Hedge Funds Are Buying ConAgra Foods, Inc. (CAG)

Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed over the past few years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that hedge funds do have great stock picking skills, so let’s take a glance at the smart money sentiment towards ConAgra Foods, Inc. (NYSE:CAG).

Is ConAgra Foods, Inc. (NYSE:CAG) a bargain? Money managers are taking a bullish view. The number of long hedge fund bets advanced by 7 recently. CAG was in 38 hedge funds’ portfolios at the end of September. There were 31 hedge funds in our database with CAG holdings at the end of the previous quarter. 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 Under Armour Inc (NYSE:UA), TD Ameritrade Holding Corp. (NYSE:AMTD), and HCP, Inc. (NYSE:HCP) to gather more data points.

In the financial world, there are several gauges shareholders put to use to value stocks. A pair of the less known gauges are hedge fund and insider trading indicators. Our researchers have shown that, historically, those who follow the best picks of the elite hedge fund managers can trounce the market by a solid amount (see the details here).

Now, we’re going to check out the recent action encompassing ConAgra Foods, Inc. (NYSE:CAG).

What have hedge funds been doing with ConAgra Foods, Inc. (NYSE:CAG)?

At the Q3’s end, a total of 38 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 23% from one quarter earlier. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, JANA Partners, managed by Barry Rosenstein, holds the biggest position in ConAgra Foods, Inc. (NYSE:CAG). JANA Partners has an $1.2384 billion position in the stock, comprising 14% of its 13F portfolio. Coming in second is Citadel Investment Group, managed by Ken Griffin, which holds an $259.1 million position; the fund has 0.2% of its 13F portfolio invested in the stock. The remaining members of the smart money that are bullish contain Phill Gross and Robert Atchinson’s Adage Capital Management, Israel Englander’s Millennium Management, and Eric W. Mandelblatt’s Soroban Capital Partners.

Now, key money managers have been driving this bullishness. Soroban Capital Partners initiated the biggest call position in ConAgra Foods, Inc. (NYSE:CAG). Soroban Capital Partners had $81 million invested in the company at the end of the quarter. Robert Pohly’s Samlyn Capital also initiated an $50.8 million position during the quarter. The following funds were also among the new CAG investors: Jim Simons’ Renaissance Technologies, Dmitry Balyasny’s Balyasny Asset Management, and Paul Marshall and Ian Wace’s Marshall Wace LLP.

Let’s now review hedge fund activity in other stocks similar to ConAgra Foods, Inc. (NYSE:CAG). We will take a look at Under Armour Inc (NYSE:UA), TD Ameritrade Holding Corp. (NYSE:AMTD), HCP, Inc. (NYSE:HCP), and Paychex, Inc. (NASDAQ:PAYX). This group of stocks’ market valuations are similar to CAG’s market valuation.

As you can see these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $398 million. That figure was $2.51 billion in CAG’s case. Under Armour Inc (NYSE:UA) is the most popular stock in this table, as 23 funds disclosed owning shares of the company. On the other hand HCP, Inc. (NYSE:HCP) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks ConAgra Foods, Inc. (NYSE:CAG) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.