How Kellogg Company (K) Stacks Up Against Its Peers

Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips on the charts, usually don’t make them change their opinion towards a company. The second half of 2015 and the first few months of this year was a stressful period for hedge funds. However, things have been taking a turn for the better in the second half of this year. Small-cap stocks which hedge funds are usually overweight outperformed the market by double digits and it may be a good time to pay attention to hedge funds’ picks before it is too late. In this article we are going to analyze the hedge fund sentiment towards Kellogg Company (NYSE:K) to find out whether it was one of their high conviction long-term ideas.

Kellogg Company (NYSE:K) shareholders have witnessed a huge increase in hedge fund sentiment in recent months. There were 27 hedge funds in our database with K holdings at the end of June. At the end of this article we will also compare Kellogg Company to other stocks including Deere & Company (NYSE:DE), Sempra Energy (NYSE:SRE), and Fresenius Medical Care AG & Co. (ADR) (NYSE:FMS) to get a better sense of its popularity.

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Now, let’s analyze the recent action surrounding Kellogg Company (NYSE:K).

How are hedge funds trading Kellogg Company (NYSE:K)?

At Q3’s end, a total of 39 of the hedge funds tracked by Insider Monkey held long positions in this stock, a boost of 44% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards K over the last 5 quarters. With the smart money’s capital changing hands, there exists a select group of key hedge fund managers who were upping their stakes substantially (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Rob Citrone’s Discovery Capital Management has the biggest position in Kellogg Company (NYSE:K), worth close to $254.8 million, comprising 5.4% of its total 13F portfolio. The second most bullish fund manager is Israel Englander’s Millennium Management, holding a $148.6 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Some other peers that are bullish encompass Phill Gross and Robert Atchinson’s Adage Capital Management, Robert Pohly’s Samlyn Capital and Zach Schreiber’s Point State Capital. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

As one would reasonably expect, key money managers have been driving this bullishness. Discovery Capital Management’s position in Kellogg Company (NYSE:K) is also a new position among all hedge funds. Zach Schreiber’s Point State Capital also made an $81.2 million investment in the stock during the quarter. The other funds with brand new Kellogg Company positions are Matthew Tewksbury’s Stevens Capital Management, Doug Silverman and Alexander Klabin’s Senator Investment Group, and Mark Kingdon’s Kingdon Capital.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Kellogg Company (NYSE:K) but similarly valued. We will take a look at Deere & Company (NYSE:DE), Sempra Energy (NYSE:SRE), Fresenius Medical Care AG & Co. (ADR) (NYSE:FMS), and Health Care REIT, Inc. (NYSE:HCN). All of these stocks’ market caps resemble K’s market cap.

As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $1.17 billion. That figure was $1.31 billion in K’s case. Deere & Company (NYSE:DE) is the most popular stock in this table. On the other hand Fresenius Medical Care AG & Co. (ADR) (NYSE:FMS) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Kellogg Company (NYSE:K) 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.

Disclosure: none.