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Were Hedge Funds Right About Kellogg Company (K)?

Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (see why hell is coming).

In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. 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. We have processed the filings of the more than 835 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their December 31 holdings, data that is available nowhere else. Should you consider Kellogg Company (NYSE:K) for your portfolio? We’ll look to this invaluable collective wisdom for the answer.

Kellogg Company (NYSE:K) investors should pay attention to an increase in hedge fund interest recently. Our calculations also showed that K 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).

Richard Pzena - Pzena Investment Management

Richard S. Pzena of Pzena Investment Management

We leave no stone unturned when looking for the next great investment idea. For example, COVID-19 pandemic is still the main driver of stock prices. So we are checking out this trader’s corona catalyst trades. 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. Now we’re going to check out the key hedge fund action encompassing Kellogg Company (NYSE:K).

What does smart money think about Kellogg Company (NYSE:K)?

Heading into the first quarter of 2020, a total of 30 of the hedge funds tracked by Insider Monkey were long this stock, a change of 3% from the previous quarter. On the other hand, there were a total of 27 hedge funds with a bullish position in K a year ago. With hedgies’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).

More specifically, Renaissance Technologies was the largest shareholder of Kellogg Company (NYSE:K), with a stake worth $208.1 million reported as of the end of September. Trailing Renaissance Technologies was Millennium Management, which amassed a stake valued at $85.7 million. Pzena Investment Management, Carlson Capital, and GAMCO Investors 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 Factorial Partners allocated the biggest weight to Kellogg Company (NYSE:K), around 2% of its 13F portfolio. Cognios Capital is also relatively very bullish on the stock, dishing out 0.93 percent of its 13F equity portfolio to K.

As one would reasonably expect, specific money managers have been driving this bullishness. Carlson Capital, managed by Clint Carlson, initiated the most valuable position in Kellogg Company (NYSE:K). Carlson Capital had $46.7 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also made a $12.6 million investment in the stock during the quarter. The other funds with brand new K positions are Anand Parekh’s Alyeska Investment Group, D. E. Shaw’s D E Shaw, and Karim Abbadi and Edward McBride’s Centiva Capital.

Let’s now review hedge fund activity in other stocks similar to Kellogg Company (NYSE:K). We will take a look at Rockwell Automation Inc. (NYSE:ROK), Splunk Inc (NASDAQ:SPLK), TELUS Corporation (NYSE:TU), and Synchrony Financial (NYSE:SYF). This group of stocks’ market caps are closest to K’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ROK 39 614212 10
SPLK 38 538860 2
TU 13 254674 -7
SYF 44 2269786 -5
Average 33.5 919383 0

View table here if you experience formatting issues.

As you can see these stocks had an average of 33.5 hedge funds with bullish positions and the average amount invested in these stocks was $919 million. That figure was $570 million in K’s case. Synchrony Financial (NYSE:SYF) is the most popular stock in this table. On the other hand TELUS Corporation (NYSE:TU) is the least popular one with only 13 bullish hedge fund positions. Kellogg Company (NYSE:K) 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 K, though not to the same extent, as the stock returned -5.3% 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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