The Insider Monkey team has completed processing the quarterly 13F filings for the March quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Yum! Brands, Inc. (NYSE:YUM).
Is Yum! Brands, Inc. (NYSE:YUM) a healthy stock for your portfolio? Prominent investors are becoming less hopeful. The number of long hedge fund bets were trimmed by 2 lately. Our calculations also showed that YUM isn't among the 30 most popular stocks among hedge funds. YUM was in 32 hedge funds' portfolios at the end of the first quarter of 2019. There were 34 hedge funds in our database with YUM holdings at the end of the previous quarter.
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 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 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.
Let's take a look at the fresh hedge fund action encompassing Yum! Brands, Inc. (NYSE:YUM).
What does the smart money think about Yum! Brands, Inc. (NYSE:YUM)?
Heading into the second quarter of 2019, a total of 32 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -6% from one quarter earlier. On the other hand, there were a total of 22 hedge funds with a bullish position in YUM a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Yum! Brands, Inc. (NYSE:YUM) was held by Two Sigma Advisors, which reported holding $254.3 million worth of stock at the end of March. It was followed by Arrowstreet Capital with a $211 million position. Other investors bullish on the company included D E Shaw, Millennium Management, and Alkeon Capital Management.
Because Yum! Brands, Inc. (NYSE:YUM) has faced falling interest from the aggregate hedge fund industry, logic holds that there were a few fund managers who sold off their full holdings by the end of the third quarter. Interestingly, Gabriel Plotkin's Melvin Capital Management dumped the biggest stake of the "upper crust" of funds tracked by Insider Monkey, totaling about $55.2 million in stock. Sara Nainzadeh's fund, Centenus Global Management, also dropped its stock, about $2.8 million worth. These transactions are important to note, as total hedge fund interest fell by 2 funds by the end of the third quarter.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Yum! Brands, Inc. (NYSE:YUM) but similarly valued. These stocks are Electronic Arts Inc. (NASDAQ:EA), O'Reilly Automotive Inc (NASDAQ:ORLY), Telefonaktiebolaget LM Ericsson (publ) (NASDAQ:ERIC), and Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN). All of these stocks' market caps resemble YUM's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position EA,61,2742637,4 ORLY,43,2015940,-2 ERIC,20,425457,-5 ALXN,35,2311990,-6 Average,39.75,1874006,-2.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 39.75 hedge funds with bullish positions and the average amount invested in these stocks was $1874 million. That figure was $1110 million in YUM's case. Electronic Arts Inc. (NASDAQ:EA) is the most popular stock in this table. On the other hand Telefonaktiebolaget LM Ericsson (publ) (NASDAQ:ERIC) is the least popular one with only 20 bullish hedge fund positions. Yum! Brands, Inc. (NYSE:YUM) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. A small number of hedge funds were also right about betting on YUM as the stock returned 2.2% during the same time frame and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.