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 third 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 PepsiCo, Inc. (NASDAQ:PEP) based on that data.
Is PEP a good stock to buy now? PepsiCo, Inc. (NASDAQ:PEP) investors should be aware of a decrease in activity from the world’s largest hedge funds in recent months. PepsiCo, Inc. (NYSE:PEP) was in 52 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 65. Our calculations also showed that PEP 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 tons of methods shareholders can use to grade their holdings. Some of the most underrated methods are hedge fund and insider trading interest. We have shown that, historically, those who follow the best picks of the top fund managers can outclass the broader indices by a significant margin (see the details here).
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 5 best cheap stocks to buy according to Ray Dalio to identify stocks with 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. With all of this in mind let’s analyze the key hedge fund action regarding PepsiCo, Inc. (NASDAQ:PEP).
How are hedge funds trading PepsiCo, Inc. (NASDAQ:PEP)?
At third quarter’s end, a total of 52 of the hedge funds tracked by Insider Monkey were long this stock, a change of -2% from the previous quarter. The graph below displays the number of hedge funds with bullish position in PEP over the last 21 quarters. With the smart money’s capital changing hands, there exists a select group of noteworthy hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).
Among these funds, Yacktman Asset Management held the most valuable stake in PepsiCo, Inc. (NASDAQ:PEP), which was worth $458 million at the end of the third quarter. On the second spot was AQR Capital Management which amassed $401 million worth of shares. Diamond Hill Capital, Two Sigma Advisors, and Adage Capital Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Kehrs Ridge Capital allocated the biggest weight to PepsiCo, Inc. (NASDAQ:PEP), around 7.35% of its 13F portfolio. Yacktman Asset Management is also relatively very bullish on the stock, dishing out 6.79 percent of its 13F equity portfolio to PEP.
Because PepsiCo, Inc. (NASDAQ:PEP) has witnessed falling interest from hedge fund managers, it’s safe to say that there is a sect of hedge funds who sold off their positions entirely by the end of the third quarter. Interestingly, Greg Poole’s Echo Street Capital Management cut the largest stake of all the hedgies tracked by Insider Monkey, valued at an estimated $64.5 million in stock, and Renaissance Technologies was right behind this move, as the fund cut about $16.8 million worth. These moves are interesting, as aggregate hedge fund interest was cut by 1 funds by the end of the third quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as PepsiCo, Inc. (NASDAQ:PEP) but similarly valued. We will take a look at SAP SE (NYSE:SAP), Toyota Motor Corporation (NYSE:TM), Oracle Corporation (NYSE:ORCL), Thermo Fisher Scientific Inc. (NYSE:TMO), Cisco Systems, Inc. (NASDAQ:CSCO), McDonald’s Corporation (NYSE:MCD), and Novo Nordisk A/S (NYSE:NVO). This group of stocks’ market caps are similar to PEP’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 44.3 hedge funds with bullish positions and the average amount invested in these stocks was $2789 million. That figure was $2937 million in PEP’s case. Thermo Fisher Scientific Inc. (NYSE:TMO) is the most popular stock in this table. On the other hand Toyota Motor Corporation (NYSE:TM) is the least popular one with only 12 bullish hedge fund positions. PepsiCo, Inc. (NASDAQ:PEP) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for PEP is 57.4. 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 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 31.6% in 2020 through December 2nd and beat the market again by 16 percentage points. Unfortunately PEP wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on PEP were disappointed as the stock returned 4.3% since the end of September (through 12/2) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.