Is Tyson Foods, Inc. (TSN) Going to Burn These Hedge Funds?

Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips on the charts, usually don’t make them change their opinion towards a company. The second half of 2015 and the first few months of this year was a stressful period for hedge funds. However, things have been taking a turn for the better in the second half of this year. Small-cap stocks which hedge funds are usually overweight outperformed the market by double digits and it may be a good time to pay attention to hedge funds’ picks before it is too late. In this article we are going to analyze the hedge fund sentiment towards Tyson Foods, Inc. (NYSE:TSN) to find out whether it was one of their high conviction long-term ideas.

Tyson Foods, Inc. (NYSE:TSN) shareholders have witnessed a decrease in enthusiasm from smart money recently. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as AvalonBay Communities Inc (NYSE:AVB), Pioneer Natural Resources (NYSE:PXD), and CBS Corporation (NYSE:CBS) to gather more data points.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

Now, we’re going to view the latest action surrounding Tyson Foods, Inc. (NYSE:TSN).

How have hedgies been trading Tyson Foods, Inc. (NYSE:TSN)?

At Q3’s end, a total of 35 of the hedge funds tracked by Insider Monkey were bullish on this stock, a decrease of 13% from the second quarter of 2016. With hedgies’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, AQR Capital Management, managed by Cliff Asness, holds the most valuable position in Tyson Foods, Inc. (NYSE:TSN). The fund has a $569.1 million position in the stock, comprising 0.9% of its 13F portfolio. On AQR Capital Management’s heels is Iridian Asset Management, run by David Cohen and Harold Levy, which holds a $432.8 million position; the fund has 3.8% of its 13F portfolio invested in the stock. Remaining peers with similar optimism include D. E. Shaw’s D E Shaw, David Harding’s Winton Capital Management and Dmitry Balyasny’s Balyasny Asset Management.

Seeing as Tyson Foods, Inc. (NYSE:TSN) has faced declining sentiment from the entirety of the hedge funds we track, it’s easy to see that there were a few hedge funds that decided to sell off their entire stakes heading into Q4. It’s worth mentioning that Jean-Marie Eveillard’s First Eagle Investment Management cut the largest investment of the 700 funds followed by Insider Monkey, valued at about $148.3 million in call options, and Ken Griffin’s Citadel Investment Group was right behind this move, as the fund sold off about $14 million worth of options. These transactions are important to note, as aggregate hedge fund interest fell by 5 funds heading into Q4.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Tyson Foods, Inc. (NYSE:TSN) but similarly valued. We will take a look at AvalonBay Communities Inc (NYSE:AVB), Pioneer Natural Resources (NYSE:PXD), CBS Corporation (NYSE:CBS), and Ventas, Inc. (NYSE:VTR). This group of stocks’ market caps are closest to TSN’s market cap.

As you can see these stocks had an average of 41 hedge funds with bullish positions and the average amount invested in these stocks was $1.98 billion. That figure was $1.63 billion in TSN’s case. Pioneer Natural Resources (NYSE:PXD) is the most popular stock in this table. On the other hand AvalonBay Communities Inc (NYSE:AVB) is the least popular one with only 16 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. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard PXD might be a better candidate to consider a long position.

Disclosure: none.