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Was The Smart Money Right About Conagra Brands, Inc. (CAG)?

Hedge funds don’t get the respect they used to get. Nowadays investors prefer passive funds over actively managed funds. One thing they don’t realize is that 100% of the passive funds didn’t see the coronavirus recession coming, but a lot of hedge funds did. Even we published an article near the end of February and predicted a US recession. Think about all the losses you could have avoided if you sold your shares in February and bought them back at the end of March. In this article we look at what hedge funds think of Conagra Brands, Inc. (NYSE:CAG).

Conagra Brands, Inc. (NYSE:CAG) was in 29 hedge funds’ portfolios at the end of the fourth quarter of 2019. CAG investors should pay attention to a decrease in activity from the world’s largest hedge funds recently. There were 31 hedge funds in our database with CAG positions at the end of the previous quarter. Our calculations also showed that CAG isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by more than 41 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Barry Rosenstein - Jana Partners

Barry Rosenstein of JANA Partners

We leave no stone unturned when looking for the next great investment idea. For example, this investor can predict short term winners following earnings announcements with 77% accuracy, so we check out his stock picks. A former hedge fund manager is pitching the “next Amazon” in this video; again we are listening. 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 S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s go over the recent hedge fund action surrounding Conagra Brands, Inc. (NYSE:CAG).

Hedge fund activity in Conagra Brands, Inc. (NYSE:CAG)

At the end of the fourth quarter, a total of 29 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -6% from the third quarter of 2019. By comparison, 33 hedge funds held shares or bullish call options in CAG a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Conagra Brands, Inc. (NYSE:CAG) was held by JANA Partners, which reported holding $512.3 million worth of stock at the end of September. It was followed by GAMCO Investors with a $66.3 million position. Other investors bullish on the company included Citadel Investment Group, Adage Capital Management, and D E Shaw. In terms of the portfolio weights assigned to each position JANA Partners allocated the biggest weight to Conagra Brands, Inc. (NYSE:CAG), around 42.66% of its 13F portfolio. Element Capital Management is also relatively very bullish on the stock, designating 2.12 percent of its 13F equity portfolio to CAG.

Seeing as Conagra Brands, Inc. (NYSE:CAG) has experienced declining sentiment from the smart money, we can see that there is a sect of hedge funds that slashed their positions entirely heading into Q4. Interestingly, Renaissance Technologies sold off the largest stake of all the hedgies watched by Insider Monkey, valued at an estimated $11.3 million in stock, and Anand Parekh’s Alyeska Investment Group was right behind this move, as the fund cut about $6.1 million worth. These bearish behaviors are interesting, as total hedge fund interest fell by 2 funds heading into Q4.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Conagra Brands, Inc. (NYSE:CAG) but similarly valued. We will take a look at Maxim Integrated Products Inc. (NASDAQ:MXIM), WellCare Health Plans, Inc. (NYSE:WCG), Regions Financial Corporation (NYSE:RF), and Enel Americas S.A. (NYSE:ENIA). This group of stocks’ market valuations match CAG’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MXIM 32 504696 0
WCG 46 2186486 4
RF 37 468137 10
ENIA 8 217190 0
Average 30.75 844127 3.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 30.75 hedge funds with bullish positions and the average amount invested in these stocks was $844 million. That figure was $741 million in CAG’s case. WellCare Health Plans, Inc. (NYSE:WCG) is the most popular stock in this table. On the other hand Enel Americas S.A. (NYSE:ENIA) is the least popular one with only 8 bullish hedge fund positions. Conagra Brands, Inc. (NYSE:CAG) is not the least popular stock in this group but hedge fund interest is still below 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 1.0% in 2020 through May 1st but beat the market by 12.9 percentage points. A small number of hedge funds were also right about betting on CAG, though not to the same extent, as the stock returned -1.6% during the same time period and outperformed the market.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

Disclosure: None. This article was originally published at Insider Monkey.

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