Hedge Funds Were Fleeing From Kraft Heinz Company (KHC) Before The Plunge

During the fourth quarter the Russell 2000 ETF (IWM) lagged the larger S&P 500 ETF (SPY) by nearly 7 percentage points as investors worried over the possible ramifications of rising interest rates. The hedge funds and institutional investors we track typically invest more in smaller-cap stocks than an average investor (i.e. only 298 S&P 500 constituents were among the 500 most popular stocks among hedge funds), and we have seen data that shows those funds paring back their overall exposure. Those funds cutting positions in small-caps is one reason why volatility has increased. In the following paragraphs, we take a closer look at what hedge funds and prominent investors think of The Kraft Heinz Company (NASDAQ:KHC) and see how the stock is affected by the recent hedge fund activity.

The Kraft Heinz Company (NASDAQ:KHC) has seen a decrease in enthusiasm from smart money during the fourth quarter of 2018. Our calculations also showed that KHC isn’t among the 30 most popular stocks among hedge funds. The number of hedge funds with bullish KHC positions went down by nearly 50% over the last 2.5 years.

If you’d ask most shareholders, hedge funds are perceived as unimportant, old investment vehicles of yesteryear. While there are greater than 8000 funds trading at present, Our experts hone in on the upper echelon of this group, about 750 funds. These investment experts manage the majority of all hedge funds’ total capital, and by monitoring their best investments, Insider Monkey has identified a number of investment strategies that have historically exceeded the broader indices. Insider Monkey’s flagship hedge fund strategy surpassed the S&P 500 index by nearly 5 percentage points annually since its inception in May 2014 through early November 2018. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 27.5% since February 2017 (through March 12th) even though the market was up nearly 25% during the same period. We just shared a list of 6 short targets in our latest quarterly update and they are already down an average of 6% in less than a month.

D. E. Shaw

We’re going to analyze the latest hedge fund action surrounding The Kraft Heinz Company (NASDAQ:KHC).

What does the smart money think about The Kraft Heinz Company (NASDAQ:KHC)?

At the end of the fourth quarter, a total of 33 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -11% from the second quarter of 2018. On the other hand, there were a total of 34 hedge funds with a bullish position in KHC a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to Insider Monkey’s hedge fund database, Warren Buffett’s Berkshire Hathaway has the most valuable position in The Kraft Heinz Company (NASDAQ:KHC), worth close to $14.0153 billion, corresponding to 7.7% of its total 13F portfolio. Sitting at the No. 2 spot is D E Shaw, managed by D. E. Shaw, which holds a $197 million position; 0.3% of its 13F portfolio is allocated to the company. Some other peers that hold long positions include Ken Griffin’s Citadel Investment Group, and Jim Simons’s Renaissance Technologies.


Since The Kraft Heinz Company (NASDAQ:KHC) has witnessed falling interest from hedge fund managers, it’s easy to see that there was a specific group of funds that slashed their positions entirely heading into Q3. Intriguingly, Jeffrey Talpins’s Element Capital Management sold off the biggest stake of the 700 funds monitored by Insider Monkey, valued at an estimated $133 million in call options, and James Woodson Davis’s Woodson Capital Management was right behind this move, as the fund sold off about $20.4 million worth. These moves are important to note, as total hedge fund interest fell by 4 funds heading into Q3.

Let’s also examine hedge fund activity in other stocks similar to The Kraft Heinz Company (NASDAQ:KHC). We will take a look at CSX Corporation (NASDAQ:CSX), Simon Property Group, Inc (NYSE:SPG), Vodafone Group Plc (NASDAQ:VOD), and Colgate-Palmolive Company (NYSE:CL). This group of stocks’ market valuations match KHC’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CSX 50 5423861 -4
SPG 26 724139 1
VOD 18 626912 0
CL 45 1865501 12
Average 34.75 2160103 2.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 34.75 hedge funds with bullish positions and the average amount invested in these stocks was $2160 million. That figure was $14562 million in KHC’s case. CSX Corporation (NASDAQ:CSX) is the most popular stock in this table. On the other hand Vodafone Group Plc (NASDAQ:VOD) is the least popular one with only 18 bullish hedge fund positions. The Kraft Heinz Company (NASDAQ:KHC) is not the least popular stock in this group but hedge fund interest is still below average. This is a negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 15 most popular stocks among hedge funds returned 19.7% through March 15th and outperformed the S&P 500 ETF (SPY) by 6.6 percentage points. Unfortunately KHC wasn’t in this group. Hedge funds that bet on KHC were disappointed as the stock lost 24.5% and underperformed the market by a huge margin. If you are interested in investing in large cap stocks, you should check out the top 15 hedge fund stocks as 13 of these outperformed the market.

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