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Is Coca-Cola FEMSA, S.A.B. de C.V. (KOF) A Good Stock To Buy?

At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Coca-Cola FEMSA, S.A.B. de C.V. (NYSE:KOF).

Coca-Cola FEMSA, S.A.B. de C.V. (NYSE:KOF) shareholders have witnessed a decrease in hedge fund interest of late. KOF was in 7 hedge funds’ portfolios at the end of March. There were 10 hedge funds in our database with KOF holdings at the end of the previous quarter. Our calculations also showed that KOF isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 58 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Paul Marshall Marshall Wace

Paul Marshall of Marshall Wace

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s review the fresh hedge fund action encompassing Coca-Cola FEMSA, S.A.B. de C.V. (NYSE:KOF).

What does smart money think about Coca-Cola FEMSA, S.A.B. de C.V. (NYSE:KOF)?

At Q1’s end, a total of 7 of the hedge funds tracked by Insider Monkey were long this stock, a change of -30% from the previous quarter. On the other hand, there were a total of 9 hedge funds with a bullish position in KOF a year ago. 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, Bill & Melinda Gates Foundation Trust was the largest shareholder of Coca-Cola FEMSA, S.A.B. de C.V. (NYSE:KOF), with a stake worth $250 million reported as of the end of September. Trailing Bill & Melinda Gates Foundation Trust was Renaissance Technologies, which amassed a stake valued at $69.8 million. Millennium Management, AQR Capital Management, and Marshall Wace LLP 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 Bill & Melinda Gates Foundation Trust allocated the biggest weight to Coca-Cola FEMSA, S.A.B. de C.V. (NYSE:KOF), around 1.44% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, setting aside 0.07 percent of its 13F equity portfolio to KOF.

Because Coca-Cola FEMSA, S.A.B. de C.V. (NYSE:KOF) has witnessed a decline in interest from the smart money, it’s safe to say that there was a specific group of hedgies that decided to sell off their positions entirely last quarter. Intriguingly, Michael Gelband’s ExodusPoint Capital sold off the largest position of the 750 funds watched by Insider Monkey, totaling about $0.5 million in stock. Mike Vranos’s fund, Ellington, also said goodbye to its stock, about $0.5 million worth. These moves are interesting, as aggregate hedge fund interest dropped by 3 funds last quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Coca-Cola FEMSA, S.A.B. de C.V. (NYSE:KOF) but similarly valued. These stocks are Cigna Corporation (NYSE:CI), PetroChina Company Limited (NYSE:PTR), Lowe’s Companies, Inc. (NYSE:LOW), and Fiserv, Inc. (NASDAQ:FISV). This group of stocks’ market caps are similar to KOF’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CI 74 2988126 2
PTR 7 66671 -6
LOW 71 3844984 -6
FISV 67 2949178 -11
Average 54.75 2462240 -5.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 54.75 hedge funds with bullish positions and the average amount invested in these stocks was $2462 million. That figure was $325 million in KOF’s case. Cigna Corporation (NYSE:CI) is the most popular stock in this table. On the other hand PetroChina Company Limited (NYSE:PTR) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Coca-Cola FEMSA, S.A.B. de C.V. (NYSE:KOF) is even less popular than PTR. Hedge funds dodged a bullet by taking a bearish stance towards KOF. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.9% in 2020 through June 10th but managed to beat the market by 14.2 percentage points. Unfortunately KOF wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); KOF investors were disappointed as the stock returned 14.7% during the second quarter (through June 10th) 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 so far in 2020.

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