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Hedge Funds Started Dumping Mondelez International (MDLZ) Before Coronavirus

Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published this article and predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits.

Is Mondelez International Inc (NASDAQ:MDLZ) a safe investment now? Investors who are in the know are becoming less confident. The number of long hedge fund bets were cut by 6 lately. Our calculations also showed that MDLZ isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings). MDLZ was in 50 hedge funds’ portfolios at the end of December. There were 56 hedge funds in our database with MDLZ positions at the end of the previous quarter.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by more than 41 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

TRIAN PARTNERS

Nelson Peltz of Trian Partners

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. In January, we recommended a long position in one of the most shorted stocks in the market, and that stock returned more than 50% despite the large losses in the market since our recommendation. Keeping this in mind we’re going to take a glance at the recent hedge fund action surrounding Mondelez International Inc (NASDAQ:MDLZ).

What have hedge funds been doing with Mondelez International Inc (NASDAQ:MDLZ)?

At Q4’s end, a total of 50 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -11% from the third quarter of 2019. By comparison, 45 hedge funds held shares or bullish call options in MDLZ a year ago. With hedge funds’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).

The largest stake in Mondelez International Inc (NASDAQ:MDLZ) was held by Trian Partners, which reported holding $1037.1 million worth of stock at the end of September. It was followed by D E Shaw with a $147.7 million position. Other investors bullish on the company included Hillhouse Capital Management, Point72 Asset Management, and GAMCO Investors. In terms of the portfolio weights assigned to each position Trian Partners allocated the biggest weight to Mondelez International Inc (NASDAQ:MDLZ), around 10.93% of its 13F portfolio. Kehrs Ridge Capital is also relatively very bullish on the stock, designating 5.32 percent of its 13F equity portfolio to MDLZ.

Because Mondelez International Inc (NASDAQ:MDLZ) has witnessed a decline in interest from the entirety of the hedge funds we track, it’s safe to say that there exists a select few hedge funds that slashed their positions entirely in the third quarter. It’s worth mentioning that Ricky Sandler’s Eminence Capital said goodbye to the biggest investment of the 750 funds tracked by Insider Monkey, comprising an estimated $54.9 million in stock. Ryan Tolkin (CIO)’s fund, Schonfeld Strategic Advisors, also sold off its stock, about $12.2 million worth. These moves are important to note, as total hedge fund interest dropped by 6 funds in the third quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Mondelez International Inc (NASDAQ:MDLZ) but similarly valued. We will take a look at Fiserv, Inc. (NASDAQ:FISV), Stryker Corporation (NYSE:SYK), BlackRock, Inc. (NYSE:BLK), and Anthem Inc (NYSE:ANTM). All of these stocks’ market caps are closest to MDLZ’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
FISV 78 4174064 -2
SYK 43 833267 7
BLK 43 916922 -4
ANTM 71 4833772 7
Average 58.75 2689506 2

View table here if you experience formatting issues.

As you can see these stocks had an average of 58.75 hedge funds with bullish positions and the average amount invested in these stocks was $2690 million. That figure was $2343 million in MDLZ’s case. Fiserv, Inc. (NASDAQ:FISV) is the most popular stock in this table. On the other hand Stryker Corporation (NYSE:SYK) is the least popular one with only 43 bullish hedge fund positions. Mondelez International Inc (NASDAQ:MDLZ) is not the least popular stock in this group but hedge fund interest is still below average. 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 10.1 percentage points. These stocks lost 12.9% in 2020 through March 9th but still beat the market by 1.9 percentage points. A small number of hedge funds were also right about betting on MDLZ as the stock returned -2.1% during the same time period and outperformed the market by an even larger margin.

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

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