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Did Hedge Funds Drop The Ball On Pilgrim’s Pride Corporation (PPC)?

At Insider Monkey we track the activity of some of the best-performing hedge funds like Appaloosa Management, Baupost, and Tiger Global because we determined that some of the stocks that they are collectively bullish on can help us generate returns above the broader indices. Out of thousands of stocks that hedge funds invest in, small-caps can provide the best returns over the long term due to the fact that these companies are less efficiently priced and are usually under the radars of mass-media, analysts and dumb money. This is why we follow the smart money moves in the small-cap space.

Pilgrim’s Pride Corporation (NASDAQ:PPC) investors should pay attention to an increase in activity from the world’s largest hedge funds of late. PPC was in 19 hedge funds’ portfolios at the end of the second quarter of 2019. There were 14 hedge funds in our database with PPC holdings at the end of the previous quarter. Our calculations also showed that PPC isn’t among the 30 most popular stocks among hedge funds (view the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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 has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

PPC_oct2019

Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to take a glance at the latest hedge fund action regarding Pilgrim’s Pride Corporation (NASDAQ:PPC).

How have hedgies been trading Pilgrim’s Pride Corporation (NASDAQ:PPC)?

At Q2’s end, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 36% from the first quarter of 2019. The graph below displays the number of hedge funds with bullish position in PPC over the last 16 quarters. With hedge funds’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).

Noam Gottesman GLG Partners

When looking at the institutional investors followed by Insider Monkey, AQR Capital Management, managed by Cliff Asness, holds the largest position in Pilgrim’s Pride Corporation (NASDAQ:PPC). AQR Capital Management has a $73.7 million position in the stock, comprising 0.1% of its 13F portfolio. On AQR Capital Management’s heels is GLG Partners, managed by Noam Gottesman, which holds a $44.3 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors that are bullish comprise Ken Griffin’s Citadel Investment Group, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and D. E. Shaw’s D E Shaw.

Consequently, key hedge funds have jumped into Pilgrim’s Pride Corporation (NASDAQ:PPC) headfirst. DSAM Partners, managed by Guy Shahar, assembled the most valuable position in Pilgrim’s Pride Corporation (NASDAQ:PPC). DSAM Partners had $3.3 million invested in the company at the end of the quarter. Joseph A. Jolson’s Harvest Capital Strategies also made a $2.5 million investment in the stock during the quarter. The following funds were also among the new PPC investors: Renaissance Technologies, Matthew Tewksbury’s Stevens Capital Management, and Thomas Bailard’s Bailard Inc.

Let’s check out hedge fund activity in other stocks similar to Pilgrim’s Pride Corporation (NASDAQ:PPC). We will take a look at People’s United Financial, Inc. (NASDAQ:PBCT), Buckeye Partners, L.P. (NYSE:BPL), Dolby Laboratories, Inc. (NYSE:DLB), and Israel Chemicals Ltd. (NYSE:ICL). This group of stocks’ market valuations resemble PPC’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PBCT 18 130104 -2
BPL 13 166135 8
DLB 27 502234 -2
ICL 6 37150 2
Average 16 208906 1.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $209 million. That figure was $249 million in PPC’s case. Dolby Laboratories, Inc. (NYSE:DLB) is the most popular stock in this table. On the other hand Israel Chemicals Ltd. (NYSE:ICL) is the least popular one with only 6 bullish hedge fund positions. Pilgrim’s Pride Corporation (NASDAQ:PPC) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Hedge funds were also right about betting on PPC as the stock returned 26.2% during the third quarter and outperformed the market. Hedge funds were rewarded for their relative bullishness.

Disclosure: None. This article was originally published at Insider Monkey.

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