The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 817 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of September 30th, 2020. In this article we are going to take a look at smart money sentiment towards Yum! Brands, Inc. (NYSE:YUM).
Is YUM a good stock to buy now? Yum! Brands, Inc. (NYSE:YUM) has seen a decrease in hedge fund interest recently. Yum! Brands, Inc. (NYSE:YUM) was in 42 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 65. Our calculations also showed that YUM 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.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 66 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy to pick the best large-cap stocks to buy. 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 check out the latest hedge fund action regarding Yum! Brands, Inc. (NYSE:YUM).
Do Hedge Funds Think YUM Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 42 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -11% from the second quarter of 2020. The graph below displays the number of hedge funds with bullish position in YUM over the last 21 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Soroban Capital Partners, managed by Eric W. Mandelblatt and Gaurav Kapadia, holds the most valuable position in Yum! Brands, Inc. (NYSE:YUM). Soroban Capital Partners has a $350.8 million position in the stock, comprising 3.5% of its 13F portfolio. Coming in second is Alkeon Capital Management, led by Panayotis Takis Sparaggis, holding a $159 million position; the fund has 0.3% of its 13F portfolio invested in the stock. Remaining members of the smart money that are bullish include D. E. Shaw’s D E Shaw, Cliff Asness’s AQR Capital Management and John Overdeck and David Siegel’s Two Sigma Advisors. In terms of the portfolio weights assigned to each position Incline Global Management allocated the biggest weight to Yum! Brands, Inc. (NYSE:YUM), around 6.08% of its 13F portfolio. Becker Drapkin Management is also relatively very bullish on the stock, setting aside 3.54 percent of its 13F equity portfolio to YUM.
Seeing as Yum! Brands, Inc. (NYSE:YUM) has experienced bearish sentiment from the smart money, it’s safe to say that there lies a certain “tier” of money managers that slashed their positions entirely heading into Q4. Interestingly, Gabriel Plotkin’s Melvin Capital Management cut the biggest stake of all the hedgies watched by Insider Monkey, valued at an estimated $156.4 million in stock. James Parsons’s fund, Junto Capital Management, also dropped its stock, about $90.9 million worth. These moves are intriguing to say the least, as total hedge fund interest dropped by 5 funds heading into Q4.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Yum! Brands, Inc. (NYSE:YUM) but similarly valued. We will take a look at D.R. Horton, Inc. (NYSE:DHI), STMicroelectronics N.V. (NYSE:STM), Travelers Companies Inc (NYSE:TRV), Okta, Inc. (NASDAQ:OKTA), V.F. Corporation (NYSE:VFC), Waste Connections, Inc. (NYSE:WCN), and Ball Corporation (NYSE:BLL). All of these stocks’ market caps are closest to YUM’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 36.6 hedge funds with bullish positions and the average amount invested in these stocks was $935 million. That figure was $1382 million in YUM’s case. D.R. Horton, Inc. (NYSE:DHI) is the most popular stock in this table. On the other hand STMicroelectronics N.V. (NYSE:STM) is the least popular one with only 21 bullish hedge fund positions. Yum! Brands, Inc. (NYSE:YUM) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for YUM is 45. 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 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 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. Hedge funds were also right about betting on YUM as the stock returned 15.7% since the end of Q3 (through 12/8) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.