U.S. Markets closed

Mondelez International Inc (MDLZ): Hedge Funds In Wait-And-See Mode

Nina Todic

Many investors, including Paul Tudor Jones or Stan Druckenmiller, have been saying before the Q4 market crash that the stock market is overvalued due to a low interest rate environment that leads to companies swapping their equity for debt and focusing mostly on short-term performance such as beating the quarterly earnings estimates. In the first half of 2019, most investors recovered all of their Q4 losses as sentiment shifted and optimism dominated the US China trade negotiations. Nevertheless, many of the stocks that delivered strong returns in the first half still sport strong fundamentals and their gains were more related to the general market sentiment rather than their individual performance and hedge funds kept their bullish stance. In this article we will find out how hedge fund sentiment to Mondelez International Inc (NASDAQ:MDLZ) changed recently.

Hedge fund interest in Mondelez International Inc (NASDAQ:MDLZ) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that Mondelez isn't among the 30 most popular stocks among hedge funds (see the video at the bottom of this article). 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 Banco Bradesco SA (NYSE:BBD), Caterpillar Inc. (NYSE:CAT), and Stryker Corporation (NYSE:SYK) to gather more data points.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

TRIAN PARTNERS

Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We're going to view the fresh hedge fund action regarding Mondelez International Inc (NASDAQ:MDLZ).

How have hedgies been trading Mondelez International Inc (NASDAQ:MDLZ)?

At the end of the second quarter, a total of 47 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. The graph below displays the number of hedge funds with bullish position in MDLZ over the last 16 quarters. With hedgies' positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).

No of Hedge Funds with MDLZ Positions

The largest stake in Mondelez International Inc (NASDAQ:MDLZ) was held by Trian Partners, which reported holding $1014.8 million worth of stock at the end of March. It was followed by Renaissance Technologies with a $342.6 million position. Other investors bullish on the company included Millennium Management, D E Shaw, and Citadel Investment Group.

Due to the fact that Mondelez International Inc (NASDAQ:MDLZ) has experienced falling interest from the aggregate hedge fund industry, we can see that there was a specific group of money managers that slashed their entire stakes heading into Q3. It's worth mentioning that Paul Tudor Jones's Tudor Investment Corp dropped the largest stake of all the hedgies tracked by Insider Monkey, comprising close to $3.9 million in stock. James Dondero's fund, Highland Capital Management, also dropped its stock, about $3.5 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let's now take a look at hedge fund activity in other stocks similar to Mondelez International Inc (NASDAQ:MDLZ). We will take a look at Banco Bradesco SA (NYSE:BBD), Caterpillar Inc. (NYSE:CAT), Stryker Corporation (NYSE:SYK), and Bristol-Myers Squibb Company (NYSE:BMY). This group of stocks' market caps resemble MDLZ's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BBD,14,751983,-4 CAT,45,3000982,-8 SYK,30,489887,-4 BMY,65,3885775,-6 Average,38.5,2032157,-5.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 38.5 hedge funds with bullish positions and the average amount invested in these stocks was $2032 million. That figure was $2755 million in MDLZ's case. Bristol-Myers Squibb Company (NYSE:BMY) is the most popular stock in this table. On the other hand Banco Bradesco SA (NYSE:BBD) is the least popular one with only 14 bullish hedge fund positions. Mondelez International Inc (NASDAQ:MDLZ) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Hedge funds were also right about betting on MDLZ, though not to the same extent, as the stock returned 3.2% during the third quarter and outperformed the market as well. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

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

Related Content