Hedge Funds Beating A Hasty Retreat From Monsanto Company (MON)

Is Monsanto Company (NYSE:MON) a good bet right now? We like to analyze hedge fund sentiment before doing days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy league graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments (for some reason media paid a ton of attention to Ackman’s gigantic JC Penney and Valeant failures) and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.

Is Monsanto Company (NYSE:MON) worth your attention right now? Hedge funds are taking a pessimistic view. The number of bullish hedge fund positions dropped by 10 lately. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Stryker Corporation (NYSE:SYK), Public Storage (NYSE:PSA), and Caterpillar Inc. (NYSE:CAT) to gather more data points.

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What have hedge funds been doing with Monsanto Company (NYSE:MON)?

Heading into the fourth quarter of 2016, a total of 77 of the hedge funds tracked by Insider Monkey were bullish on this stock, an 11% drop from the second quarter of 2016. That came after a quarter where more funds jumped into the stock than any other, as takeover rumors swirled around the company. With the smart money’s sentiment also swirling, there exists a select group of key hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).


When looking at the institutional investors followed by Insider Monkey, Third Point, managed by Dan Loeb, holds the most valuable position in Monsanto Company (NYSE:MON). Third Point has a $378.1 million position in the stock, comprising 3.3% of its 13F portfolio. Coming in second is Highfields Capital Management, led by Jonathon Jacobson, holding a $362.7 million position. Remaining peers with similar optimism consist of James Dinan’s York Capital Management, Israel Englander’s Millennium Management, and Clint Carlson’s Carlson Capital.

Seeing as Monsanto Company (NYSE:MON) has faced a decline in interest from the entirety of the hedge funds we track, logic holds that there exists a select few money managers who were dropping their entire positions by the end of the third quarter. At the top of the heap, Larry Robbins’ Glenview Capital dropped the largest position of the “upper crust” of funds followed by Insider Monkey, worth about $1.12 billion in stock, and Daniel S. Och’s OZ Management was right behind this move, as the fund dropped about $286.8 million worth of shares. These moves are intriguing to say the least, as aggregate hedge fund interest dropped by 10 funds by the end of the third quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Monsanto Company (NYSE:MON) but similarly valued. We will take a look at Stryker Corporation (NYSE:SYK), Public Storage (NYSE:PSA), Caterpillar Inc. (NYSE:CAT), and Paypal Holdings Inc (NASDAQ:PYPL). This group of stocks’ market values match MON’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SYK 24 694322 2
PSA 23 1010970 -4
CAT 32 1460921 1
PYPL 74 4655124 -10

As you can see these stocks had an average of 38.25 hedge funds with bullish positions and the average amount invested in these stocks was $1.96 billion. That figure was $3.68 billion in MON’s case. Paypal Holdings Inc (NASDAQ:PYPL) is the most popular stock in this table. On the other hand Public Storage (NYSE:PSA) is the least popular one with only 23 bullish hedge fund positions. Compared to these stocks Monsanto Company (NYSE:MON) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio, bearing in mind that it’s now a merger arb play.

Disclosure: None