Hedge Funds Are Cashing Out Of Campbell Soup Company (CPB)

Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Campbell Soup Company (NYSE:CPB)? The smart money sentiment can provide an answer to this question.

Campbell Soup Company (NYSE:CPB) was in 27 hedge funds’ portfolios at the end of June. The all time high for this statistic is 40. CPB investors should pay attention to a decrease in hedge fund interest of late. There were 28 hedge funds in our database with CPB holdings at the end of March. Our calculations also showed that CPB isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

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 79 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.

Ken Griffin of Citadel Investment Group

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind let’s take a look at the recent hedge fund action surrounding Campbell Soup Company (NYSE:CPB).

Do Hedge Funds Think CPB Is A Good Stock To Buy Now?

At Q2’s end, a total of 27 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -4% from the first quarter of 2020. Below, you can check out the change in hedge fund sentiment towards CPB over the last 24 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is CPB A Good Stock To Buy?

More specifically, Renaissance Technologies was the largest shareholder of Campbell Soup Company (NYSE:CPB), with a stake worth $138.5 million reported as of the end of June. Trailing Renaissance Technologies was Citadel Investment Group, which amassed a stake valued at $106.8 million. Armistice Capital, Balyasny Asset Management, and Millennium Management 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 Factorial Partners allocated the biggest weight to Campbell Soup Company (NYSE:CPB), around 1.71% of its 13F portfolio. Armistice Capital is also relatively very bullish on the stock, dishing out 1.07 percent of its 13F equity portfolio to CPB.

Since Campbell Soup Company (NYSE:CPB) has faced bearish sentiment from the entirety of the hedge funds we track, it’s easy to see that there was a specific group of money managers that slashed their entire stakes last quarter. At the top of the heap, Steve Cohen’s Point72 Asset Management dumped the biggest investment of the “upper crust” of funds followed by Insider Monkey, totaling about $13.1 million in stock. Brandon Haley’s fund, Holocene Advisors, also sold off its stock, about $7 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest fell by 1 funds last quarter.

Let’s also examine hedge fund activity in other stocks similar to Campbell Soup Company (NYSE:CPB). We will take a look at DENTSPLY SIRONA Inc. (NASDAQ:XRAY), Vipshop Holdings Limited (NYSE:VIPS), Fortune Brands Home & Security Inc (NYSE:FBHS), Crown Holdings, Inc. (NYSE:CCK), IAC/InterActiveCorp (NASDAQ:IAC), Tuya Inc. (NYSE:TUYA), and RLX Technology Inc. (NYSE:RLX). This group of stocks’ market caps are closest to CPB’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
XRAY 35 1109745 9
VIPS 36 1306788 -18
FBHS 28 411937 5
CCK 53 1981122 -7
IAC 50 1226152 -13
TUYA 8 224184 -7
RLX 12 192836 -11
Average 31.7 921823 -6

View table here if you experience formatting issues.

As you can see these stocks had an average of 31.7 hedge funds with bullish positions and the average amount invested in these stocks was $922 million. That figure was $430 million in CPB’s case. Crown Holdings, Inc. (NYSE:CCK) is the most popular stock in this table. On the other hand Tuya Inc. (NYSE:TUYA) is the least popular one with only 8 bullish hedge fund positions. Campbell Soup Company (NYSE:CPB) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for CPB is 45.4. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24.9% in 2021 through October 15th and surpassed the market again by 4.5 percentage points. Unfortunately CPB wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); CPB investors were disappointed as the stock returned -8.2% since the end of June (through 10/15) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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