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Hedge Funds’ #1 Stock Picks in Video Games, Casinos, Restaurants, & More

Hedge Funds’ #1 Restaurant Stock Pick: McDonald’s Corporation (NYSE:MCD)

Number of Hedge Fund Shareholders of MCD (as of June 30): 44

Value of Hedge Funds’ Holdings in MCD (as of June 30): $1.32 billion

McDonald’s Corporation (NYSE:MCD) is the most popular restaurant stock among hedge funds as of June 30, though the top players in the industry have lost quite a bit of hedge fund support over the past few years. 44 hedge funds in our system owned McDonald’s at the end of June, down from 63 two years ago. Cliff Asness’ AQR Capital Management owned 1.13 million McDonald’s shares on June 30, down by 17% from a quarter earlier.

McDonald’s Corporation (NYSE:MCD) announced in mid-August that the company and some of its franchisees will spend $6 billion modernizing the majority of McDonald’s locations by 2020. Among the host of changes will be digital self-ordering kiosks, refreshed interiors with new furniture, and designated parking spaces for pick-ups through mobile ordering. Some of those changes have already been rolled out at a limited number of locations. Morning coffee rival Dunkin Brands Group Inc (NASDAQ:DNKN) is also undertaking the addition of digital kiosks and mobile orders at a few dozen test stores to open by the end of this year as the service industry rapidly shifts to meet the demands of more tech-focused and time-starved consumers.

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Hedge Funds’ #1 Tobacco Stock Pick: Philip Morris International Inc. (NYSE:PM)

Number of Hedge Fund Shareholders of PM (as of June 30): 43

Value of Hedge Funds’ Holdings in PM (as of June 30): $3 billion

Philip Morris International Inc. (NYSE:PM) leads rival Altria Group Inc. (NYSE:MO) by a count of 43 to 35 in hedge fund ownership, ranking it as the most popular tobacco stock. Nonetheless, there was a small flight from the stock during a brutal Q2 that battered the shares of both companies. Ownership of Philip Morris among hedge funds fell by seven to 43 during the second-quarter, while the amount invested in the stock declined by 33% to $3 billion.

Philip Morris International Inc. (NYSE:PM) is hovering around 3-year lows as the tobacco industry struggles to stem the flow of lost nicotine addicts. The company has expressed a long-term goal of phasing out its traditional tobacco products completely in favor of smoke-free, reduced-risk products. Japanese sales of its heated tobacco system iQOS have been strong, which has Philip Morris optimistic as it converts factories to produce iQOS units in greater quantities ahead of its entrance into additional markets. However, Philip Morris had to revise down its heated tobacco shipment expectations recently, and some potential markets like India have been throwing up worrisome signals lately, with that country’s health ministry calling for the banning of heated tobacco products like iQOS.

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Hedge Funds’ #1 Aerospace Stock Pick: Boeing Co (NYSE:BA)

Number of Hedge Fund Shareholders of BA (as of June 30): 53

Value of Hedge Funds’ Holdings in BA (as of June 30): $3.41 billion

Boeing Co (NYSE:BA) soars above all other aerospace stocks with 53 of the 645 hedge funds in our system owning the stock on June 30. That was a slight decline from 57 at the end of March. Doug Silverman and Alexander Klabin’s Senator Investment Group raised its Boeing position by 35% to 850,000 shares during the second-quarter.

Boeing Co (NYSE:BA) has been struggling with production and supply-chain issues, which has lead to a mounting backlog of 737 orders, as well as a growing number of undelivered Dreamliners at its Charleston manufacturing facility. Boeing aimed to boost 737 output to 52 per month from 47 last year, but has faced parts delays from several suppliers that have been unable to keep up with the increased demand. Among them are engine supplier CFM International, cabin components supplier Astronics Corp., and fuselage supplier Spirit AeroSystems Holdings, Inc. (NYSE:SPR).

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Disclosure: None

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