The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Stocks kept going up since then. In this article we look at how hedge funds traded Yum China Holdings, Inc. (NYSE:YUMC) and determine whether the smart money was really smart about this stock.
Yum China Holdings, Inc. (NYSE:YUMC) was in 35 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 34. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. YUMC has seen an increase in hedge fund sentiment of late. There were 24 hedge funds in our database with YUMC holdings at the end of March. Our calculations also showed that YUMC isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 56 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 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, this “mom” trader turned $2000 into $2 million within 2 years. So, we are checking out her best trade idea of the month. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world 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. With all of this in mind we’re going to take a look at the key hedge fund action surrounding Yum China Holdings, Inc. (NYSE:YUMC).
How are hedge funds trading Yum China Holdings, Inc. (NYSE:YUMC)?
At the end of June, a total of 35 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 46% from one quarter earlier. By comparison, 28 hedge funds held shares or bullish call options in YUMC a year ago. With hedge funds’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).
More specifically, GuardCap Asset Management was the largest shareholder of Yum China Holdings, Inc. (NYSE:YUMC), with a stake worth $178.2 million reported as of the end of September. Trailing GuardCap Asset Management was Antipodes Partners, which amassed a stake valued at $130.7 million. Broad Peak Investment Holdings, Platinum Asset Management, and Tremblant Capital 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 Broad Peak Investment Holdings allocated the biggest weight to Yum China Holdings, Inc. (NYSE:YUMC), around 9.63% of its 13F portfolio. Tiger Pacific Capital is also relatively very bullish on the stock, designating 8.36 percent of its 13F equity portfolio to YUMC.
Now, some big names have jumped into Yum China Holdings, Inc. (NYSE:YUMC) headfirst. Driehaus Capital, managed by Richard Driehaus, established the largest position in Yum China Holdings, Inc. (NYSE:YUMC). Driehaus Capital had $31.9 million invested in the company at the end of the quarter. Noam Gottesman’s GLG Partners also made a $26.8 million investment in the stock during the quarter. The other funds with new positions in the stock are James Parsons’s Junto Capital Management, D. E. Shaw’s D E Shaw, and Ryan Caldwell’s Chiron Investment Management.
Let’s also examine hedge fund activity in other stocks similar to Yum China Holdings, Inc. (NYSE:YUMC). These stocks are DISH Network Corp. (NASDAQ:DISH), Chewy, Inc. (NYSE:CHWY), Delta Air Lines, Inc. (NYSE:DAL), Fortis Inc. (NYSE:FTS), PG&E Corporation (NYSE:PCG), Slack Technologies Inc (NYSE:WORK), and Akamai Technologies, Inc. (NASDAQ:AKAM). This group of stocks’ market caps are closest to YUMC’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 44.1 hedge funds with bullish positions and the average amount invested in these stocks was $1318 million. That figure was $840 million in YUMC’s case. PG&E Corporation (NYSE:PCG) is the most popular stock in this table. On the other hand Fortis Inc. (NYSE:FTS) is the least popular one with only 8 bullish hedge fund positions. Yum China Holdings, Inc. (NYSE:YUMC) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for YUMC is 56.1. 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. 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 33% in 2020 through the end of August and still beat the market by 23.2 percentage points. A small number of hedge funds were also right about betting on YUMC as the stock returned 20.1% since the end of June and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.