Barclays PLC (ADR) (NYSE:BCS) has announced its top stock picks for its latest Americas Top Picks List in different sectors. In the Consumer sector, Barclays picks include food and beverage companies like PepsiCo, Inc. (NYSE:PEP) and Mondelez International Inc (NASDAQ:MDLZ) and the food retailer company, Sprouts Farmers Market Inc (NASDAQ:SFM). How do hedge funds feel about these stocks? Let’s crunch the numbers and find out.
Most investors don’t understand hedge funds and indicators that are based on hedge fund and insider activity. They ignore hedge funds because of their recent poor performance in the long-running bull market. Our research indicates that hedge funds underperformed because they aren’t 100% long. Hedge fund fees are also very large compared to the returns generated and they reduce the net returns enjoyed (or not) by investors. We uncovered through extensive research that hedge funds’ long positions in small-cap stocks actually greatly outperformed the market from 1999 to 2012, and built a system around this. The 15 most popular small-cap stocks among funds beat the S&P 500 Index by more than 80 percentage points since the end of August 2012 when this system went live, returning a cumulative 135% vs. less than 55% for the S&P 500 Index (read the details). Likewise, other research (not our own) has shown insider purchases are also effective piggybacking methods for investors that lead to greater returns. That’s why we believe investors should pay attention to what hedge funds and insiders are buying and keep them apprised of this information.
Barclays PLC (ADR) (NYSE:BCS) mentioned that it still holds PepsiCo, Inc. (NYSE:PEP) as its top pick in the U.S. Beverages and Tobacco segment. It believes that PepsiCo, Inc. (NYSE:PEP) will continue to meet or beat expectations for the rest of this year. Barclays acknowledged the fact that currency headwinds might play a role, but it thinks that the company’s underlying growth is holding up well in a slow-paced market space. It thinks that the activist influence on the stock might help the company in delivering strong results as well, and that the attractive cash returns along with target-meeting capabilities should push the stock up further in 2015. Barclays has set a price target of $111 on the stock, which is 19% more from what the stock closed at on Tuesday.
At the end of the first quarter, there were 61 hedge funds with a cumulative investment of $8.02 billion in Pepsi, a hike up from the 54 hedge funds with $7.17 billion of the stock at the end of 2014. The 10% increase in capital investment by hedge funds in the stock came amid a minuscule 0.3% gain for it in the first three months of the year, showing the hike in capital was through more shares being bought. Donald Yacktman‘s Yacktman Asset Management holds the largest position in the stock with 25.5 million shares valued at $2.4 billion; comprising 11.2% of the hedge fund’s total 13F portfolio. Notably, James Dinan‘s York Capital Management opened up the largest ‘Call’ position in the stock by buying call options underlying around 8.7 million shares in the quarter. All of the above stats shows that the smart money was indeed bullish on the stock. But what about insiders? There were no insider purchases of the stock, but there were quite a few insider sales. CEO of PepsiCo, Inc. (NYSE:PEP), Indra Nooyi sold over 58,000 shares in May, while CEO, America Beverages, Albert Carey sold nearly 45,000 shares, also in May.