Is Coca-Cola (KO) Stock A Buy or Sell?

Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren’t timid and registered double digit market beating gains. Financials, energy and industrial stocks initially suffered the most but many of these stocks delivered strong returns since November and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment towards The Coca-Cola Company (NYSE:KO) changed recently.

Is KO stock a buy or sell? Investors who are in the know were in an optimistic mood. The number of long hedge fund bets increased by 2 lately. The Coca-Cola Company (NYSE:KO) was in 62 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 62. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that KO isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017 (see the details here).

Donald Yacktman of Yacktman Asset Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. Recently Oregon became the first state to legalize psychedelic mushrooms which are shown to have promising results in treating depression, addiction, and PTSD in early stage academic studies. So, we are checking out this psychedelic drug stock idea right now. We go through lists like the 10 best biotech stocks to invest in to pick the next stock that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage (or at the end of this article). With all of this in mind we’re going to review the key hedge fund action surrounding The Coca-Cola Company (NYSE:KO).

Do Hedge Funds Think KO Is A Good Stock To Buy Now?

Heading into the first quarter of 2021, a total of 62 of the hedge funds tracked by Insider Monkey were long this stock, a change of 3% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in KO over the last 22 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Berkshire Hathaway was the largest shareholder of The Coca-Cola Company (NYSE:KO), with a stake worth $21936 million reported as of the end of December. Trailing Berkshire Hathaway was Yacktman Asset Management, which amassed a stake valued at $351.2 million. D E Shaw, Bridgewater Associates, and Adage 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 Berkshire Hathaway allocated the biggest weight to The Coca-Cola Company (NYSE:KO), around 8.13% of its 13F portfolio. Franklin Street Capital is also relatively very bullish on the stock, dishing out 7.39 percent of its 13F equity portfolio to KO.

As industrywide interest jumped, some big names have been driving this bullishness. Balyasny Asset Management, managed by Dmitry Balyasny, assembled the largest position in The Coca-Cola Company (NYSE:KO). Balyasny Asset Management had $133.4 million invested in the company at the end of the quarter. Brandon Haley’s Holocene Advisors also initiated a $119.2 million position during the quarter. The other funds with brand new KO positions are Parvinder Thiara’s Athanor Capital, Mark R. Freeman’s Socorro Asset Management, and Minhua Zhang’s Weld Capital Management.

Let’s check out hedge fund activity in other stocks similar to The Coca-Cola Company (NYSE:KO). We will take a look at NIKE, Inc. (NYSE:NKE), Pinduoduo Inc. (NASDAQ:PDD), Toyota Motor Corporation (NYSE:TM), Novartis AG (NYSE:NVS), Merck & Co., Inc. (NYSE:MRK), ASML Holding N.V. (NASDAQ:ASML), and PepsiCo, Inc. (NASDAQ:PEP). This group of stocks’ market valuations are similar to KO’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NKE 82 6285513 7
PDD 54 10528058 20
TM 11 797163 -1
NVS 23 1680463 -2
MRK 82 7171072 2
ASML 30 2976227 7
PEP 56 4288005 4
Average 48.3 4818072 5.3

View table here if you experience formatting issues.

As you can see these stocks had an average of 48.3 hedge funds with bullish positions and the average amount invested in these stocks was $4818 million. That figure was $24683 million in KO’s case. NIKE, Inc. (NYSE:NKE) is the most popular stock in this table. On the other hand Toyota Motor Corporation (NYSE:TM) is the least popular one with only 11 bullish hedge fund positions. The Coca-Cola Company (NYSE:KO) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for KO is 72.9. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 5.3% in 2021 through March 19th and beat the market again by 0.8 percentage points. Unfortunately KO wasn’t nearly as popular as these 30 stocks and hedge funds that were betting on KO were disappointed as the stock returned -6.6% since the end of December (through 3/19) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

Follow Coca Cola Co (NYSE:KO)

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