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Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 900 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds' 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Yum China Holdings, Inc. (NYSE:YUMC) in this article.
Is YUMC stock a buy or sell? Hedge fund interest in Yum China Holdings, Inc. (NYSE:YUMC) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that YUMC isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings). 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 Take-Two Interactive Software, Inc. (NASDAQ:TTWO), Franco-Nevada Corporation (NYSE:FNV), and Carnival Corporation & plc (NYSE:CCL) to gather more data points.
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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017 (see the details here).
Kerr Neilson of Platinum Asset Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 10 best battery stocks to buy to identify the next stock with 10x upside potential. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. With all of this in mind let's analyze the latest hedge fund action regarding Yum China Holdings, Inc. (NYSE:YUMC).
Do Hedge Funds Think YUMC Is A Good Stock To Buy Now?
At Q4's end, a total of 39 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the third quarter of 2020. On the other hand, there were a total of 29 hedge funds with a bullish position in YUMC a year ago. With the smart money's positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were upping their holdings substantially (or already accumulated large positions).
More specifically, GuardCap Asset Management was the largest shareholder of Yum China Holdings, Inc. (NYSE:YUMC), with a stake worth $292.8 million reported as of the end of December. Trailing GuardCap Asset Management was Junto Capital Management, which amassed a stake valued at $154.2 million. Tremblant Capital, Antipodes Partners, and Platinum Asset Management 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 Cheyne Capital allocated the biggest weight to Yum China Holdings, Inc. (NYSE:YUMC), around 14.62% of its 13F portfolio. Tiger Pacific Capital is also relatively very bullish on the stock, earmarking 6.57 percent of its 13F equity portfolio to YUMC.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren't any hedge funds dumping their holdings during the third quarter, there weren't any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven't identified any viable catalysts that can attract investor attention.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Yum China Holdings, Inc. (NYSE:YUMC) but similarly valued. We will take a look at Take-Two Interactive Software, Inc. (NASDAQ:TTWO), Franco-Nevada Corporation (NYSE:FNV), Carnival Corporation & plc (NYSE:CCL), Fortive Corporation (NYSE:FTV), Arthur J. Gallagher & Co. (NYSE:AJG), Edison International (NYSE:EIX), and Maxim Integrated Products Inc. (NASDAQ:MXIM). This group of stocks' market caps are similar to YUMC's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TTWO,55,1513003,3 FNV,27,1224140,-4 CCL,47,1196934,10 FTV,33,1116808,-1 AJG,24,142669,-11 EIX,30,1441563,2 MXIM,54,2844204,2 Average,38.6,1354189,0.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 38.6 hedge funds with bullish positions and the average amount invested in these stocks was $1354 million. That figure was $1317 million in YUMC's case. Take-Two Interactive Software, Inc. (NASDAQ:TTWO) is the most popular stock in this table. On the other hand Arthur J. Gallagher & Co. (NYSE:AJG) is the least popular one with only 24 bullish hedge fund positions. Yum China Holdings, Inc. (NYSE:YUMC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for YUMC is 59.2. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 5.3% in 2021 through March 19th and still beat the market by 0.8 percentage points. Hedge funds were also right about betting on YUMC as the stock returned 6.3% since the end of Q4 (through 3/19) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.