Yum Brands Might Be Down, but Hedge Funds Don’t Think It’s Out

Loeb, who held 3.58 million shares via Third Point at the end of June, isn’t the only hedge fund manager bullish on Yum Brands. According to our database of around 730 elite funds, all ten of the company’s top ten shareholders either increased their position or established new positions in the stock during the second quarter. Keith Meister‘s Corvex Capital increased its position by 1,685% to 15.29 million shares. Doug Silverman and Alexander Klabin’s Senator Investment Group upped its holding by 56% to 3.5 million shares, while Ken Griffin’s Citadel Investment Group hiked its position by 477% to 1.93 million shares. James Dinan’s York Capital Management established a new stake of 1.78 million shares. Overall, a total of 59 funds reported stakes worth $4.06 billion in aggregate (representing 10.4% of the float) in the last round of 13F filings, versus 45 funds and $1.49 billion respectively a quarter earlier.

After today’s earnings report, the hedge funds that are long Yum will have to be patient for their thesis to play out. Yum Brands does have strong intrinsic value, and the Chinese economy will eventually strengthen. The Chinese stock market is now stable so a spin-off is also possible. If Yum Brands spins off Yum China as a separate entity listed on a Chinese exchange, the new division will likely garner a higher valuation and draw less political and media attention. Management could also try the asset light approach and franchise more to boost profits.

Disclosure: None