Before we spend days researching a stock idea we’d like to take a look at how hedge funds and billionaire investors recently traded that stock. S&P 500 Index returned about 5.2% during the last 12 months ending October 30, 2015. Less than 49% of the stocks in the index outperformed the index. This means you (or a monkey throwing a dart) have less than an even chance of beating the market by randomly picking a stock. On the other hand, the top 30 S&P 500 stocks among hedge funds at the end of September 2014 had an average return of 9.5% during the same period. Sixty three percent of these 30 stocks outperformed the market. Hedge funds had bad stock picks like everyone else. Micron, which lost 50% over this period, was one of hedge funds’ 30 favorite S&P 500 stocks. Anadarko Petroleum was another failed stock pick which lost more than 26%. So, taking cues from hedge funds isn’t a foolproof strategy, but it seems to work on average. In this article, we will take a look at what hedge funds think about Mead Johnson Nutrition CO (NYSE:MJN).
Is Mead Johnson Nutrition CO (NYSE:MJN) worth your attention right now? The best stock pickers are getting less bullish. The number of bullish hedge fund positions retreated by 1 in recent months. MJN was in 43 hedge funds’ portfolios at the end of September. There were 44 hedge funds in our database with MJN holdings at the end of the previous quarter. At the end of this article we will also compare MJN to other stocks, including Tenaris S.A. (ADR) (NYSE:TS), W.W. Grainger, Inc. (NYSE:GWW), and Motorola Solutions Inc (NYSE:MSI) to get a better sense of its popularity.
Today there are plenty of gauges market participants use to size up publicly traded companies. Two of the most underrated gauges are hedge fund and insider trading activity. Our experts have shown that, historically, those who follow the top picks of the top money managers can trounce their index-focused peers by a very impressive amount (see the details here).
Keeping this in mind, let’s take a look at the latest action regarding Mead Johnson Nutrition CO (NYSE:MJN).
What have hedge funds been doing with Mead Johnson Nutrition CO (NYSE:MJN)?
At the Q3’s end, a total of 43 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -2% from the previous quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Mason Capital Management, managed by Kenneth Mario Garschina, holds the biggest position in Mead Johnson Nutrition CO (NYSE:MJN). Mason Capital Management has a $281.6 million call position in the stock, comprising 6% of its 13F portfolio. The second most bullish fund is Jim Simons’ Renaissance Technologies, with a $208.6 million position; 0.5% of its 13F portfolio is allocated to the company. Remaining peers that hold long positions include Ken Griffin’s Citadel Investment Group, John Overdeck and David Siegel’s Two Sigma Advisors and Israel Englander’s Millennium Management.
Due to the fact that Mead Johnson Nutrition CO (NYSE:MJN) has faced declining sentiment from the aggregate hedge fund industry, it’s safe to say that there was a specific group of fund managers who were dropping their positions entirely last quarter. Interestingly, James Dinan’s York Capital Management cut the largest position of the 700 funds monitored by Insider Monkey, worth close to $243.8 million in stock. Benjamin A. Smith’s fund, Laurion Capital Management, also dropped its stock, about $33.9 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest fell by 1 funds last quarter.
Let’s also examine hedge fund activity in other stocks similar to Mead Johnson Nutrition CO (NYSE:MJN). These stocks are Tenaris S.A. (ADR) (NYSE:TS), W.W. Grainger, Inc. (NYSE:GWW), Motorola Solutions Inc (NYSE:MSI), and CenturyLink, Inc. (NYSE:CTL). All of these stocks’ market caps are similar to MJN’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 21 hedge funds with bullish positions and the average amount invested in these stocks was $1.07 billion. That figure was $1.63 billion in MJN’s case. Motorola Solutions Inc (NYSE:MSI) is the most popular stock in this table, while Tenaris S.A. (ADR) (NYSE:TS) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks Mead Johnson Nutrition CO (NYSE:MJN) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.