The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 821 13F filings submitted by hedge funds and prominent investors. These filings show these funds' portfolio positions as of March 31st, 2020. In this article we are going to take a look at smart money sentiment towards The Kraft Heinz Company (NASDAQ:KHC).
The Kraft Heinz Company (NASDAQ:KHC) investors should pay attention to an increase in hedge fund interest recently. Our calculations also showed that KHC 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.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. 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 S&P 500 ETFs by 51 percentage points since March 2017 (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.
[caption id="attachment_26084" align="aligncenter" width="399"] Bruce Berkowitz of Fairholme (FAIRX)[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities 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 take a look at the fresh hedge fund action surrounding The Kraft Heinz Company (NASDAQ:KHC).
What have hedge funds been doing with The Kraft Heinz Company (NASDAQ:KHC)?
At the end of the first quarter, a total of 39 of the hedge funds tracked by Insider Monkey held long positions in 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 KHC over the last 18 quarters. With hedgies' positions undergoing their usual ebb and flow, there exists an "upper tier" of noteworthy hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
More specifically, Berkshire Hathaway was the largest shareholder of The Kraft Heinz Company (NASDAQ:KHC), with a stake worth $8056.2 million reported as of the end of September. Trailing Berkshire Hathaway was Arrowstreet Capital, which amassed a stake valued at $55 million. Citadel Investment Group, Armistice Capital, and Renaissance Technologies 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 Berkshire Hathaway allocated the biggest weight to The Kraft Heinz Company (NASDAQ:KHC), around 4.59% of its 13F portfolio. Hi-Line Capital Management is also relatively very bullish on the stock, dishing out 2.82 percent of its 13F equity portfolio to KHC.
As aggregate interest increased, key hedge funds were leading the bulls' herd. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, assembled the biggest position in The Kraft Heinz Company (NASDAQ:KHC). Arrowstreet Capital had $55 million invested in the company at the end of the quarter. Mark Coe's Intrinsic Edge Capital also initiated a $20.8 million position during the quarter. The other funds with brand new KHC positions are Bruce Berkowitz's Fairholme (FAIRX), Paul Marshall and Ian Wace's Marshall Wace LLP, and Brandon Haley's Holocene Advisors.
Let's check out hedge fund activity in other stocks similar to The Kraft Heinz Company (NASDAQ:KHC). These stocks are General Motors Company (NYSE:GM), Workday Inc (NASDAQ:WDAY), Canadian Pacific Railway Limited (NYSE:CP), and The Bank of New York Mellon Corporation (NYSE:BK). This group of stocks' market values are similar to KHC's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GM,53,3020405,-22 WDAY,58,2259501,3 CP,32,1568644,3 BK,52,4401625,-6 Average,48.75,2812544,-5.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 48.75 hedge funds with bullish positions and the average amount invested in these stocks was $2813 million. That figure was $8315 million in KHC's case. Workday Inc (NASDAQ:WDAY) is the most popular stock in this table. On the other hand Canadian Pacific Railway Limited (NYSE:CP) is the least popular one with only 32 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 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 and still beat the market by 13.2 percentage points. A small number of hedge funds were also right about betting on KHC as the stock returned 24.8% during the second quarter and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.