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Were Hedge Funds Right About The Coca-Cola Company (KO)?

Reymerlyn Martin

After several tireless days we have finished crunching the numbers from nearly 750 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms' equity portfolios as of December 31. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards The Coca-Cola Company (NYSE:KO).

The Coca-Cola Company (NYSE:KO) shareholders have witnessed an increase in hedge fund sentiment of late. Our calculations also showed that KO isn't among the 30 most popular stocks among hedge funds.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 20.7% year to date (through March 12th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 32 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Donald Yacktman

Let's check out the recent hedge fund action encompassing The Coca-Cola Company (NYSE:KO).

How have hedgies been trading The Coca-Cola Company (NYSE:KO)?

At Q4's end, a total of 53 of the hedge funds tracked by Insider Monkey were long this stock, a change of 23% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards KO over the last 14 quarters. With hedge funds' sentiment swirling, there exists a few key hedge fund managers who were upping their stakes significantly (or already accumulated large positions).

KO_mar2019

Among these funds, Berkshire Hathaway held the most valuable stake in The Coca-Cola Company (NYSE:KO), which was worth $18940 million at the end of the third quarter. On the second spot was Yacktman Asset Management which amassed $626.8 million worth of shares. Moreover, Adage Capital Management, Two Sigma Advisors, and Alkeon Capital Management were also bullish on The Coca-Cola Company (NYSE:KO), allocating a large percentage of their portfolios to this stock.

As one would reasonably expect, some big names were breaking ground themselves. Point72 Asset Management, managed by Steve Cohen, initiated the most outsized position in The Coca-Cola Company (NYSE:KO). Point72 Asset Management had $54 million invested in the company at the end of the quarter. Principal Global Investors's Columbus Circle Investors also initiated a $37.7 million position during the quarter. The other funds with brand new KO positions are Michael Kharitonov and Jon David McAuliffe's Voleon Capital, Robert Pohly's Samlyn Capital, and Sander Gerber's Hudson Bay Capital Management.

Let's go over hedge fund activity in other stocks similar to The Coca-Cola Company (NYSE:KO). We will take a look at Merck & Co., Inc. (NYSE:MRK), Novartis AG (NYSE:NVS), China Mobile Limited (NYSE:CHL), and Cisco Systems, Inc. (NASDAQ:CSCO). This group of stocks' market valuations are closest to KO's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MRK,68,5195801,5 NVS,34,1826780,5 CHL,14,450334,-1 CSCO,55,3238755,-3 Average,42.75,2677918,1.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 42.75 hedge funds with bullish positions and the average amount invested in these stocks was $2678 million. That figure was $20695 million in KO's case. Merck & Co., Inc. (NYSE:MRK) is the most popular stock in this table. On the other hand China Mobile Limited (NYSE:CHL) is the least popular one with only 14 bullish hedge fund positions. The Coca-Cola Company (NYSE:KO) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 15 most popular stocks among hedge funds returned 19.7% through March 15th and outperformed the S&P 500 ETF (SPY) by 6.6 percentage points. Unfortunately KO wasn't in this group. Hedge funds that bet on KO were disappointed as the stock lost 3.5% and underperformed the market. If you are interested in investing in large cap stocks, you should check out the top 15 hedge fund stocks as 13 of these outperformed the market.

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

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