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Were Hedge Funds Right About Dumping Tyson Foods, Inc. (TSN)?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Tyson Foods, Inc. (NYSE:TSN) based on that data and determine whether they were really smart about the stock.

Tyson Foods, Inc. (NYSE:TSN) was in 41 hedge funds’ portfolios at the end of March. TSN has seen a decrease in support from the world’s most elite money managers in recent months. There were 58 hedge funds in our database with TSN holdings at the end of the previous quarter. Our calculations also showed that TSN 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.

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 58 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 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Sahm Adrangi Kerrisdale Capital

Sahm Adrangi of Kerrisdale Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, this trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost gold prices. So, we are checking out this junior gold mining stock. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now let’s view the new hedge fund action encompassing Tyson Foods, Inc. (NYSE:TSN).

How have hedgies been trading Tyson Foods, Inc. (NYSE:TSN)?

At the end of the first quarter, a total of 41 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -29% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in TSN over the last 18 quarters. So, let’s see 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, Cliff Asness’s AQR Capital Management has the most valuable position in Tyson Foods, Inc. (NYSE:TSN), worth close to $355.4 million, accounting for 0.6% of its total 13F portfolio. Sitting at the No. 2 spot is Iridian Asset Management, led by David Cohen and Harold Levy, holding a $132.3 million position; the fund has 3.2% of its 13F portfolio invested in the stock. Remaining professional money managers that are bullish comprise Bernard Horn’s Polaris Capital Management, Noam Gottesman’s GLG Partners and Peter Simmie’s Bristol Gate Capital Partners. In terms of the portfolio weights assigned to each position SAYA Management allocated the biggest weight to Tyson Foods, Inc. (NYSE:TSN), around 8.33% of its 13F portfolio. Bristol Gate Capital Partners is also relatively very bullish on the stock, earmarking 4.39 percent of its 13F equity portfolio to TSN.

Since Tyson Foods, Inc. (NYSE:TSN) has witnessed declining sentiment from the smart money, we can see that there was a specific group of fund managers that slashed their entire stakes last quarter. It’s worth mentioning that Aaron Cowen’s Suvretta Capital Management dumped the largest investment of the 750 funds followed by Insider Monkey, worth an estimated $142.9 million in stock. Renaissance Technologies, also dropped its stock, about $65.4 million worth. These transactions are interesting, as total hedge fund interest was cut by 17 funds last quarter.

Let’s now review hedge fund activity in other stocks similar to Tyson Foods, Inc. (NYSE:TSN). These stocks are Ball Corporation (NYSE:BLL), CRH PLC (NYSE:CRH), TE Connectivity Ltd. (NYSE:TEL), and American International Group Inc (NYSE:AIG). All of these stocks’ market caps are similar to TSN’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BLL 41 697826 -3
CRH 10 131812 5
TEL 33 1381411 -11
AIG 43 1473892 -9
Average 31.75 921235 -4.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 31.75 hedge funds with bullish positions and the average amount invested in these stocks was $921 million. That figure was $906 million in TSN’s case. American International Group Inc (NYSE:AIG) is the most popular stock in this table. On the other hand CRH PLC (NYSE:CRH) is the least popular one with only 10 bullish hedge fund positions. Tyson Foods, Inc. (NYSE:TSN) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 12.3% in 2020 through June 30th but beat the market by 15.5 percentage points. Unfortunately TSN wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on TSN were disappointed as the stock returned 3.9% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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