Five Consumer Non-Durable Companies Smart Money Likes

Consumers buy a wide array of products. A portion of these products represents goods that will last for many years, usually referred to as durable goods. On the contrary, the goods consumed in a short time, which have useful lives of less than three years, are generally classified as non-durable. While the demand for some non-durable goods such as food tends to be relatively stable and predictable over time, demand growth in other consumer products, like clothing and electronics, tends to indicate trends in economic growth.

Hence, one may look for hints about the underlying strength of the overall economy within the non-durable goods sector. That being said, Insider Monkey compiled a list of five consumer non-durable companies favored by the smart money investors monitored by our team.

At Insider Monkey, we track around 750 hedge funds and institutional investors. Through extensive backtests, we have determined that imitating some of the stocks that these investors are collectively bullish on can help retail investors generate double digits of alpha per year. The key is to focus on the small-cap picks of these funds, which are usually less followed by the broader market and allow for larger price inefficiencies (see more details about our small-cap strategy).

#5. Nike Inc. (NYSE:NKE)

– Number of Hedge Fund Shareholders (as of June 30): 57

– Total Value of Hedge Funds’ Holdings (as of June 30): $4.30 Billion

Nike Inc. (NYSE:NKE) lost some appeal within the pool of hedge funds followed by Insider Monkey during the second quarter of 2016, as the number of funds invested in the company fell to 57 from 64. Nonetheless, the overall volume of those hedge funds’ equity investments in Nike rose by around 18% quarter-on-quarter to $4.30 billion even though the value of Nike shares fell by nearly 10% in the quarter. Nike shares are 5% in the red in 2016, but the stock has gained 5% in the past three months alone. The recent performance can be mainly attributed to positive sentiment around the recently-finished Euro 2016 soccer championship and the Rio Olympics. Just recently, analysts at B. Riley downgraded Nike to ‘Neutral’ from ‘Buy’ while maintaining their price target of $62, arguing that the downgrade was “partly based on valuation” and “misplaced positive sentiment.” Jim Simons’ Renaissance Technologies LLC added a 5.07 million-share position in Nike Inc. (NYSE:NKE) to its portfolio during the second quarter.

#4. PepsiCo Inc. (NYSE:PEP)

– Number of Hedge Fund Shareholders (as of June 30): 58

– Total Value of Hedge Funds’ Holdings (as of June 30): $5.36 Billion

PepsiCo Inc. (NYSE:PEP) fell out of favor with the hedge funds tracked by our team during the June quarter, with the number of funds invested in the company declining to 58 from 65 quarter-over-quarter. Similarly, the aggregate value of those hedge funds’ equity stakes in PepsiCo dropped by almost 11% quarter-on-quarter to $5.36 billion despite the stock having gained 4% in the three-month period that ended June 30. A fresh study shows that consumption of soda and other sugary drinks fell by around 22% in low-income neighborhoods of Berkeley, after the California city became the first to introduce a special tax on sugar-sweetened beverages in the United States. The penny-per-ounce tax made a 20-ounce bottle of Coke $0.20 more expensive for distributors. Although the long-term impact of special taxes on sugary drinks remains cloudy, U.S. soda sales volumes have already declined for 11 consecutive years. However, PepsiCo has successfully diversified its business away from the soda-only roots, which enabled the beverage giant to keep growing despite experiencing falling demand for sugary drinks. PepsiCo shares are up 7% so far in 2016. Donald Yacktman’s Yacktman Asset Management cut its position in PepsiCo Inc. (NYSE:PEP) by 21% during the June quarter to 10.61 million shares.

The second page of this article will discuss three other consumer non-durable companies favored by the hedge funds tracked by Insider Monkey.

#3. Kraft Heinz Co (NASDAQ:KHC)

– Number of Hedge Fund Shareholders (as of June 30): 60

– Total Value of Hedge Funds’ Holdings (as of June 30): $31.29 Billion

There were 60 hedge funds followed by Insider Monkey with long positions in Kraft Heinz Co (NASDAQ:KHC) both at the end of the first and second quarter of 2016. Nonetheless, the value of those positions jumped by 9% quarter-over-quarter to $31.29 billion, mainly due to a 13% increase in the value of Kraft Heinz shares. Hence, some hedge fund vehicles actually trimmed their exposure to the food giant during the three months that ended June 30. In early August, analysts at Deutsche Bank upgraded the packaged food company to ‘Buy’ from ‘Hold’ and raised their price target on the stock to $103 from $85, saying that the company “continues to deliver impressive EBIT growth and margin expansion.” Furthermore, Deutsche Bank analysts believe Kraft Heinz represents “an attractive long-term story with industry-leading margins, solid market share positions across its portfolio, and a strategy currently emulated (with varying success) by a number of peers.” The food giant has seen its market capitalization spike by 21% since the start of the year. Warren Buffett’s Berkshire Hathaway was the owner of a whopping number of 325.63 million shares of Kraft Heinz Co (NASDAQ:KHC) at the end of the June quarter.

#2. Mondelez International Inc. (NASDAQ:MDLZ)

– Number of Hedge Fund Shareholders (as of June 30): 62

– Total Value of Hedge Funds’ Holdings (as of June 30): $6.68 Billion

The number of smart money investors from our system with equity stakes in Mondelez International Inc. (NASDAQ:MDLZ) dropped to 62 from 63 during the April-to-June period, whereas the value of those stakes jumped by 18% quarter-over-quarter to $6.68 billion. The increase was predominantly driven by a 13% gain in the value of Mondelez shares in the three-month period. Those 62 asset managers amassed nearly 10% of the company’s outstanding common stock. In mid-August, the maker of Oreo and Ritz crackers agreed to buy the global license for Cadbury-branded biscuits from Burton’s Biscuit Co. The deal comes shortly after chocolate maker Hershey Co (NYSE:HSY) rejected a $23 billion cash-and-stock offer from the maker of Oreo cookies. Burton’s factories will continue to make the Cadbury-branded biscuits. Although the terms of the transaction were not disclosed, media reports value the deal at approximately $260 million. Mondelez shares are 4% in the red thus far in 2016. Bill Ackman’s Pershing Square Capital Management L.P. reported owning 22.94 million shares of Mondelez International Inc. (NASDAQ:MDLZ) through the latest round of 13Fs.

#1. Constellation Brands Inc. (NYSE:STZ)

– Number of Hedge Fund Shareholders (as of June 30): 69

– Total Value of Hedge Funds’ Holdings (as of June 30): $6.28 Billion

There were 69 asset managers followed by Insider Monkey with equity investments in Constellation Brands Inc. (NYSE:STZ) at the end of the June quarter, as compared to 71 registered at the end of the March quarter. Nonetheless, the overall value of those equity investments rose by 15% quarter-over-quarter to $6.28 billion, mainly reflecting a 9% increase in the value of the company’s stock. The 69 hedge funds hoarded up 19% of the company’s total number of outstanding shares. In December, the leading international beverage alcohol company, which owns well-known brands such as Corona, Modelo and Pacifico, acquired U.S. craft brewer Ballast Point for $998.5 million net of cash acquired. With the nearly $1 billion-acquisition, the third-largest producer of beer for the U.S. market aims to strengthen its position in the high-end U.S. beer market. Constellation Brands has seen the value of its stock gain 16% since the start of the year. Dan Loeb’s Third Point LLC owns 2.00 million shares of Constellation Brands Inc. (NYSE:STZ) as of June 30.

Disclosure: None