Were Hedge Funds Right About Nibbling On Mondelez International Inc (MDLZ)?

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 Mondelez International Inc (NASDAQ:MDLZ) based on that data and determine whether they were really smart about the stock.

Mondelez International Inc (NASDAQ:MDLZ) was in 54 hedge funds’ portfolios at the end of the first quarter of 2020. MDLZ investors should pay attention to an increase in enthusiasm from smart money in recent months. There were 50 hedge funds in our database with MDLZ positions at the end of the previous quarter. Our calculations also showed that MDLZ 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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 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.


Nelson Peltz of Trian Partners

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. Keeping this in mind let’s view the recent hedge fund action surrounding Mondelez International Inc (NASDAQ:MDLZ).

How are hedge funds trading Mondelez International Inc (NASDAQ:MDLZ)?

At the end of the first quarter, a total of 54 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 8% from the previous quarter. By comparison, 47 hedge funds held shares or bullish call options in MDLZ a year ago. With hedgies’ capital changing hands, there exists a select group of notable hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).

Among these funds, Trian Partners held the most valuable stake in Mondelez International Inc (NASDAQ:MDLZ), which was worth $793.5 million at the end of the third quarter. On the second spot was Diamond Hill Capital which amassed $233.1 million worth of shares. Two Sigma Advisors, Hillhouse Capital Management, and D E Shaw 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 Trian Partners allocated the biggest weight to Mondelez International Inc (NASDAQ:MDLZ), around 11.44% of its 13F portfolio. Bronson Point Partners is also relatively very bullish on the stock, setting aside 7.86 percent of its 13F equity portfolio to MDLZ.

As industrywide interest jumped, key money managers were breaking ground themselves. Diamond Hill Capital, managed by Ric Dillon, established the largest position in Mondelez International Inc (NASDAQ:MDLZ). Diamond Hill Capital had $233.1 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also made a $42.4 million investment in the stock during the quarter. The other funds with brand new MDLZ positions are Paul Marshall and Ian Wace’s Marshall Wace LLP, Mark Coe’s Intrinsic Edge Capital, and Steven Boyd’s Armistice Capital.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Mondelez International Inc (NASDAQ:MDLZ) but similarly valued. We will take a look at HDFC Bank Limited (NYSE:HDB), General Electric Company (NYSE:GE), American Express Company (NYSE:AXP), and BlackRock, Inc. (NYSE:BLK). This group of stocks’ market values are closest to MDLZ’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
HDB 38 1852582 -1
GE 58 3531845 -2
AXP 57 15414059 -1
BLK 38 678087 -5
Average 47.75 5369143 -2.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 47.75 hedge funds with bullish positions and the average amount invested in these stocks was $5369 million. That figure was $2218 million in MDLZ’s case. General Electric Company (NYSE:GE) is the most popular stock in this table. On the other hand HDFC Bank Limited (NYSE:HDB) is the least popular one with only 38 bullish hedge fund positions. Mondelez International Inc (NASDAQ:MDLZ) 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 MDLZ wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on MDLZ were disappointed as the stock returned 2.7% 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.