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Hedge Funds Are Souring On Conagra Brands (CAG)

At Insider Monkey we track the activity of some of the best-performing hedge funds like Appaloosa Management, Baupost, and Tiger Global because we determined that some of the stocks that they are collectively bullish on can help us generate returns above the broader indices. Out of thousands of stocks that hedge funds invest in, small-caps can provide the best returns over the long term due to the fact that these companies are less efficiently priced and are usually under the radars of mass-media, analysts and dumb money. This is why we follow the smart money moves in the small-cap space.

Is Conagra Brands, Inc. (NYSE:CAG) a buy right now? Hedge funds are becoming less hopeful. The number of bullish hedge fund bets went down by 5 recently. Our calculations also showed that CAG isn’t among the 30 most popular stocks among hedge funds.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 20.7% year to date (through March 12th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 32 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Barry Rosenstein - Jana Partners

We’re going to take a peek at the fresh hedge fund action encompassing Conagra Brands, Inc. (NYSE:CAG).

How are hedge funds trading Conagra Brands, Inc. (NYSE:CAG)?

Heading into the first quarter of 2019, a total of 33 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -13% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards CAG over the last 14 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

CAG_mar2019

According to Insider Monkey’s hedge fund database, JANA Partners, managed by Barry Rosenstein, holds the largest position in Conagra Brands, Inc. (NYSE:CAG). JANA Partners has a $289.3 million position in the stock, comprising 13.2% of its 13F portfolio. On JANA Partners’s heels is Citadel Investment Group, managed by Ken Griffin, which holds a $72.7 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Other hedge funds and institutional investors that hold long positions contain D. E. Shaw’s D E Shaw, Israel Englander’s Millennium Management and Mario Gabelli’s GAMCO Investors.

Due to the fact that Conagra Brands, Inc. (NYSE:CAG) has experienced declining sentiment from the aggregate hedge fund industry, it’s easy to see that there is a sect of funds who were dropping their entire stakes last quarter. Interestingly, Anand Parekh’s Alyeska Investment Group sold off the biggest investment of all the hedgies tracked by Insider Monkey, worth close to $66.8 million in stock. Alexander Mitchell’s fund, Scopus Asset Management, also cut its stock, about $61.1 million worth. These bearish behaviors are important to note, as total hedge fund interest fell by 5 funds last quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Conagra Brands, Inc. (NYSE:CAG) but similarly valued. These stocks are Raymond James Financial, Inc. (NYSE:RJF), Varian Medical Systems, Inc. (NYSE:VAR), Live Nation Entertainment, Inc. (NYSE:LYV), and Domino’s Pizza, Inc. (NYSE:DPZ). This group of stocks’ market valuations match CAG’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
RJF 25 727652 -6
VAR 30 803824 11
LYV 37 862439 -1
DPZ 32 1859638 4
Average 31 1063388 2

View table here if you experience formatting issues.

As you can see these stocks had an average of 31 hedge funds with bullish positions and the average amount invested in these stocks was $1063 million. That figure was $678 million in CAG’s case. Live Nation Entertainment, Inc. (NYSE:LYV) is the most popular stock in this table. On the other hand Raymond James Financial, Inc. (NYSE:RJF) is the least popular one with only 25 bullish hedge fund positions. Conagra Brands, Inc. (NYSE:CAG) is not the most popular stock in this group but hedge fund interest is still above average. 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 15 most popular stocks among hedge funds returned 19.7% through March 15th and outperformed the S&P 500 ETF (SPY) by 6.6 percentage points. Unfortunately CAG wasn’t in this group. Hedge funds that bet on CAG were disappointed as the stock returned 9.2% and underperformed the market. If you are interested in investing in large cap stocks, you should check out the top 15 hedge fund stocks as 13 of these outperformed the market.

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

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