Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards The Kraft Heinz Company (NASDAQ:KHC).
Is KHC a good stock to buy now? The Kraft Heinz Company (NASDAQ:KHC) has experienced an increase in hedge fund sentiment lately. The Kraft Heinz Company (NASDAQ:KHC) was in 39 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 60. There were 35 hedge funds in our database with KHC positions at the end of the second quarter. Our calculations also showed that KHC isn’t among the 30 most popular stocks among hedge funds (click for Q3 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.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy to pick the best large-cap stocks to buy. 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 website. Keeping this in mind let’s take a gander at the key hedge fund action surrounding The Kraft Heinz Company (NASDAQ:KHC).
Do Hedge Funds Think KHC Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 39 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 11% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards KHC over the last 21 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Berkshire Hathaway, managed by Warren Buffett, holds the largest position in The Kraft Heinz Company (NASDAQ:KHC). Berkshire Hathaway has a $9.7528 billion position in the stock, comprising 4.3% of its 13F portfolio. The second largest stake is held by Ken Griffin of Citadel Investment Group, with a $77.6 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining members of the smart money that are bullish consist of Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, and Renaissance Technologies. In terms of the portfolio weights assigned to each position Berkshire Hathaway allocated the biggest weight to The Kraft Heinz Company (NASDAQ:KHC), around 4.26% of its 13F portfolio. Hi-Line Capital Management is also relatively very bullish on the stock, setting aside 3.01 percent of its 13F equity portfolio to KHC.
As industrywide interest jumped, key hedge funds have jumped into The Kraft Heinz Company (NASDAQ:KHC) headfirst. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, created the most valuable position in The Kraft Heinz Company (NASDAQ:KHC). Arrowstreet Capital had $39.9 million invested in the company at the end of the quarter. Joseph Samuels’s Islet Management also made a $14.6 million investment in the stock during the quarter. The other funds with new positions in the stock are Brian Scudieri’s Kehrs Ridge Capital, Paul Marshall and Ian Wace’s Marshall Wace LLP, and Jinghua Yan’s TwinBeech Capital.
Let’s now review hedge fund activity in other stocks similar to The Kraft Heinz Company (NASDAQ:KHC). We will take a look at Constellation Brands, Inc. (NYSE:STZ), eBay Inc (NASDAQ:EBAY), Telefonaktiebolaget LM Ericsson (publ) (NASDAQ:ERIC), Xcel Energy Inc (NYSE:XEL), The Blackstone Group Inc. (NYSE:BX), SBA Communications Corporation (NASDAQ:SBAC), and Las Vegas Sands Corp. (NYSE:LVS). This group of stocks’ market valuations match KHC’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
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As you can see these stocks had an average of 41 hedge funds with bullish positions and the average amount invested in these stocks was $1856 million. That figure was $10114 million in KHC’s case. Constellation Brands, Inc. (NYSE:STZ) is the most popular stock in this table. On the other hand Xcel Energy Inc (NYSE:XEL) is the least popular one with only 22 bullish hedge fund positions. The Kraft Heinz Company (NASDAQ:KHC) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for KHC is 55.9. 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. 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 percentage points. These stocks gained 33.3% in 2020 through December 18th and still beat the market by 16.4 percentage points. A small number of hedge funds were also right about betting on KHC as the stock returned 17.5% since the end of the third quarter (through 12/18) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.