Is MKC Stock A Buy or Sell?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the fourth quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of McCormick & Company, Incorporated (NYSE:MKC) based on that data.

Is MKC stock a buy or sell? McCormick & Company, Incorporated (NYSE:MKC) investors should be aware of a decrease in hedge fund sentiment lately. McCormick & Company, Incorporated (NYSE:MKC) was in 36 hedge funds’ portfolios at the end of December. The all time high for this statistic is 37. There were 37 hedge funds in our database with MKC holdings at the end of September. Our calculations also showed that MKC isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

To the average investor there are a large number of formulas shareholders can use to value publicly traded companies. Two of the most under-the-radar formulas are hedge fund and insider trading interest. Our experts have shown that, historically, those who follow the best picks of the top hedge fund managers can trounce the S&P 500 by a healthy amount (see the details here).

Noam Gottesman GLG Partners

Noam Gottesman of GLG Partners

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 10 best battery stocks to buy to identify the next stock with 10x upside potential. 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 recent hedge fund action encompassing McCormick & Company, Incorporated (NYSE:MKC).

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

At fourth quarter’s end, a total of 36 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -3% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in MKC over the last 22 quarters. With the smart money’s capital changing hands, there exists a few key hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).

Is MKC A Good Stock To Buy?

The largest stake in McCormick & Company, Incorporated (NYSE:MKC) was held by Fundsmith LLP, which reported holding $1542.4 million worth of stock at the end of December. It was followed by Two Sigma Advisors with a $68.8 million position. Other investors bullish on the company included AQR Capital Management, GLG Partners, and Adage Capital Management. In terms of the portfolio weights assigned to each position Fundsmith LLP allocated the biggest weight to McCormick & Company, Incorporated (NYSE:MKC), around 5.11% of its 13F portfolio. Intrinsic Edge Capital is also relatively very bullish on the stock, setting aside 0.77 percent of its 13F equity portfolio to MKC.

Since McCormick & Company, Incorporated (NYSE:MKC) has witnessed declining sentiment from the entirety of the hedge funds we track, it’s safe to say that there is a sect of hedge funds who sold off their full holdings in the fourth quarter. It’s worth mentioning that Steve Cohen’s Point72 Asset Management dropped the largest stake of the 750 funds monitored by Insider Monkey, totaling an estimated $12.8 million in stock, and Paul Tudor Jones’s Tudor Investment Corp was right behind this move, as the fund cut about $1.8 million worth. These bearish behaviors are interesting, as total hedge fund interest dropped by 1 funds in the fourth quarter.

Let’s go over hedge fund activity in other stocks similar to McCormick & Company, Incorporated (NYSE:MKC). We will take a look at The Clorox Company (NYSE:CLX), Dollar Tree, Inc. (NASDAQ:DLTR), Skyworks Solutions Inc (NASDAQ:SWKS), First Republic Bank (NYSE:FRC), Hormel Foods Corporation (NYSE:HRL), D.R. Horton, Inc. (NYSE:DHI), and Weyerhaeuser Co. (NYSE:WY). This group of stocks’ market values are closest to MKC’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CLX 39 1653099 0
DLTR 53 1977339 3
SWKS 41 763595 -9
FRC 34 1270095 3
HRL 31 523117 1
DHI 64 1922728 2
WY 40 614210 -1
Average 43.1 1246312 -0.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 43.1 hedge funds with bullish positions and the average amount invested in these stocks was $1246 million. That figure was $1880 million in MKC’s case. D.R. Horton, Inc. (NYSE:DHI) is the most popular stock in this table. On the other hand Hormel Foods Corporation (NYSE:HRL) is the least popular one with only 31 bullish hedge fund positions. McCormick & Company, Incorporated (NYSE:MKC) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for MKC is 40.8. 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 negative signal and 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 7.9% in 2021 through April 1st and surpassed the market again by 0.4 percentage points. Unfortunately MKC wasn’t nearly as popular as these 30 stocks (hedge fund sentiment was quite bearish); MKC investors were disappointed as the stock returned -6.7% since the end of December (through 4/1) 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 most of these stocks already outperformed the market in 2020.

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