Is McDonald’s Corporation (NYSE:MCD) the right pick for your portfolio? The best stock pickers are taking a pessimistic view. The number of bullish hedge fund bets were trimmed by 2 recently.
According to most stock holders, hedge funds are perceived as underperforming, old financial vehicles of the past. While there are over 8000 funds in operation today, we choose to focus on the elite of this club, close to 450 funds. It is widely believed that this group has its hands on most of the smart money’s total capital, and by tracking their top picks, we have unsheathed a number of investment strategies that have historically outpaced the market. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points per year for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have topped the S&P 500 index by 25 percentage points in 6.5 month (see all of our picks from August).
Just as integral, bullish insider trading sentiment is another way to break down the marketplace. Just as you’d expect, there are plenty of incentives for an upper level exec to drop shares of his or her company, but just one, very simple reason why they would behave bullishly. Various empirical studies have demonstrated the useful potential of this method if shareholders understand where to look (learn more here).
Now, it’s important to take a look at the latest action regarding McDonald’s Corporation (NYSE:MCD).
How have hedgies been trading McDonald’s Corporation (NYSE:MCD)?
In preparation for this year, a total of 47 of the hedge funds we track held long positions in this stock, a change of -4% from one quarter earlier. With hedgies’ sentiment swirling, there exists a select group of key hedge fund managers who were boosting their holdings considerably.
Of the funds we track, Michael Larson’s Bill & Melinda Gates Foundation Trust had the most valuable position in McDonald’s Corporation (NYSE:MCD), worth close to $871 million, accounting for 5.2% of its total 13F portfolio. Sitting at the No. 2 spot is Ken Griffin of Citadel Investment Group, with a $457 million position; 0.5% of its 13F portfolio is allocated to the company. Remaining hedgies that hold long positions include Ken Fisher’s Fisher Asset Management, Jim Simons’s Renaissance Technologies and Bill Miller’s Legg Mason Capital Management.
Because McDonald’s Corporation (NYSE:MCD) has witnessed bearish sentiment from hedge fund managers, we can see that there is a sect of hedge funds that elected to cut their full holdings last quarter. At the top of the heap, Peter J. Eichler Jr.’s Aletheia Research and Management cut the biggest investment of the “upper crust” of funds we track, totaling about $28 million in stock. Xerion also dumped its stock, about $18 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest was cut by 2 funds last quarter.
What do corporate executives and insiders think about McDonald’s Corporation (NYSE:MCD)?
Bullish insider trading is particularly usable when the company we’re looking at has seen transactions within the past six months. Over the latest 180-day time period, McDonald’s Corporation (NYSE:MCD) has experienced 1 unique insiders buying, and 14 insider sales (see the details of insider trades here).
With the results demonstrated by the aforementioned studies, everyday investors should always watch hedge fund and insider trading sentiment, and McDonald’s Corporation (NYSE:MCD) applies perfectly to this mantra.
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