHI), Weyerhaeuser Co. (NYSE:WY), ZTO Express (Cayman) Inc. (NYSE:ZTO), PG&E Corporation (NYSE:PCG), Verisign, Inc. (NASDAQ:VRSN), Keysight Technologies Inc (NYSE:KEYS), and ArcelorMittal (NYSE:MT). This group of stocks' market valuations are closest to HRL's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position DHI,64,1922728,2 WY,40,614210,-1 ZTO,17,426129,-5 PCG,66,6651557,-10 VRSN,47,6421904,1 KEYS,27,592599,-9 MT,18,511254,-2 Average,39.9,2448626,-3.4 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 39.9 hedge funds with bullish positions and the average amount invested in these stocks was $2449 million. That figure was $523 million in HRL's case. PG&E Corporation (NYSE:PCG) is the most popular stock in this table. On the other hand ZTO Express (Cayman) Inc. (NYSE:ZTO) is the least popular one with only 17 bullish hedge fund positions. Hormel Foods Corporation (NYSE:HRL) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for HRL is 50.3. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.2% in 2021 through April 12th and surpassed the market again by 1.5 percentage points. Unfortunately HRL wasn't nearly as popular as these 30 stocks (hedge fund sentiment was quite bearish); HRL investors were disappointed as the stock returned 2% since the end of December (through 4/12) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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

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