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Hedge Funds Were Dumping Campbell Soup Company (CPB) Before The Coronavirus

We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (read our latest 10 coronavirus predictions).

In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the fourth quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4 years and analyze what the smart money thinks of Campbell Soup Company (NYSE:CPB) based on that data.

Campbell Soup Company (NYSE:CPB) has seen a decrease in activity from the world’s largest hedge funds lately. CPB was in 29 hedge funds’ portfolios at the end of December. There were 34 hedge funds in our database with CPB positions at the end of the previous quarter. Our calculations also showed that CPB isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings).

According to most stock holders, hedge funds are perceived as underperforming, outdated financial tools of years past. While there are greater than 8000 funds with their doors open at the moment, We choose to focus on the elite of this club, around 850 funds. These money managers handle bulk of all hedge funds’ total capital, and by shadowing their top picks, Insider Monkey has identified a few investment strategies that have historically beaten Mr. Market. Insider Monkey’s flagship short hedge fund strategy outpaced the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 35.3% since February 2017 (through March 3rd) even though the market was up more than 35% during the same period. We just shared a list of 7 short targets in our latest quarterly update .

Dan Loeb THIRD POINT

Dan Loeb of Third Point

We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s check out the key hedge fund action regarding Campbell Soup Company (NYSE:CPB).

What does smart money think about Campbell Soup Company (NYSE:CPB)?

At Q4’s end, a total of 29 of the hedge funds tracked by Insider Monkey were long this stock, a change of -15% from one quarter earlier. By comparison, 29 hedge funds held shares or bullish call options in CPB a year ago. With hedgies’ capital changing hands, there exists a few notable hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).

Is CPB A Good Stock To Buy?

Among these funds, Third Point held the most valuable stake in Campbell Soup Company (NYSE:CPB), which was worth $711.6 million at the end of the third quarter. On the second spot was Citadel Investment Group which amassed $110.2 million worth of shares. Holocene Advisors, AQR Capital Management, and GAMCO Investors 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 Third Point allocated the biggest weight to Campbell Soup Company (NYSE:CPB), around 8.18% of its 13F portfolio. GRT Capital Partners is also relatively very bullish on the stock, setting aside 1.66 percent of its 13F equity portfolio to CPB.

Because Campbell Soup Company (NYSE:CPB) has experienced a decline in interest from the smart money, we can see that there were a few money managers who sold off their positions entirely by the end of the third quarter. It’s worth mentioning that Sander Gerber’s Hudson Bay Capital Management dumped the biggest position of the “upper crust” of funds monitored by Insider Monkey, valued at about $7 million in stock, and Renaissance Technologies was right behind this move, as the fund dropped about $4.1 million worth. These moves are interesting, as aggregate hedge fund interest fell by 5 funds by the end of the third quarter.

Let’s now review hedge fund activity in other stocks similar to Campbell Soup Company (NYSE:CPB). These stocks are Diamondback Energy Inc (NASDAQ:FANG), Celanese Corporation (NYSE:CE), CNH Industrial NV (NYSE:CNHI), and Evergy, Inc. (NYSE:EVRG). This group of stocks’ market caps are similar to CPB’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
FANG 44 712696 0
CE 31 924932 10
CNHI 16 333220 -1
EVRG 25 942248 -2
Average 29 728274 1.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 29 hedge funds with bullish positions and the average amount invested in these stocks was $728 million. That figure was $1026 million in CPB’s case. Diamondback Energy Inc (NASDAQ:FANG) is the most popular stock in this table. On the other hand CNH Industrial NV (NYSE:CNHI) is the least popular one with only 16 bullish hedge fund positions. Campbell Soup Company (NYSE:CPB) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 22.3% in 2020 through March 16th but still beat the market by 3.2 percentage points. A small number of hedge funds were also right about betting on CPB as the stock returned 0.5% during the same time period and outperformed the market by an even larger margin.

5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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

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