“The end to the U.S. Government shutdown, reports of progress on China-U.S. trade talks, and the Federal Reserve’s confirmation that it did not plan further interest rate hikes in 2019 allayed investor fears and drove U.S. markets substantially higher in the first quarter of the year. Global markets followed suit pretty much across the board delivering what some market participants described as a “V-shaped” recovery,” This is how Evermore Global Value summarized the first quarter in its investor letter. We pay attention to what hedge funds are doing in a particular stock before considering a potential investment because it works for us. So let’s take a glance at the smart money sentiment towards one of the stocks hedge funds invest in.
Is Coca-Cola European Partners plc (NYSE:CCEP) undervalued? The best stock pickers are selling. The number of bullish hedge fund positions decreased by 4 lately. Our calculations also showed that CCEP isn’t among the 30 most popular stocks among hedge funds.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 market by 40 percentage points since May 2014 through May 30, 2019 (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.
We’re going to check out the new hedge fund action encompassing Coca-Cola European Partners plc (NYSE:CCEP).
How are hedge funds trading Coca-Cola European Partners plc (NYSE:CCEP)?
At Q1’s end, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, a change of -24% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards CCEP over the last 15 quarters. With hedge funds’ capital changing hands, there exists a select group of key hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
The largest stake in Coca-Cola European Partners plc (NYSE:CCEP) was held by Renaissance Technologies, which reported holding $49.3 million worth of stock at the end of March. It was followed by Arrowstreet Capital with a $48 million position. Other investors bullish on the company included Millennium Management, D E Shaw, and Citadel Investment Group.
Due to the fact that Coca-Cola European Partners plc (NYSE:CCEP) has witnessed a decline in interest from hedge fund managers, we can see that there exists a select few hedgies that decided to sell off their full holdings by the end of the third quarter. Intriguingly, James Dondero’s Highland Capital Management sold off the largest investment of the “upper crust” of funds tracked by Insider Monkey, comprising about $2.3 million in stock, and Paul Tudor Jones’s Tudor Investment Corp was right behind this move, as the fund said goodbye to about $1.6 million worth. These transactions are important to note, as total hedge fund interest was cut by 4 funds by the end of the third quarter.
Let’s now review hedge fund activity in other stocks similar to Coca-Cola European Partners plc (NYSE:CCEP). These stocks are Hilton Worldwide Holdings Inc (NYSE:HLT), Ctrip.com International, Ltd. (NASDAQ:CTRP), Archer Daniels Midland Company (NYSE:ADM), and Barrick Gold Corporation (NYSE:GOLD). This group of stocks’ market caps resemble CCEP’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HLT | 51 | 3976926 | 4 |
| CTRP | 29 | 1288524 | 8 |
| ADM | 25 | 625238 | -4 |
| GOLD | 37 | 956008 | 1 |
| Average | 35.5 | 1711674 | 2.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 35.5 hedge funds with bullish positions and the average amount invested in these stocks was $1712 million. That figure was $290 million in CCEP’s case. Hilton Worldwide Holdings Inc (NYSE:HLT) is the most popular stock in this table. On the other hand Archer Daniels Midland Company (NYSE:ADM) is the least popular one with only 25 bullish hedge fund positions. Compared to these stocks Coca-Cola European Partners plc (NYSE:CCEP) is even less popular than ADM. Hedge funds clearly dropped the ball on CCEP as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. A small number of hedge funds were also right about betting on CCEP as the stock returned 12.8% during the same period and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
