Were Hedge Funds Right About The Kraft Heinz Company (KHC)?

Will the new coronavirus cause a recession in US in the next 6 months? On February 27th, we put the probability at 75% and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards The Kraft Heinz Company (NASDAQ:KHC).

The Kraft Heinz Company (NASDAQ:KHC) was in 34 hedge funds’ portfolios at the end of December. KHC shareholders have witnessed a decrease in activity from the world’s largest hedge funds of late. There were 39 hedge funds in our database with KHC holdings at the end of the previous quarter. Our calculations also showed that KHC 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).


Philippe Laffont of Coatue 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 go over the latest hedge fund action regarding The Kraft Heinz Company (NASDAQ:KHC).

Hedge fund activity in The Kraft Heinz Company (NASDAQ:KHC)

Heading into the first quarter of 2020, a total of 34 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -13% from the previous quarter. By comparison, 33 hedge funds held shares or bullish call options in KHC a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in The Kraft Heinz Company (NASDAQ:KHC) was held by Berkshire Hathaway, which reported holding $10462.6 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $56.9 million position. Other investors bullish on the company included Renaissance Technologies, GLG Partners, and Gotham Asset Management. In terms of the portfolio weights assigned to each position Berkshire Hathaway allocated the biggest weight to The Kraft Heinz Company (NASDAQ:KHC), around 4.32% of its 13F portfolio. Kamunting Street Capital is also relatively very bullish on the stock, earmarking 3.42 percent of its 13F equity portfolio to KHC.

Seeing as The Kraft Heinz Company (NASDAQ:KHC) has witnessed declining sentiment from the aggregate hedge fund industry, logic holds that there exists a select few hedge funds who sold off their full holdings last quarter. Interestingly, John Murphy’s Levin Easterly Partners said goodbye to the largest position of all the hedgies tracked by Insider Monkey, comprising about $44.2 million in stock, and Benjamin A. Smith’s Laurion Capital Management was right behind this move, as the fund cut about $42.5 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest dropped by 5 funds last quarter.

Let’s now review hedge fund activity in other stocks similar to The Kraft Heinz Company (NASDAQ:KHC). These stocks are NetEase, Inc (NASDAQ:NTES), Mizuho Financial Group Inc. (NYSE:MFG), Eaton Corporation plc (NYSE:ETN), and Marathon Petroleum Corp (NYSE:MPC). This group of stocks’ market caps are similar to KHC’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NTES 44 3818274 12
MFG 5 15118 1
ETN 42 1224237 8
MPC 69 2759103 1
Average 40 1954183 5.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 40 hedge funds with bullish positions and the average amount invested in these stocks was $1954 million. That figure was $10747 million in KHC’s case. Marathon Petroleum Corp (NYSE:MPC) is the most popular stock in this table. On the other hand Mizuho Financial Group Inc. (NYSE:MFG) is the least popular one with only 5 bullish hedge fund positions. The Kraft Heinz Company (NASDAQ:KHC) 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 KHC, though not to the same extent, as the stock returned -7% 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.