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

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. We at Insider Monkey have gone over 835 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of December 31st. In this article, we look at what those funds think of Tyson Foods, Inc. (NYSE:TSN) based on that data.

Tyson Foods, Inc. (NYSE:TSN) has experienced an increase in hedge fund interest recently. Our calculations also showed that TSN 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).

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 41 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 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Harold Levy Iridian Asset Management

Harold Levy of Iridian Asset Management

We leave no stone unturned when looking for the next great investment idea. For example, this trader is claiming triple digit returns, so we check out his latest trade recommendations. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences (by the way watch this video if you want to hear one of the best healthcare hedge fund manager’s coronavirus analysis). 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 we’re going to check out the recent hedge fund action regarding Tyson Foods, Inc. (NYSE:TSN).

How are hedge funds trading Tyson Foods, Inc. (NYSE:TSN)?

At the end of the fourth quarter, a total of 58 of the hedge funds tracked by Insider Monkey were long this stock, a change of 9% from the third quarter of 2019. The graph below displays the number of hedge funds with bullish position in TSN over the last 18 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, AQR Capital Management was the largest shareholder of Tyson Foods, Inc. (NYSE:TSN), with a stake worth $521.8 million reported as of the end of September. Trailing AQR Capital Management was Iridian Asset Management, which amassed a stake valued at $196.8 million. Millennium Management, Suvretta Capital Management, and Citadel Investment Group 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 Highline Capital Management allocated the biggest weight to Tyson Foods, Inc. (NYSE:TSN), around 7.54% of its 13F portfolio. Mountaineer Partners Management is also relatively very bullish on the stock, designating 7.3 percent of its 13F equity portfolio to TSN.

As aggregate interest increased, specific money managers were breaking ground themselves. Bristol Gate Capital Partners, managed by Peter Simmie, created the biggest position in Tyson Foods, Inc. (NYSE:TSN). Bristol Gate Capital Partners had $44.1 million invested in the company at the end of the quarter. Jack Woodruff’s Candlestick Capital Management also initiated a $35.3 million position during the quarter. The following funds were also among the new TSN investors: Paul Marshall and Ian Wace’s Marshall Wace LLP, David Rosen’s Rubric Capital Management, and Sander Gerber’s Hudson Bay Capital Management.

Let’s now take a look at hedge fund activity in other stocks similar to Tyson Foods, Inc. (NYSE:TSN). We will take a look at Welltower Inc. (NYSE:WELL), O’Reilly Automotive Inc (NASDAQ:ORLY), Barrick Gold Corporation (NYSE:GOLD), and Southern Copper Corporation (NYSE:SCCO). This group of stocks’ market caps are closest to TSN’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
WELL 24 533196 7
ORLY 64 2318640 17
GOLD 51 1814507 3
SCCO 20 230399 4
Average 39.75 1224186 7.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 39.75 hedge funds with bullish positions and the average amount invested in these stocks was $1224 million. That figure was $2187 million in TSN’s case. O’Reilly Automotive Inc (NASDAQ:ORLY) is the most popular stock in this table. On the other hand Southern Copper Corporation (NYSE:SCCO) is the least popular one with only 20 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 lost 1.0% in 2020 through April 20th but beat the market by 11 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 -29.4% 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.
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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