Did Hedge Funds Make The Right Call On General Mills, Inc. (GIS) ?

We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards General Mills, Inc. (NYSE:GIS) and determine whether hedge funds skillfully traded this stock.

General Mills, Inc. (NYSE:GIS) has experienced an increase in hedge fund sentiment recently. GIS was in 39 hedge funds’ portfolios at the end of the first quarter of 2020. There were 37 hedge funds in our database with GIS holdings at the end of the previous quarter. Our calculations also showed that GIS 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.

To most investors, hedge funds are viewed as worthless, outdated financial tools of years past. While there are greater than 8000 funds with their doors open at the moment, Our experts choose to focus on the leaders of this group, around 850 funds. These money managers handle the lion’s share of the hedge fund industry’s total capital, and by watching their finest picks, Insider Monkey has come up with numerous investment strategies that have historically defeated Mr. Market. Insider Monkey’s flagship short hedge fund strategy defeated the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .


Paul Tudor Jones of Tudor Investment Corp

At Insider Monkey we scour multiple sources to uncover the next great investment idea. 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 we are checking out this tiny lithium stock. Keeping this in mind we’re going to take a look at the latest hedge fund action surrounding General Mills, Inc. (NYSE:GIS).

How are hedge funds trading General Mills, Inc. (NYSE:GIS)?

Heading into the second quarter of 2020, a total of 39 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 5% from the previous quarter. By comparison, 32 hedge funds held shares or bullish call options in GIS a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Renaissance Technologies held the most valuable stake in General Mills, Inc. (NYSE:GIS), which was worth $252.1 million at the end of the third quarter. On the second spot was D E Shaw which amassed $101.4 million worth of shares. AQR Capital Management, Two Sigma Advisors, and GAMCO Investors were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Wallace Capital Management allocated the biggest weight to General Mills, Inc. (NYSE:GIS), around 2.66% of its 13F portfolio. Beech Hill Partners is also relatively very bullish on the stock, setting aside 2.09 percent of its 13F equity portfolio to GIS.

As aggregate interest increased, specific money managers have been driving this bullishness. Bridgewater Associates, managed by Ray Dalio, initiated the largest position in General Mills, Inc. (NYSE:GIS). Bridgewater Associates had $1.8 million invested in the company at the end of the quarter. Andrew Kurita’s Kettle Hill Capital Management also initiated a $1.5 million position during the quarter. The other funds with brand new GIS positions are Greg Eisner’s Engineers Gate Manager, Paul Tudor Jones’s Tudor Investment Corp, and Qing Li’s Sciencast Management.

Let’s now review hedge fund activity in other stocks similar to General Mills, Inc. (NYSE:GIS). These stocks are Eaton Corporation plc (NYSE:ETN), FedEx Corporation (NYSE:FDX), Xcel Energy Inc (NASDAQ:XEL), and Kinder Morgan Inc (NYSE:KMI). This group of stocks’ market values are similar to GIS’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ETN 35 823530 -7
FDX 50 1092300 5
XEL 24 394426 9
KMI 47 947312 7
Average 39 814392 3.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 39 hedge funds with bullish positions and the average amount invested in these stocks was $814 million. That figure was $691 million in GIS’s case. FedEx Corporation (NYSE:FDX) is the most popular stock in this table. On the other hand Xcel Energy Inc (NASDAQ:XEL) is the least popular one with only 24 bullish hedge fund positions. General Mills, Inc. (NYSE:GIS) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds 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 and surpassed the market by 15.5 percentage points. Unfortunately GIS wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); GIS investors were disappointed as the stock returned 17.9% 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 in 2020.

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