Is Conagra Brands, Inc. (CAG) A Good Stock To Buy?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 873 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 30th. In this article we look at what those investors think of Conagra Brands, Inc. (NYSE:CAG).

Is Conagra Brands, Inc. (NYSE:CAG) the right pick for your portfolio? Hedge funds were taking a bearish view. The number of bullish hedge fund bets dropped by 1 recently. Conagra Brands, Inc. (NYSE:CAG) was in 29 hedge funds’ portfolios at the end of June. The all time high for this statistic is 50. Our calculations also showed that CAG isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 30 hedge funds in our database with CAG positions at the end of the first quarter.

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 S&P 500 ETFs by 79 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 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.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla 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. Now let’s take a peek at the key hedge fund action encompassing Conagra Brands, Inc. (NYSE:CAG).

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

At the end of the second quarter, a total of 29 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -3% from one quarter earlier. By comparison, 35 hedge funds held shares or bullish call options in CAG 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, JANA Partners, managed by Barry Rosenstein, holds the number one position in Conagra Brands, Inc. (NYSE:CAG). JANA Partners has a $292.9 million position in the stock, comprising 24.2% of its 13F portfolio. On JANA Partners’s heels is Peter Rathjens, Bruce Clarke and John Campbell of Arrowstreet Capital, with a $79.1 million position; 0.1% of its 13F portfolio is allocated to the stock. Some other peers that are bullish include Israel Englander’s Millennium Management, Mario Gabelli’s GAMCO Investors and Renaissance Technologies. In terms of the portfolio weights assigned to each position JANA Partners allocated the biggest weight to Conagra Brands, Inc. (NYSE:CAG), around 24.17% of its 13F portfolio. Weld Capital Management is also relatively very bullish on the stock, earmarking 0.44 percent of its 13F equity portfolio to CAG.

Because Conagra Brands, Inc. (NYSE:CAG) has experienced bearish sentiment from the entirety of the hedge funds we track, we can see that there was a specific group of hedge funds who were dropping their entire stakes in the second quarter. Intriguingly, Ray Dalio’s Bridgewater Associates cut the largest stake of all the hedgies tracked by Insider Monkey, worth about $20.7 million in stock, and John Overdeck and David Siegel’s Two Sigma Advisors was right behind this move, as the fund said goodbye to about $6.5 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest dropped by 1 funds in the second quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Conagra Brands, Inc. (NYSE:CAG) but similarly valued. These stocks are Avery Dennison Corporation (NYSE:AVY), Tata Motors Limited (NYSE:TTM), Jacobs Engineering Group Inc. (NYSE:J), The AES Corporation (NYSE:AES), ASE Technology Holding Co., Ltd. (NYSE:ASX), PerkinElmer, Inc. (NYSE:PKI), and Viatris Inc. (NASDAQ:VTRS). This group of stocks’ market values are similar to CAG’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 28.9 hedge funds with bullish positions and the average amount invested in these stocks was $1020 million. That figure was $576 million in CAG’s case. Viatris Inc. (NASDAQ:VTRS) is the most popular stock in this table. On the other hand ASE Technology Holding Co., Ltd. (NYSE:ASX) is the least popular one with only 7 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 overall hedge fund sentiment score for CAG is 45.3. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24.9% in 2021 through October 15th and beat the market again by 4.5 percentage points. Unfortunately CAG wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on CAG were disappointed as the stock returned -7.7% since the end of June (through 10/15) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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