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 Coca-Cola European Partners plc (NYSE:CCEP) and determine whether the smart money was really smart about this stock.
Is Coca-Cola European Partners plc (NYSE:CCEP) ready to rally soon? Investors who are in the know were betting on the stock. The number of long hedge fund bets went up by 5 lately. Coca-Cola European Partners plc (NYSE:CCEP) was in 27 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 40. Our calculations also showed that CCEP 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.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. 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. 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 to get excerpts of these letters in your inbox. With all of this in mind let’s take a look at the key hedge fund action surrounding Coca-Cola European Partners plc (NYSE:CCEP).
How have hedgies been trading Coca-Cola European Partners plc (NYSE:CCEP)?
At the end of the second quarter, a total of 27 of the hedge funds tracked by Insider Monkey were long this stock, a change of 23% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards CCEP over the last 20 quarters. With hedgies’ sentiment swirling, there exists a few notable hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
The largest stake in Coca-Cola European Partners plc (NYSE:CCEP) was held by Polaris Capital Management, which reported holding $127.7 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $61.7 million position. Other investors bullish on the company included Citadel Investment Group, Point72 Asset Management, and Echo Street Capital Management. In terms of the portfolio weights assigned to each position Polaris Capital Management allocated the biggest weight to Coca-Cola European Partners plc (NYSE:CCEP), around 6.31% of its 13F portfolio. Solel Partners is also relatively very bullish on the stock, designating 5.01 percent of its 13F equity portfolio to CCEP.
Now, key money managers have been driving this bullishness. Polaris Capital Management, managed by Bernard Horn, initiated the most valuable position in Coca-Cola European Partners plc (NYSE:CCEP). Polaris Capital Management had $127.7 million invested in the company at the end of the quarter. Jack Woodruff’s Candlestick Capital Management also initiated a $30.8 million position during the quarter. The following funds were also among the new CCEP investors: Craig Peskin and Peter Fleiss’s Solel Partners, Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors, and Paul Tudor Jones’s Tudor Investment Corp.
Let’s now review hedge fund activity in other stocks similar to Coca-Cola European Partners plc (NYSE:CCEP). We will take a look at Conagra Brands, Inc. (NYSE:CAG), iQIYI, Inc. (NASDAQ:IQ), Alnylam Pharmaceuticals, Inc. (NASDAQ:ALNY), Cheniere Energy Partners LP (NYSE:CQP), Teleflex Incorporated (NYSE:TFX), Freeport-McMoRan Inc. (NYSE:FCX), and W.W. Grainger, Inc. (NYSE:GWW). All of these stocks’ market caps are similar to CCEP’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 28.9 hedge funds with bullish positions and the average amount invested in these stocks was $741 million. That figure was $465 million in CCEP’s case. Freeport-McMoRan Inc. (NYSE:FCX) is the most popular stock in this table. On the other hand Cheniere Energy Partners LP (NYSE:CQP) is the least popular one with only 3 bullish hedge fund positions. Coca-Cola European Partners plc (NYSE:CCEP) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for CCEP is 54.3. 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 negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 21.3% in 2020 through September 25th and surpassed the market by 17.7 percentage points. Unfortunately CCEP wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); CCEP investors were disappointed as the stock returned 2.5% since Q2 and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Disclosure: None. This article was originally published at Insider Monkey.