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Why Campbell Soup (CPB) Is A Compelling Investment Case

Alex Smith

If you are looking for the best ideas for your portfolio you may want to consider some of Third Point's top stock picks. Third Point, an investment management firm, is bullish on Campbell Soup Co (NYSE:CPB) stock. In its Q4 2019 investor letter – you can download a copy here – the firm discussed its investment thesis on Campbell Soup Co (NYSE:CPB) stock. Campbell Soup Co (NYSE:CPB) is a food processing company. The stock is up 1.9% since the Third Point's pitch in January 2020. On a year-to-date basis, Campbell Soup Co (NYSE:CPB) stock has fallen by 0.3%.

On January 31, 2020, Third Point had released its Q4 2019 Investor Letter. Third Point said that Campbell Soup Co (NYSE:CPB) stock returned 6% in the fourth quarter and 55% in the full-year 2019.

For the quarter ended December 31st, 2019, Third Point Offshore fund recorded a return of 3.9%, compared to 9.1% of the S&P 500 Index. This brings its 2019 full-year return to 17.1%, compared to 31.5% of the S&P 500 Index.

Let’s take a look at comments made by Third Point about Campbell Soup Co (NYSE:CPB) in the letter.

"One of our biggest winners in Q4 and 2019 was Campbell, which gained over 6% in Q4 and 55% overall in 2019. Our initial foray into Campbell was met with skepticism, both in terms of the difficulty in effecting change in a family-controlled board and the seeming difficulty in turning around what most thought was a moribund and declining business. We saw things differently and created an opening for an attractive settlement with the board by securing support from all proxy advisory firms and building consensus among non-family shareholders around the need for change.

The Board has been refreshed with the addition of three directors – two former packaged food CEOs and a marketing guru. The senior leadership team has been upgraded with the appointment of a new CEO and CFO. The balance sheet has been repaired with the divestiture of non-core fresh food and international snacks businesses for more than $3 billion, which reduced leverage from ~5x to 3.5x. The core business has stabilized, providing a stronger foundation on which to build. And, a compelling multi-year turnaround is now underway to return the company to sustainable sales and earnings growth.

CEO Mark Clouse, who is only one year into his tenure, has demonstrated how powerful leadership working with an engaged board can revitalize a company. During the most recent quarterly call in December, Clouse was upbeat about the potential for top line growth in 2020, which is key to the next leg of the story. Given strong 2019 performance, we took some profits and reduced our position to below 5% of the company, however we remain enthusiastic about Clouse’s leadership and Campbell’s future and are pleased to have played a role in repositioning this iconic company."

In Q1 2020, the number of bullish hedge fund positions on Campbell Soup Co (NYSE:CPB) stock increased by about 38% from the previous quarter (see the chart here), so a number of other hedge fund managers seem to agree with Campbell Soup's growth potential. Our calculations showed that Campbell Soup Co (NYSE:CPB) isn't ranked among the 30 most popular stocks among hedge funds.

The top 10 stocks among hedge funds returned 185% since the end of 2014 and outperformed the S&P 500 Index ETFs by more than 109 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds' poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Below you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.

Video: Top 5 Stocks Among Hedge Funds

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 stocks recommended/scorned by legendary Bill Miller. 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. You can subscribe to our free enewsletter below to receive our stories in your inbox:


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