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SYSCO Corporation (SYY): Hedge Funds Are Snapping Up

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 821 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of March 31st, 2020. What do these smart investors think about SYSCO Corporation (NYSE:SYY)?

SYSCO Corporation (NYSE:SYY) was in 35 hedge funds’ portfolios at the end of the first quarter of 2020. SYY has experienced an increase in support from the world’s most elite money managers in recent months. There were 28 hedge funds in our database with SYY positions at the end of the previous quarter. Our calculations also showed that SYY isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.

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 51 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.

TRIAN PARTNERS

Nelson Peltz of Trian Partners

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to view the recent hedge fund action regarding SYSCO Corporation (NYSE:SYY).

What have hedge funds been doing with SYSCO Corporation (NYSE:SYY)?

Heading into the second quarter of 2020, a total of 35 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 25% from one quarter earlier. By comparison, 36 hedge funds held shares or bullish call options in SYY a year ago. With hedge funds’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).

Is SYY A Good Stock To Buy?

The largest stake in SYSCO Corporation (NYSE:SYY) was held by Trian Partners, which reported holding $1080.3 million worth of stock at the end of September. It was followed by Yacktman Asset Management with a $281 million position. Other investors bullish on the company included AQR Capital Management, Alyeska Investment Group, and Renaissance Technologies. In terms of the portfolio weights assigned to each position Trian Partners allocated the biggest weight to SYSCO Corporation (NYSE:SYY), around 15.57% of its 13F portfolio. Yacktman Asset Management is also relatively very bullish on the stock, setting aside 4.66 percent of its 13F equity portfolio to SYY.

As one would reasonably expect, key money managers were leading the bulls’ herd. Citadel Investment Group, managed by Ken Griffin, established the biggest position in SYSCO Corporation (NYSE:SYY). Citadel Investment Group had $41.2 million invested in the company at the end of the quarter. John Osterweis’s Osterweis Capital Management also initiated a $15.3 million position during the quarter. The other funds with new positions in the stock are Malcolm Levine’s Dendur Capital, Christian Leone’s Luxor Capital Group, and Benjamin A. Smith’s Laurion Capital Management.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as SYSCO Corporation (NYSE:SYY) but similarly valued. We will take a look at Capital One Financial Corp. (NYSE:COF), Canon Inc. (NYSE:CAJ), Equity Residential (NYSE:EQR), and Square, Inc. (NYSE:SQ). This group of stocks’ market valuations resemble SYY’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
COF 50 1107098 0
CAJ 7 46934 -1
EQR 24 175386 -6
SQ 56 1609151 0
Average 34.25 734642 -1.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 34.25 hedge funds with bullish positions and the average amount invested in these stocks was $735 million. That figure was $1784 million in SYY’s case. Square, Inc. (NYSE:SQ) is the most popular stock in this table. On the other hand Canon Inc. (NYSE:CAJ) is the least popular one with only 7 bullish hedge fund positions. SYSCO Corporation (NYSE:SYY) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May but still beat the market by 13.2 percentage points. Hedge funds were also right about betting on SYY as the stock returned 22.2% in Q2 (through the end of May) 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.