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Did Hedge Funds Make The Right Call On Coca-Cola European Partners plc (CCEP) ?

At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Coca-Cola European Partners plc (NYSE:CCEP) at the end of the first quarter and determine whether the smart money was really smart about this stock.

Is Coca-Cola European Partners plc (NYSE:CCEP) a buy, sell, or hold? Hedge funds were in a bullish mood. The number of long hedge fund positions advanced by 1 recently. Our calculations also showed that CCEP isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: 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’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

Peter Rathjens Arrowstreet Capital 394

Peter Rathjens of Arrowstreet Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, on one site we found out that NBA champion Isiah Thomas is now the CEO of this cannabis company. The same site also talks about a snack manufacturer that’s growing at 30% annually. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so if you have any good ideas send us an email. Keeping this in mind let’s take a look at the latest hedge fund action surrounding Coca-Cola European Partners plc (NYSE:CCEP).

How have hedgies been trading Coca-Cola European Partners plc (NYSE:CCEP)?

At the end of the first quarter, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of 5% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards CCEP over the last 18 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Coca-Cola European Partners plc (NYSE:CCEP) was held by Citadel Investment Group, which reported holding $67.6 million worth of stock at the end of September. It was followed by Echo Street Capital Management with a $16.4 million position. Other investors bullish on the company included GLG Partners, D E Shaw, and Renaissance Technologies. In terms of the portfolio weights assigned to each position Hengistbury Investment Partners allocated the biggest weight to Coca-Cola European Partners plc (NYSE:CCEP), around 2.89% of its 13F portfolio. Neo Ivy Capital is also relatively very bullish on the stock, designating 0.52 percent of its 13F equity portfolio to CCEP.

As aggregate interest increased, key hedge funds have been driving this bullishness. Hengistbury Investment Partners, managed by Stuart Powers, created the biggest position in Coca-Cola European Partners plc (NYSE:CCEP). Hengistbury Investment Partners had $12.6 million invested in the company at the end of the quarter. Steve Cohen’s Point72 Asset Management also made a $11.2 million investment in the stock during the quarter. The other funds with brand new CCEP positions are Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Greg Eisner’s Engineers Gate Manager, and Dmitry Balyasny’s Balyasny Asset Management.

Let’s now review hedge fund activity in other stocks similar to Coca-Cola European Partners plc (NYSE:CCEP). We will take a look at Snap Inc. (NYSE:SNAP), Tencent Music Entertainment Group (NYSE:TME), Simon Property Group, Inc (NYSE:SPG), and CMS Energy Corporation (NYSE:CMS). All of these stocks’ market caps are similar to CCEP’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SNAP 48 929814 -18
TME 25 455610 -1
SPG 29 419445 3
CMS 28 421101 -2
Average 32.5 556493 -4.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 32.5 hedge funds with bullish positions and the average amount invested in these stocks was $556 million. That figure was $186 million in CCEP’s case. Snap Inc. (NYSE:SNAP) is the most popular stock in this table. On the other hand Tencent Music Entertainment Group (NYSE:TME) is the least popular one with only 25 bullish hedge fund positions. Compared to these stocks Coca-Cola European Partners plc (NYSE:CCEP) is even less popular than TME. Hedge funds dodged a bullet by taking a bearish stance towards CCEP. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th but managed to beat the market by 15.5 percentage points. Unfortunately CCEP wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); CCEP investors were disappointed as the stock returned 0.6% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020.

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