We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Melvin Capital’s recent GameStop losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Restaurant Brands International Inc (NYSE:QSR).
Is QSR a good stock to buy? Money managers were becoming less hopeful. The number of bullish hedge fund bets were trimmed by 13 in recent months. Restaurant Brands International Inc (NYSE:QSR) was in 26 hedge funds’ portfolios at the end of March. The all time high for this statistic is 59. Our calculations also showed that QSR isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 39 hedge funds in our database with QSR holdings at the end of December.
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 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Harold Levy of Iridian Asset Management
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, economists warn of inflation flare up. So, we are checking out this backdoor gold play that has hit peak gains of 718% in a little over a year. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Keeping this in mind let’s take a look at the new hedge fund action surrounding Restaurant Brands International Inc (NYSE:QSR).
Do Hedge Funds Think QSR Is A Good Stock To Buy Now?
Heading into the second quarter of 2021, a total of 26 of the hedge funds tracked by Insider Monkey were long this stock, a change of -33% from the fourth quarter of 2020. On the other hand, there were a total of 41 hedge funds with a bullish position in QSR a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Pershing Square, managed by Bill Ackman, holds the biggest position in Restaurant Brands International Inc (NYSE:QSR). Pershing Square has a $1.5552 billion position in the stock, comprising 14.9% of its 13F portfolio. Sitting at the No. 2 spot is Pelham Capital, managed by Ross Turner, which holds a $163.5 million position; 10.1% of its 13F portfolio is allocated to the company. Other peers with similar optimism consist of David Cohen and Harold Levy’s Iridian Asset Management, Alexander Mitchell’s Scopus Asset Management and Joseph Sirdevan’s Galibier Capital Management. In terms of the portfolio weights assigned to each position Pershing Square allocated the biggest weight to Restaurant Brands International Inc (NYSE:QSR), around 14.87% of its 13F portfolio. MIC Capital Partners is also relatively very bullish on the stock, designating 10.68 percent of its 13F equity portfolio to QSR.
Seeing as Restaurant Brands International Inc (NYSE:QSR) has experienced bearish sentiment from the smart money, it’s safe to say that there were a few fund managers that elected to cut their positions entirely heading into Q2. It’s worth mentioning that Robert Pohly’s Samlyn Capital dropped the biggest position of the 750 funds watched by Insider Monkey, comprising about $60.7 million in stock. David Thomas’s fund, Atalan Capital, also cut its stock, about $30.6 million worth. These moves are intriguing to say the least, as total hedge fund interest dropped by 13 funds heading into Q2.
Let’s go over hedge fund activity in other stocks similar to Restaurant Brands International Inc (NYSE:QSR). These stocks are Regions Financial Corporation (NYSE:RF), Burlington Stores Inc (NYSE:BURL), Dover Corporation (NYSE:DOV), 10x Genomics, Inc. (NASDAQ:TXG), Discovery Inc. (NASDAQ:DISCA), Trimble Inc. (NASDAQ:TRMB), and M&T Bank Corporation (NYSE:MTB). This group of stocks’ market caps match QSR’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| RF | 32 | 272499 | 6 |
| BURL | 32 | 1440740 | 3 |
| DOV | 26 | 639746 | -6 |
| TXG | 23 | 1217339 | -10 |
| DISCA | 48 | 590723 | 20 |
| TRMB | 23 | 1515928 | 2 |
| MTB | 36 | 671109 | 3 |
| Average | 31.4 | 906869 | 2.6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 31.4 hedge funds with bullish positions and the average amount invested in these stocks was $907 million. That figure was $2254 million in QSR’s case. Discovery Inc. (NASDAQ:DISCA) is the most popular stock in this table. On the other hand 10x Genomics, Inc. (NASDAQ:TXG) is the least popular one with only 23 bullish hedge fund positions. Restaurant Brands International Inc (NYSE:QSR) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for QSR is 11.2. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through July 9th and surpassed the market again by 6.7 percentage points. Unfortunately QSR wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); QSR investors were disappointed as the stock returned -0.3% since the end of March (through 7/9) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.
Follow Restaurant Brands International Inc. (NYSE:QSR)
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Disclosure: None. This article was originally published at Insider Monkey.
