McDonald's Corporation (NYSE:MCD) investors should be aware of a decrease in enthusiasm from smart money in recent months.
According to most stock holders, hedge funds are assumed to be unimportant, outdated financial vehicles of the past. While there are over 8000 funds in operation at the moment, we at Insider Monkey look at the crème de la crème of this club, around 450 funds. It is widely believed that this group has its hands on the lion's share of the smart money's total capital, and by monitoring their top equity investments, we have revealed a few investment strategies that have historically outstripped the S&P 500 index. Our small-cap hedge fund strategy outstripped the S&P 500 index by 18 percentage points per year for a decade in our back tests, and since we've began to sharing our picks with our subscribers at the end of August 2012, we have beaten the S&P 500 index by 23.3 percentage points in 8 months (see all of our picks from August).
Equally as key, optimistic insider trading activity is a second way to parse down the financial markets. As the old adage goes: there are lots of reasons for an insider to drop shares of his or her company, but just one, very simple reason why they would initiate a purchase. Various empirical studies have demonstrated the market-beating potential of this tactic if investors know where to look (learn more here).
With these "truths" under our belt, it's important to take a peek at the recent action encompassing McDonald's Corporation (NYSE:MCD).
Heading into Q2, a total of 43 of the hedge funds we track were long in this stock, a change of -12% from the first quarter. With hedgies' positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were upping their holdings significantly.
According to our comprehensive database, Michael Larson's Bill & Melinda Gates Foundation Trust had the biggest position in McDonald's Corporation (NYSE:MCD), worth close to $984.2 million, comprising 5.4% of its total 13F portfolio. Coming in second is Fisher Asset Management, managed by Ken Fisher, which held a $518.8 million position; the fund has 1.4% of its 13F portfolio invested in the stock. Other hedge funds with similar optimism include Jim Simons's Renaissance Technologies, Ken Griffin's Citadel Investment Group and Ric Dillon's Diamond Hill Capital.
Since McDonald's Corporation (NYSE:MCD) has experienced a declination in interest from the entirety of the hedge funds we track, logic holds that there lies a certain "tier" of hedge funds that elected to cut their entire stakes heading into Q2. It's worth mentioning that Daniel S. Och's OZ Management dumped the largest stake of the 450+ funds we watch, worth close to $32 million in stock.. John A. Levin's fund, Levin Capital Strategies, also dropped its stock, about $23 million worth. These transactions are interesting, as total hedge fund interest dropped by 6 funds heading into Q2.
Bullish insider trading is most useful when the company in question has seen transactions within the past 180 days. Over the last half-year time period, McDonald's Corporation (NYSE:MCD) has experienced 1 unique insiders buying, and 9 insider sales (see the details of insider trades here).
Let's also review hedge fund and insider activity in other stocks similar to McDonald's Corporation (NYSE:MCD). These stocks are Darden Restaurants, Inc. (NYSE:DRI), Burger King Worldwide Inc (NYSE:BKW), Tim Hortons Inc. (USA) (NYSE:THI), Chipotle Mexican Grill, Inc. (NYSE:CMG), and Yum! Brands, Inc. (NYSE:YUM). All of these stocks are in the restaurants industry and their market caps resemble MCD's market cap.