Stocks, especially the once high flying technology stocks, had a lousy start to the new year. QQQ lost 9% of its value in January. We aren’t certain about the bubbly technology stocks that trade for ridiculously high multiples of their revenues, but we believe top hedge fund stocks will deliver positive returns for the rest of the year. In this article, we will take a closer look at hedge fund sentiment towards The Hershey Company (NYSE:HSY) at the end of the third quarter and determine whether the smart money was really smart about this stock.
The Hershey Company (NYSE:HSY) investors should pay attention to a decrease in hedge fund interest lately. The Hershey Company (NYSE:HSY) was in 33 hedge funds’ portfolios at the end of September. The all time high for this statistic is 43. Our calculations also showed that HSY isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
Ray Dalio of Bridgewater Associates
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Now let’s take a gander at the recent hedge fund action encompassing The Hershey Company (NYSE:HSY).
Do Hedge Funds Think HSY Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2021, a total of 33 of the hedge funds tracked by Insider Monkey were long this stock, a change of -13% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in HSY over the last 25 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in The Hershey Company (NYSE:HSY), which was worth $552.6 million at the end of the third quarter. On the second spot was AQR Capital Management which amassed $150.1 million worth of shares. Holocene Advisors, Arrowstreet Capital, and Bridgewater Associates were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Quantinno Capital allocated the biggest weight to The Hershey Company (NYSE:HSY), around 0.72% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, designating 0.71 percent of its 13F equity portfolio to HSY.
Seeing as The Hershey Company (NYSE:HSY) has witnessed declining sentiment from the smart money, it’s safe to say that there exists a select few hedge funds that elected to cut their full holdings last quarter. Interestingly, Dmitry Balyasny’s Balyasny Asset Management dropped the biggest stake of all the hedgies followed by Insider Monkey, totaling an estimated $25.6 million in call options, and Israel Englander’s Millennium Management was right behind this move, as the fund said goodbye to about $17.4 million worth. These transactions are important to note, as total hedge fund interest dropped by 5 funds last quarter.
Let’s now review hedge fund activity in other stocks similar to The Hershey Company (NYSE:HSY). We will take a look at NatWest Group plc (NYSE:NWG), Welltower Inc. (NYSE:WELL), TransDigm Group Incorporated (NYSE:TDG), Rockwell Automation Inc. (NYSE:ROK), First Republic Bank (NYSE:FRC), International Flavors & Fragrances Inc (NYSE:IFF), and CoStar Group Inc (NASDAQ:CSGP). This group of stocks’ market values resemble HSY’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NWG | 7 | 8068 | 2 |
| WELL | 22 | 508861 | 3 |
| TDG | 63 | 7188554 | 6 |
| ROK | 29 | 519693 | 4 |
| FRC | 35 | 918312 | 1 |
| IFF | 46 | 2838241 | -6 |
| CSGP | 29 | 2585035 | -20 |
| Average | 33 | 2080966 | -1.4 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 33 hedge funds with bullish positions and the average amount invested in these stocks was $2081 million. That figure was $1274 million in HSY’s case. TransDigm Group Incorporated (NYSE:TDG) is the most popular stock in this table. On the other hand NatWest Group plc (NYSE:NWG) is the least popular one with only 7 bullish hedge fund positions. The Hershey Company (NYSE:HSY) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for HSY is 46.2. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 29.6% in 2021 and still beat the market by 3.6 percentage points. A small number of hedge funds were also right about betting on HSY as the stock returned 17% since the end of the third quarter (through 1/31) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
