Hedge Funds Are Piling Into Yum China Holdings, Inc. (YUMC)

The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on September 30th, about a month before the elections. We at Insider Monkey have made an extensive database of more than 817 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Yum China Holdings, Inc. (NYSE:YUMC) based on those filings.

Is Yum China Holdings, Inc. (NYSE:YUMC) a good investment right now? Money managers were getting more optimistic. The number of bullish hedge fund positions advanced by 4 lately. Yum China Holdings, Inc. (NYSE:YUMC) was in 39 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 35. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that YUMC isn’t among the 30 most popular stocks among hedge funds (click for Q3 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.

According to most investors, hedge funds are viewed as underperforming, outdated investment tools of the past. While there are more than 8000 funds in operation today, Our experts look at the aristocrats of this club, approximately 850 funds. These money managers shepherd bulk of all hedge funds’ total asset base, and by paying attention to their matchless stock picks, Insider Monkey has unsheathed various investment strategies that have historically exceeded Mr. Market. Insider Monkey’s flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 13% since February 2017 (through November 17th) even though the market was up 65% during the same period. We just shared a list of 6 short targets in our latest quarterly update .

Ian Wace Marshall Wace

Ian Wace of Marshall Wace

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy to pick the best large-cap stocks to buy. 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 website. With all of this in mind let’s review the latest hedge fund action regarding Yum China Holdings, Inc. (NYSE:YUMC).

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

At third quarter’s end, a total of 39 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 11% from one quarter earlier. By comparison, 34 hedge funds held shares or bullish call options in YUMC a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is YUMC A Good Stock To Buy?

More specifically, GuardCap Asset Management was the largest shareholder of Yum China Holdings, Inc. (NYSE:YUMC), with a stake worth $216.3 million reported as of the end of September. Trailing GuardCap Asset Management was Antipodes Partners, which amassed a stake valued at $122.4 million. Junto Capital Management, Tremblant Capital, and Platinum Asset 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 Cheyne Capital allocated the biggest weight to Yum China Holdings, Inc. (NYSE:YUMC), around 14.73% of its 13F portfolio. Kadensa Capital is also relatively very bullish on the stock, designating 9.78 percent of its 13F equity portfolio to YUMC.

As one would reasonably expect, key money managers were leading the bulls’ herd. Segantii Capital, managed by Simon Sadler, initiated the most outsized position in Yum China Holdings, Inc. (NYSE:YUMC). Segantii Capital had $72.2 million invested in the company at the end of the quarter. Jonathan Lourie and Stuart Fiertz’s Cheyne Capital also initiated a $29.9 million position during the quarter. The following funds were also among the new YUMC investors: Andrew Weiss’s Weiss Asset Management, Leung Chi Kit’s Kadensa Capital, and Paul Marshall and Ian Wace’s Marshall Wace LLP.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Yum China Holdings, Inc. (NYSE:YUMC) but similarly valued. We will take a look at DTE Energy Company (NYSE:DTE), Kellogg Company (NYSE:K), Southwest Airlines Co. (NYSE:LUV), Cerner Corporation (NASDAQ:CERN), Wheaton Precious Metals Corp. (NYSE:WPM), Chewy, Inc. (NYSE:CHWY), and Nokia Corporation (NYSE:NOK). This group of stocks’ market valuations match YUMC’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
DTE 28 232166 4
K 35 483978 2
LUV 51 744922 -5
CERN 34 789984 -4
WPM 29 932017 8
CHWY 46 484642 2
NOK 21 173335 -5
Average 34.9 548721 0.3

View table here if you experience formatting issues.

As you can see these stocks had an average of 34.9 hedge funds with bullish positions and the average amount invested in these stocks was $549 million. That figure was $1096 million in YUMC’s case. Southwest Airlines Co. (NYSE:LUV) is the most popular stock in this table. On the other hand Nokia Corporation (NYSE:NOK) is the least popular one with only 21 bullish hedge fund positions. Yum China Holdings, Inc. (NYSE:YUMC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for YUMC is 69. 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 positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 33.3% in 2020 through December 18th and beat the market again by 16.4 percentage points. Unfortunately YUMC wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on YUMC were disappointed as the stock returned 10.2% since the end of September (through 12/18) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

Follow Yum China Holdings Inc. (NYSE:YUMC)

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