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Were Hedge Funds Right About SYSCO Corporation (SYY)?

We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (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. Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in SYSCO Corporation (NYSE:SYY)? The smart money sentiment can provide an answer to this question.

Is SYSCO Corporation (NYSE:SYY) going to take off soon? The best stock pickers are becoming more confident. The number of bullish hedge fund bets advanced by 3 lately. Our calculations also showed that SYY 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).

Bruce Kovner, Caxton Associates LP

Bruce Kovner of Caxton Associates LP

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. With all of this in mind let’s take a gander at the key hedge fund action encompassing SYSCO Corporation (NYSE:SYY).

What does smart money think about SYSCO Corporation (NYSE:SYY)?

At the end of the fourth quarter, a total of 28 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 12% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards SYY 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.

Is SYY A Good Stock To Buy?

When looking at the institutional investors followed by Insider Monkey, Trian Partners, managed by Nelson Peltz, holds the most valuable position in SYSCO Corporation (NYSE:SYY). Trian Partners has a $2.0253 billion position in the stock, comprising 21.4% of its 13F portfolio. The second largest stake is held by Yacktman Asset Management, managed by Donald Yacktman, which holds a $325.4 million position; the fund has 4.1% of its 13F portfolio invested in the stock. Other professional money managers that are bullish consist of John Overdeck and David Siegel’s Two Sigma Advisors, Renaissance Technologies and Cliff Asness’s AQR Capital Management. In terms of the portfolio weights assigned to each position Trian Partners allocated the biggest weight to SYSCO Corporation (NYSE:SYY), around 21.35% of its 13F portfolio. Yacktman Asset Management is also relatively very bullish on the stock, setting aside 4.11 percent of its 13F equity portfolio to SYY.

As aggregate interest increased, specific money managers have been driving this bullishness. Balyasny Asset Management, managed by Dmitry Balyasny, assembled the most outsized position in SYSCO Corporation (NYSE:SYY). Balyasny Asset Management had $5.6 million invested in the company at the end of the quarter. Bruce Kovner’s Caxton Associates LP also made a $5.2 million investment in the stock during the quarter. The following funds were also among the new SYY investors: Lee Ainslie’s Maverick Capital, Anand Parekh’s Alyeska Investment Group, and Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as SYSCO Corporation (NYSE:SYY) but similarly valued. We will take a look at National Grid plc (NYSE:NGG), Sempra Energy (NYSE:SRE), Baxter International Inc. (NYSE:BAX), and Lam Research Corporation (NASDAQ:LRCX). This group of stocks’ market valuations are similar to SYY’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NGG 6 439511 -4
SRE 35 717221 4
BAX 47 3519863 8
LRCX 52 2625592 0
Average 35 1825547 2

View table here if you experience formatting issues.

As you can see these stocks had an average of 35 hedge funds with bullish positions and the average amount invested in these stocks was $1826 million. That figure was $3021 million in SYY’s case. Lam Research Corporation (NASDAQ:LRCX) is the most popular stock in this table. On the other hand National Grid plc (NYSE:NGG) is the least popular one with only 6 bullish hedge fund positions. SYSCO Corporation (NYSE:SYY) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and 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 1.0% in 2020 through May 1st but beat the market by 12.9 percentage points. Unfortunately SYY wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); SYY investors were disappointed as the stock returned -37.3% 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 most of these stocks already outperformed the market in 2020.
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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