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Hedge Funds Have Never Been This Bullish On McCormick & Company, Incorporated (MKC)

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 March 31st, about a week after the S&P 500 Index bottomed. We at Insider Monkey have made an extensive database of more than 821 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded McCormick & Company, Incorporated (NYSE:MKC) based on those filings.

McCormick & Company, Incorporated (NYSE:MKC) has experienced an increase in enthusiasm from smart money in recent months. Our calculations also showed that MKC isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.

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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 51 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Phill Gross of Adage Capital Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s analyze the recent hedge fund action surrounding McCormick & Company, Incorporated (NYSE:MKC).

How have hedgies been trading McCormick & Company, Incorporated (NYSE:MKC)?

At the end of the first quarter, a total of 31 of the hedge funds tracked by Insider Monkey were long this stock, a change of 29% from one quarter earlier. On the other hand, there were a total of 24 hedge funds with a bullish position in MKC a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Renaissance Technologies, holds the largest position in McCormick & Company, Incorporated (NYSE:MKC). Renaissance Technologies has a $94.9 million position in the stock, comprising 0.1% of its 13F portfolio. The second most bullish fund manager is AQR Capital Management, led by Cliff Asness, holding a $49.3 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors with similar optimism consist of John Overdeck and David Siegel’s Two Sigma Advisors, D. E. Shaw’s D E Shaw and Phill Gross and Robert Atchinson’s Adage Capital Management. In terms of the portfolio weights assigned to each position Cognios Capital allocated the biggest weight to McCormick & Company, Incorporated (NYSE:MKC), around 0.89% of its 13F portfolio. Quantamental Technologies is also relatively very bullish on the stock, dishing out 0.82 percent of its 13F equity portfolio to MKC.

With a general bullishness amongst the heavyweights, some big names have jumped into McCormick & Company, Incorporated (NYSE:MKC) headfirst. Renaissance Technologies, assembled the largest position in McCormick & Company, Incorporated (NYSE:MKC). Renaissance Technologies had $94.9 million invested in the company at the end of the quarter. John Overdeck and David Siegel’s Two Sigma Advisors also initiated a $28.3 million position during the quarter. The other funds with new positions in the stock are Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Robert Joseph Caruso’s Select Equity Group, and Joseph Samuels’s Islet Management.

Let’s go over hedge fund activity in other stocks similar to McCormick & Company, Incorporated (NYSE:MKC). We will take a look at Schlumberger Limited. (NYSE:SLB), Match Group, Inc. (NASDAQ:MTCH), Fortive Corporation (NYSE:FTV), and Cadence Design Systems Inc (NASDAQ:CDNS). All of these stocks’ market caps are similar to MKC’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SLB 49 641144 2
MTCH 38 1032869 6
FTV 35 1015089 -8
CDNS 31 1339958 -11
Average 38.25 1007265 -2.75

View table here if you experience formatting issues.

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 $1007 million. That figure was $281 million in MKC’s case. Schlumberger Limited. (NYSE:SLB) is the most popular stock in this table. On the other hand Cadence Design Systems Inc (NASDAQ:CDNS) is the least popular one with only 31 bullish hedge fund positions. Compared to these stocks McCormick & Company, Incorporated (NYSE:MKC) is even less popular than CDNS. Hedge funds clearly dropped the ball on MKC as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May and still beat the market by 13.2 percentage points. A small number of hedge funds were also right about betting on MKC as the stock returned 24.6% so far in the second quarter and outperformed the market by an even larger margin.

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