Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don’t make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards Tyson Foods, Inc. (NYSE:TSN) to find out whether there were any major changes in hedge funds’ views.
Is TSN stock a buy or sell? Tyson Foods, Inc. (NYSE:TSN) was in 38 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 58. TSN investors should pay attention to an increase in activity from the world’s largest hedge funds in recent months. There were 36 hedge funds in our database with TSN holdings at the end of September. Our calculations also showed that TSN isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 124 percentage points since March 2017 (see the details here).
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Do Hedge Funds Think TSN Is A Good Stock To Buy Now?
At the end of December, a total of 38 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 6% from one quarter earlier. By comparison, 58 hedge funds held shares or bullish call options in TSN a year ago. With hedgies’ sentiment swirling, there exists a few key hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
More specifically, Yacktman Asset Management was the largest shareholder of Tyson Foods, Inc. (NYSE:TSN), with a stake worth $167.5 million reported as of the end of December. Trailing Yacktman Asset Management was AQR Capital Management, which amassed a stake valued at $121.7 million. Two Sigma Advisors, GLG Partners, and Bristol Gate Capital Partners 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 Bristol Gate Capital Partners allocated the biggest weight to Tyson Foods, Inc. (NYSE:TSN), around 4.14% of its 13F portfolio. Kehrs Ridge Capital is also relatively very bullish on the stock, earmarking 2.34 percent of its 13F equity portfolio to TSN.
As aggregate interest increased, some big names have been driving this bullishness. Yacktman Asset Management, managed by Donald Yacktman, initiated the biggest position in Tyson Foods, Inc. (NYSE:TSN). Yacktman Asset Management had $167.5 million invested in the company at the end of the quarter. Brian Scudieri’s Kehrs Ridge Capital also made a $6.4 million investment in the stock during the quarter. The other funds with new positions in the stock are Greg Poole’s Echo Street Capital Management, Parvinder Thiara’s Athanor Capital, and Richard S. Pzena’s Pzena Investment Management.
Let’s also examine hedge fund activity in other stocks similar to Tyson Foods, Inc. (NYSE:TSN). We will take a look at DTE Energy Company (NYSE:DTE), Equifax Inc. (NYSE:EFX), Cloudflare, Inc. (NYSE:NET), Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk (NYSE:TLK), Lennar Corporation (NYSE:LEN), Valero Energy Corporation (NYSE:VLO), and KKR & Co Inc. (NYSE:KKR). This group of stocks’ market values are closest to TSN’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
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As you can see these stocks had an average of 39 hedge funds with bullish positions and the average amount invested in these stocks was $1429 million. That figure was $867 million in TSN’s case. Cloudflare, Inc. (NYSE:NET) is the most popular stock in this table. On the other hand Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk (NYSE:TLK) is the least popular one with only 4 bullish hedge fund positions. Tyson Foods, Inc. (NYSE:TSN) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for TSN is 57. 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. 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 5.3% in 2021 through March 19th and still beat the market by 0.8 percentage points. A small number of hedge funds were also right about betting on TSN as the stock returned 19.9% since the end of the fourth quarter (through 3/19) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.