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How Did Conagra Brands, Inc. (CAG) Compare Against Top Hedge Fund Stocks in 2019?

2018’s fourth quarter was a rough one for investors and many hedge funds, which were naturally unable to overcome the big dip in the broad market, as the S&P 500 fell by about 4.8% during 2018 and average hedge fund losing about 1%. The Russell 2000, composed of smaller companies, performed even worse, trailing the S&P by more than 6 percentage points, as investors fled less-known quantities for safe havens. Luckily hedge funds were shifting their holdings into large-cap stocks. The 20 most popular hedge fund stocks actually generated an average return of 41.3% in 2019 and outperformed the S&P 500 ETF by more than 10 percentage points. In this article we will study how hedge fund sentiment towards Conagra Brands, Inc. (NYSE:CAG) changed during the third quarter and how the stock performed in comparison to hedge fund consensus stocks.

Conagra Brands, Inc. (NYSE:CAG) investors should be aware of an increase in enthusiasm from smart money recently. CAG was in 27 hedge funds’ portfolios at the end of September. There were 24 hedge funds in our database with CAG positions at the end of the previous quarter. Our calculations also showed that CAG isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Barry Rosenstein JANA PARTNERS

Barry Rosenstein of JANA Partners

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock is still extremely cheap despite already gaining 20 percent. Now let’s analyze the key hedge fund action regarding Conagra Brands, Inc. (NYSE:CAG).

What have hedge funds been doing with Conagra Brands, Inc. (NYSE:CAG)?

Heading into the fourth quarter of 2019, a total of 27 of the hedge funds tracked by Insider Monkey were long this stock, a change of 13% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards CAG over the last 17 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, JANA Partners was the largest shareholder of Conagra Brands, Inc. (NYSE:CAG), with a stake worth $459 million reported as of the end of September. Trailing JANA Partners was GAMCO Investors, which amassed a stake valued at $59.1 million. Millennium Management, Adage Capital Management, and PEAK6 Capital Management 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 JANA Partners allocated the biggest weight to Conagra Brands, Inc. (NYSE:CAG), around 36.99% of its 13F portfolio. Cognios Capital is also relatively very bullish on the stock, earmarking 0.97 percent of its 13F equity portfolio to CAG.

Consequently, key hedge funds have jumped into Conagra Brands, Inc. (NYSE:CAG) headfirst. Renaissance Technologies assembled the largest position in Conagra Brands, Inc. (NYSE:CAG). Renaissance Technologies had $11.3 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also made a $6.1 million investment in the stock during the quarter. The following funds were also among the new CAG investors: Anand Parekh’s Alyeska Investment Group, Lee Ainslie’s Maverick Capital, and David Costen Haley’s HBK Investments.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Conagra Brands, Inc. (NYSE:CAG) but similarly valued. These stocks are Waters Corporation (NYSE:WAT), Mid-America Apartment Communities, Inc. (NYSE:MAA), Huntington Bancshares Incorporated (NASDAQ:HBAN), and Ulta Beauty, Inc. (NASDAQ:ULTA). This group of stocks’ market values match CAG’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
WAT 25 595467 -1
MAA 17 298982 4
HBAN 20 96244 -3
ULTA 39 900250 -5
Average 25.25 472736 -1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 25.25 hedge funds with bullish positions and the average amount invested in these stocks was $473 million. That figure was $682 million in CAG’s case. Ulta Beauty, Inc. (NASDAQ:ULTA) is the most popular stock in this table. On the other hand Mid-America Apartment Communities, Inc. (NYSE:MAA) is the least popular one with only 17 bullish hedge fund positions. Conagra Brands, Inc. (NYSE:CAG) is not the most popular stock in this group but hedge fund interest is still above 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. Hedge funds were also right about betting on CAG as the stock returned 65.5% in 2019 and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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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